Market report: Wednesday close

By Mickey Clark for MailOnline
Updated: 11:55 EDT, 25 July 2007

Music publisher EMI Group hit a bum note with speculators today amid growing fears the proposed £2.4bn bid from private equity may have to be aborted.

The shares fell 14¼p to 247p today and now trade at a substantial discount to the 265p a share being offered by Guy Hands' Terra Firma. The continuing rise in interest rates may have made the deal less attractive to its backers and the growing crisis in the credit markets suggests awave of debt may prove unpalatable.

City investors generally fought a rearguard action as they attempted to limit the damage following the biggest sell-off on Wall Street overnight in more than three months, which reverberated around the world.

Overall, the FTSE 100 index closed down 44.4 points at 6454.3.

Centrica was down ¾p to 374½p after Lehman Brothers moved from underweight to overweight. More importantly, the broker has jacked up its target from 340p to 440p claiming the British Gas services group will gain from a more benign outlook for commodity prices.

Lehman Brothers has downgraded Scottish & Southern Energy, 1p dearer at 1442p, from equalweight to underweight but increased its target from 1180p to 1330p on valuation grounds.

Scottish and Southern has been one of the worst performers in the European utilities sector this year.

Keep an eye on oil and gas explorer BowLeven, down 6p at 244p, which has lured another senior manager from rival Cairn Energy. Ed Willett is the new exploration chief and joins Kevin Hart, the former Cairn finance director, chief executive since last year. BowLeven has dropped from a peak of 812½p in 2005 and Hart last November bought 50,000 shares at 220p, raising his stake to 221,337.

The bears were feeling the squeeze in GlaxoSmithKline, up 29p at 1275p despite a big drop in second-quarter sales and a fall in sales of its diabetes treatment Avandia, which has been linked to the increased risk of heart attacks. GSK sweetened the pill by raising its share buyback to £12bn.

But the move has not impressed everyone. Even before the figures were published, Bear Stearns had cut its rating on the shares from peer perform to underperform. Goldman Sachs is also believed to be taking an increasingly bearish view of prospects. It has been a tough few months for Glaxo.

Oxford Biomedica, up ¼p at 43¼p, has been told by the independent Data Safety Monitoring Board that the Phase three trial of its TroVax drug for renal cancer should continue as planned.

Bob Morton's Vislink expects first-half adjusted operating profit to top £7.5m. in line with market expectations after absorbing the impact of the significantly weaker dollar. The transmission products company remains confident for the full year and will announce its first half results on 30 August. The shares dipped 2¼p to 82½p.

Software firm Autonomy continued to rally from profit-taking, which accompanied Monday's results with the price adding 35p at 867p, making it one of the better-performing second-liners.

Citi keeps the faith but Sports Direct gets a real panning from Panmure

Sports Direct shares showed no sign of bounce today - although did have a late rally which resulted in them closing up 7p at 154p - but some of the City's finest were keeping faith in the beleaguered company. The stock slumped yesterday after a terrible set of results that had even in-house broker Merrill Lynch running for cover.

But in a note dated today, Citigroup, one of the banks that led the disastrous float, retained a 'target price' for the shares of 300p - their debut price. This would require a Lazarus-like recovery. Helpfully, Citigroup tells clients, 'we retain a neutral investment code' on the company.

But Panmure Gordon, in a note headed 'Resist temptation', cut its price target again, from 150p to 130p. Analyst Philip Drogan wrote: 'The shares are now less than half the level they were floated at. Forecasts are being slashed. Brokers are very gloomy. The darkest hour is just before the dawn etc. We will look at this further, but we would sell the shares lower and look for the next profit warning (inevitable) before taking the plunge.'

There is increasing pressure on founder Mike Ashley to move up from deputy chairman to fill the vacant chairman's role and take charge of the business in which he has a 57% stake.

Sports Direct's annual report, which will reveal how much Ashley gets from the sale of 35 leasehold properties to the firm, is due in two weeks.

Banking & finance
SG Securities has cut Friends Provident, which is staging an £8bn merger with rival Resolution, from buy to hold. It says Friends has solved its cashflow issue, but at a significant price. Talk of a counterbid continues.

Building & property
The building services and maintenance group specialising in affordable and social housing, Inspace, said its first-half results are expected to beat forecasts. More of its social housing work is coming from private landlords.

Consumer
Fabrics and wallpaper company Walker Greenbank said its firsthalf trading has been materially ahead of forecasts thanks to demand for its upmarket ranges. On Monday, Colefax & Fowler reported strong profits growth.

Economy
The dollar recouped some of its heavy losses today after falling to lows against the euro last night and tumbling against the pound on worries about the US credit market. Against sterling it made up 0.31c of the loss to $2.0593 and 0.67c against the euro at $1.3733.

Engineering
French car parts maker Valeo has formed a joint venture with NK Minda producing alternators and starters in India. Valeo will hold 66.7% of the venture. The operation, Valeo Minda Electrical Systems India, will be based near Mumbai.

Health
Allergy Therapeutics says the NorthAmerican launch of its ragweed allergy vaccine has been delayed a year. The US halted trials earlier this month after one patient suffered a 'rare adverse event'.

Industrials
Investment bank Natixis has reduced its stake in Saint-Gobain to below5%. It now holds 4.56% of the capital in the construction materials group, against 8.14% before, and 4.35% of voting rights, down from7.76%.

Leisure
Dresdner Kleinwort has downgraded Domino's Pizza from buy to add while tweaking its target price 20p higher to 320p. It says the shares are now up with events, and the current like-for-like run rate looks unsustainable. Domino's dominates the home-delivery market.

Media
Numis has cut Pearson's price target from 982p to 948p ahead of interim results. It said the move reflected the impact of dollar weakness, although the markets in which the Financial Times publisher operates remain healthy.

Natural resources
Imperial Energy is adamant its independently audited reserves and resource estimates are accurate and says it sees no reason for Russia's natural resources ministry to take issue over how many wells have been tested.

Retail
Comet owner Kesa Electricals moved into the Spanish market today with a €100m (£67m) deal. Kesa agreed to buy electrical retailer EMH - with revenues of €271m - from Impala Capital Partners and the Perez family.

Support services
Capita's 18% pre-tax profit rise to £103m did not impress everyone, despite evidence of strong organic growth. Panmure Gordon warns an absence of stated organic growth figures and of a share buyback suggest the shares are unlikely to hold initial gains.

Technology
CSR, the Cambridge company whose microchips are used in Apple's iPhone, reported record revenues for the first half of the year but its shares were hit by profit-taking. They fell 100½p to 768p as some brokers fretted aboutWiFi revenues.

Telecoms
Italy's telecoms regulator wants Telecom Italia to put its fixed-line network under separate management by the year-end to increase competition. Telecom Italia is the dominant operator in wholesale and retail fixed-line markets.

Transport
Autoclenz is confident of achieving expectations for the year, and plans to pay an interim dividend of 1.8p. The car valet company has achieved topline growth, despite tough trading conditions in the first half.

Utilities
E.ON expects to lose £6.6bn after its nuclear plants Krümmel and Brunsbüttel, which it jointly owns with Vattenfall Europe, were shut down last month. E.ON and Vattenfall are between them losing €1m (£672,000) every day in Krümmel.