Market report: Tuesday close

By Mickey Clark for MailOnline
Updated:

 

Investors were breathing a huge sigh of relief today as share prices, backed by a strong showing on Wall Street overnight, staged an impressive rally following three consecutive days of losses.

The FTSE 100 index, which fell more than 300 points last week because of the debt-market crisis, bounced back with a 154 point rise to close at 6360.1. But turnover remains thin as the holiday season kicks in.

Oil and gas explorer BG Group is the latest UK blue-chip to find a major Chinese investor on its shareholder register during the past few days.

BG shares raced up 32p to 808p as around 27m shares changed hands on evidence of stakebuilding by the People's Bank of China (PBC). Dealers say the PBC has bought a total of 15.5m shares (0.46% of the company), worth on average £128m.

The PBC is reckoned to have started buying the shares in the market on 15 June, with the last purchases made on 13 July, paying prices ranging from 792p to 877p.

The BG share price has come in for profit-taking during the past couple of weeks following an upbeat first-quarter trading update in which chief executive Frank Chapman described group performance as strong, despite a high level of scheduled maintenance. Operating profits rose 14% to £747m.

The Chinese move will no doubt also rekindle talk of a takeover of BG Group, which boasts huge reserves and has often been seen as a target for the other oil majors.

Only last week the China Development Bank agreed to pay almost £5bn for a near-7% stake in Barclays, up 29p at 710p, in return for helping the High Street bank raise its terms for ABN Amro. Brokers say the Chinese have around £120bn to invest abroad.

> Where next for shares?

GlaxoSmithKline jumped 40p to 1255p after its diabetes drug Avandia won a green light from the US Food and Drug Administration. The FDA accepted a link to heart attacks but ruled the risk is not enough to pull it from US sale.

Glaxo may simply have to put a health warning on the box. But broker Merrill Lynch repeated its sell recommendation, with the target price cut to 1160p. UBS is also bearish and urged clients to sell if the price gets above 1300p. Morgan Stanley says Avandia's withdrawal in the US would have forced it to cut its 1400p target price by 2%.

First results from newly-merged Taylor Wimpey were well received despite problems in the US, with the price jumping 30¼p to 330¼p. Evidence of strong margins also benefited Bovis Homes, up 38p at 775p, Bellway, 51p to 1247p, and Persimmon, 60p to 1161p.

BSkyB's £125m acquisition of Sir Alan Sugar's Amstrad, up 26p at 147¼p, could be bad news for rival TV set-top boxes maker Pace Microtechnology, which reacted with a fall of 14p to 93½p.

ClinPhone slumped 46¼p to 78¾p after warning that full-year profits will come in significantly below market expectations. The technology services specialist says that, due to incorrect treatment of a tax effect, its adjusted earnings for the year ended 28 February were wrongly recorded as 6.87p. The figure should have read 6.04p.

Connemara Mining made its Aim debut following a placing at 35p which valued it at £5.3m. The zinc miner opened at 38½p before settling at 40¼p.

Latest market data

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Financial data

BANKING AND FINANCE
Lehman Brothers cut Northern Rock from overweight to equalweight and slashed its target from 956p to 858p after last week's profits news. The lender's management guidance suggests an 8.2 PE multiple for 2008 and a yield of 6.8%, it says.

BUILDING AND PROPERTY
Quintain Estates has asked the Takeover Panel to impose a time limit for Quill Securities to say whether it will bid for the firm. Earlier this month, Quill, a subsiduary of HBO, said it was evaluating its options and considering an offer.

CONSUMER
Diagnostics specialist Cozart says the Home Office has released guidelines for police in England and Wales to expand drug interventions programmes using its RapiScan system. This tests saliva for cocaine, crack and heroin.

ECONOMICS
Consumer spending in the US rose at its slowest pace for nine months in June as falling home values and rising petrol prices took their toll. Spending was up just 0.1% compared with a 0.5% rise in May, according to the latest government figures.

ENGINEERING
Standard & Poor's left its ratings and outlook on engineered materials maker Saint-Gobain unchanged on BBB+ and A-2 after a e650 million provision related to a European Commission investigation of anti-competition claims.

HEALTH
Biocare Solutions has started commissioning its new Italian facility at Ferrandina and expects production to start during the next few weeks.It aims is to transfer all production there from its Meda facility over the next two months.

INDUSTRIALS
Merrill Lynch repeated its neutral rating on Ultra Electronics after first-half results yesterday. Citigroup maintained a hold recommendation. The aerospace and defence supplier reported a 10% pre-tax profits rise to £26.2m.

LEISURE
Seymour Pierce has raised Hornby from outperform to buy on the back of last week's bullish trading update showing a solid start had been made to the year. The order intake of the model train and Scalextrix slot racing-car maker is significantly ahead of last year.

MEDIA
Panmure Gordon has raised its rating on Pearson from sell to hold. The Penguin and Financial Times publisher reported a 74% rise in half-year profits and predicted 2007 as a whole will be 'another good year' for its education business.

NATURAL RESOURCES
For the first time Soco International included numbers in its latest Vietnam drilling update, which spurred a share-price rise. But Oriel Securities warns the group is a long way from being able to claim ownership of a billion-barrel discovery.

RETAILING
John Browett's appointment as DSG International chief executive is positive, says Seymour Pierce. The current development director at Tesco has 'a strong CV' and good reputation. DSG need look no further for a fresh pair of eyes.

SUPPORT SERVICES
Dresdner Kleinwort has raised Homeserve from add to buy and repeated its 2207p target following the AGM. It says the shares are trading significantly cheaper than its discounted cash value, but will be overshadowed by the group's bid for Domestic & General.

TECHNOLOGY
Bridgewell has downgraded technology outsourcing specialist Xansa from buy to neutral following a 130p-a-share offer from Group Steria. It says this represents a full price and is unlikely to be bettered by any Indian outsourcing company.

TELECOMS
JMP Securities has raised Motorola from underperform to perform following a 6% decline in the price since 19 July, when the company reported a quarterly loss on shrinking sales, especially in its mobile-phone business.

TRANSPORT
Merrill Lynch jacked up its National Express target by 80p to 1340p and repeated its buy rating to account for UK restructuring, which could save £11m a year. First-half results were solid with the shares destined for better things.

UTILITIES
Bid speculation drove Pennon higher again yesterday. But brokers say rising interest rates are likely to deter private-equity companies because they would be unable to extract value. Instead, such suitors may turn their attention to Pennon's waste arm, Viridor.

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