Market report: Wednesday close

By Mickey Clark for MailOnline
Updated: 11:59 EDT, 1 August 2007

Just when City investors thought it was safe to move back into the stock market they found themselves on the receiving end of yet another mauling by the bears.

In a jittery day for traders and investors alike, the FTSE 100 index managed to reduce some of the damage, reducing its deficit by the close to 109.5 at 6250.6, having been 173 points down at its worst. Some brokers say this showed just how flimsy yesterday's rally was.

It followed a dramatic session on Wall Street overnight, where the Dow reversed a 140-point rise to finish 146 down as more casualties emerged from the debt markets credit crunch. Wall Street made a nervous start this afternoon with the Dow rose 19.20 to 13,231.20.

Cadbury Schweppes fell 51p to 569p following a disappointing response to half-year numbers and fears that it may not find a buyer for its US soft-drinks business. Speculative buying lifted ICI 3½p to 627½p amid speculation Dow Chemical of the US may launch a counterbid. Earlier this week, ICI rejected a higher offer of 650p a share from Dutch rival Akzo Nobel.

While the rest of the market suffered, shares of Wood Group raced-up 15p to 340½p on heavy turnover of fivem shares. Once again there is talk that the oil services may soon be on the receiving end of a bid approach.

The reason for a surge in easyJet stock yesterday has become apparent with news that Blackrock Inc has bought 21.33m shares, stretching its indirect stake to 5.09%. The no-frills airline says it also plans to introduce a new route from Glasgow to Paris Charles De Gaulle. The price marked time today 511p.

Billionaire Mike Ashley is continuing to splash money around. Sports Direct International, 1½p off at 147½p, the company he brought to market earlier this year, has spent almost £40m doubling its stake in Amer Sports, the owner of ski brands Salomon and Atomic and the Wilson tennis and golf brand, to 10.64%.

In recent weeks, Ashley has spent £48m on a 1% stake in German sportswear maker Adidas and £91m on Everlast Worldwide, the boxing brand.

Sports Direct shares have slumped since they were floated, beset by two profit warnings, but Ashley netted £929m from the sale. Last month he took control of Newcastle United. Panmure Gordon has repeated its sell rating and 130p target. The broker is worried about Sport Direct's 'scattergun acquisitions'.

Citigroup has raised HSBC, down 13½p at 900½p, from hold to buy and increased its target price from 1000p to 1050p in the wake of yesterday's profit numbers. It reckons US subprime mortgage risk for the bank is becoming immaterial, with HSBC expecting no serious contagion from its exposure.

Bodycote fell 3p to 269p despite news that directors are buying more shares in the industrial machinery group. Chairman James Wallace has bought an extra 50,000 at 269.98p, stretching his total holding to 107,287 shares, or less than 1% of the company.

TAKING STOCK: Market news at a glance

Banking & finance

Merrill Lynch has lifted Alliance & Leicester from sell to neutral after last week's profit numbers. The broker says the mortgage provider has progressed on margins, costs and capital and earnings momentum is better.

Building & property
UBS has upgraded Rightmove from neutral to buy and repeated its 680p target. The broker says the recent fall in shares of the online estate agent has been overdone and strong earnings upgrades are likely over the next year.

Consumer
It could be disappointing summer for Signal toothpaste-to-Lipton tea group Unilever. Merrill Lynch has put the shares on its least-preferred list for August and expects them to suffer as talk of a buyout fades and trading gets tougher.

Economy
Consumer confidence grew in July as rising interest rates failed to dampen Britons' optimism about the economy. Nationwide building society's index of consumer sentiment, based on interviews with 1020 people, rose one point to 96 after declining slightly in June.

Engineering
Engineer Rotork impressed Bridgewell with sparkling interim results yesterday but the broker is sticking with its underweight rating as the shares are generously valued. Numis is still a buyer and has raised its sights from 1038p to 1109p.

Health
GlaxoSmithKline has won a green light for diabetes drug Avandia, despite its heart-attack link. But Merrill Lynch is still a seller, Bear Stearns has repeated its underperform rating and WestLB has cut its target from 1590p to 1440p.

Industrials
Credit Suisse remains neutral on Ultra Electronics but has raised its target from 1160p to 1190p following interim results yesterday. Citigroup raised its rating from hold to buy but lowered its sights on the price from 1350p to 1250p.

Leisure
Teather & Greenwood has repeated its hold rating and 320p target for Games Workshop after the fantasy figurines group reported a £2.9m full-year loss yesterday. The broker says the shares are fairly rated short term but is convinced of longer-term growth prospects.

Media
Trinity Mirror today sold its London and South-East regional newspapers group to Tindle Newspapers, private owner of a string of papers in Wales, the West Country and Hampshire. Tindle is paying £18.75m for the 27 titles.

Natural resources
African Eagle Resources is raising £7.4m via a placing in South Africa. The mineral exploration company will also list on the Alternative Investment Market of the Johannesburg Stock Exchange later this month.

Retail
Merrill Lynch has repeated its buy rating on Tesco but trimmed its target from 495p to 470p based on ongoing value, not property assets. The shares should perk up, having been hit by wet weather and the slowdown in consumer spending.

Support services
Reliance Security Group founder and chairman Brian Kingham has made an agreed bid of 916p a share for the firm, valuing it at £197m. He owns 70%, or 15.1m Reliance shares. He has received an irrevocable undertaking from Artemis in respect of its 4.8% holding.

Technology
Oxford Instruments has completed the sale of its Eynsham property and net proceeds were £2.5m. The hi-tech tools and systems specialist says it became surplus to requirements after restructuring its superconductivity businesses.

Telecoms
Aim-listed telecom industry payment services outfit Billing Services Group is to provide data clearing services for Telstra Corporation in addition to the financial clearing services it already carries out for the company.

Transport
Goldman Sachs raised easyJet from neutral to buy on the back of results from rival Ryanair. It says charter competition may ease during the winter and management has been incentivised to achieve a 15% return on equity in 2008.

Utilities
EDF Energies Nouvelles has agreed with MidAmerican Energy to operate and maintain four wind farms with 508.5 megawatts of capacity, and to build 75 MW of additional capacity. The four farms have 339 turbines and a further 50 will be bought from General Electric.