Market report: Tuesday close

By Mickey Clark for MailOnline
Updated: 12:07 EDT, 14 August 2007

Brewer Scottish & Newcastle raced to the top of the blue-chip leader board today with a jump of 7½p to 580p on talk of stakebuilding in the shares as the prelude to a full bid.

More than 20m shares changed hands in the John Smith's bitter and Kronenbourg lager group, leading to claims that its joint venture partner Carlsberg was in the market-place picking up shares at around 590p.

Brokers say the story is not a new one, but City speculators reckon a bid for S&N is inevitable at some stage. Carlsberg and S&N already have a link in that they have now established themselves as Russia's biggest brewer with their BHB joint venture.

Share trading generally remained unstable. Shares opened sharply lower but soon rallied on better-than-expected inflation numbers. Prices were later becalmed, with the pound dipping back below the two-dollar mark for the first time since June as the prospect of another interest-rate rise receded. However, after a weak open on Wall St, the Footsie made its second U-turn of the day as share prices plummeted in the last couple of hours of trading.

The FTSE 100 index fell 75.5 to 6143.5 and dealers remain concerned that more hedge funds are facing financial difficulty on the back of the credit crunch. Wall Street suffered fresh falls this afternoon, leaving the Dow down 86.20 at 13,150.30.

The weaker pound was good news for big exporters and dollar-earners, such as Pearson, up 2p at 767p, and Reuters, 1p better at 611p, which both rallied from opening falls.

Dealers are using stock-market volatility to identify value in companies that have been oversold. Credit Suisse reckons investors need look no further than BT Group, up 2½p at 310½p. More than 80m shares were traded, making it the second-most heavily traded stock in the market.

The broker raised its target price from 270p to 305p as it highlighted BT's cost-cutting efforts and the slow take-up of full local loop unbundling in the UK. It has also raised its earnings forecast for the years 2008 to 2011 by between 2% and 7%, and is now ahead of City consensus for next year and 2009.

Citigroup has repeated its buy rating on brewer and pubs operator Greene King, down 2p at 945p, but has cut its target from 1313p to 1200p because of uncertainty over a possible property deal. The broker believes the company's growth prospects, track record and property backing, warrant a higher rating. The chief executive and finance director have recently bought shares, and Citigroup believes investors will follow their lead.

UBS has tweaked its target price for Old Mutual, 4.4p cheaper better at 155.3p, by 10p to 220p and repeated its buy recommendation following last week's interim results. It said the insurer has had continued strong sales and improving margins, with life sales well ahead of expectations, particularly in the US and South Africa.

Assay results from Aim-listed Thor Mining's Hale River project in Australia have returned more than 100 parts perm of uranium. But drilling on the Plenty Highway project, also in Australia, has been postponed because of ground inspection and clearance delays. Thor was 0.88p cheaper at 8.13p.

Digital advertising company Screen FX fell 0.06p to 0.25p after breaking off talks with a major advertising company over the sale of its retail malls business.

TAKING STOCK: Sectors at a glance

Banking & finance
Venture capitalist 3i has fallen 15% in the past couple of months, affected by the fall-out from the debt crisis, But UBS believes the shares have now fallen far enough and has raised its call from sell to neutral with a 1098p rating.

Building & construction
Forth Ports ran into profit-taking after climbing last week on bid talk. City gossips say an approach it is only a matter of time. The hot money claims Peel Ports is the most likely suitor although it could be followed by others.

Consumer
Holidaying Britons are more likely to be victims of theft in Spain than anywhere else, a survey by swiftcover.com has found. According to the poll, one in six of us have had something stolen on holiday.

Economy
China's retail sales grew at their fastest pace in more than three years, buoyed by a stock market rally and higher wages and prices. Spending climbed 16.4% to 699.8bn yuan (£45.7bn) in July from a year earlier, the National Bureau of Statistics said today.

Engineering
Evolution has repeated its buy rating on VT Group but cut its target from 800p to 725p, citing the value of the shipbuilding operations after its venture with BAE Systems. The 13% fall in VT's share price from a 628p high is an opportunity to buy.

Health
GlaxoSmithKline has denied reports it may cut the US sales force for its diabetes treatment Avandia. The Food and Drug Adminstration has advised that Avandia should carry a warning of increased risk of heart attacks for certain patients.

Industrials
Credit Suisse has begun coverage of plumbers' merchant Wolseley with a buy rating and 1150p target. The broker says near-term share price sentiment will be dictated by the US housing downturn and rising European interest rates.

Leisure
KBC Peel Hunt has repeated its buy rating on brewers Greene King, and Marston's and bar operator Luminar. The broker says Greene King shares remain excellent value, and adds that the Loch Fyne restaurants acquisition was well-judged.

Media
Shareholders of Radio broadcasting giant Clear Channel Communications will vote on its proposed $19.6bn (£9.7bn) takeover by private equity firms on 25 September. Bain Capital and Thomas H Lee have offered $39.20 a share.

Natural resources
Evolution expects ICI shareholders to back Akzo Nobel's increased 670p-a-share offer. The broker predicts the shares will trade around 640p for now and says holding a position in a bid arbitrage situation has attractions.

Retailing
Kesa is oversold, says Pali International, which has moved the shares from neutral to buy. It says the break-up value of the business is highly attractive, with private-equity bids for the But division on the way.

Support services
Altium sees any weakness in the Michael Page share price as a buying opportunity. Net fee income during the second quarter grew strongly but the recruiter has been harder hit than its peers by the market correction, partly due to its own liquidity.

Technology
Northgate Information Solutions has won a five-year contract worth £1.8m to provide infrastructure and services to deliver a secure and an efficient new email, calendar and archiving system for users of Newcastle and North Tyneside councils.

Telecoms
Motorola has won contracts worth $394m (£195m) with China Mobile Communications for GSM network expansion. The contracts were signed in the first half and about 60% of revenues were recognised in that period.

Transport
Collins Stewart has tipped National Express as a trading buy. The broker had previously awarded the shares a hold rating and 1110p target, but reckons there is scope for improvement if it can win the East Coast main line franchise.

Utilities
Citigroup has upgraded Thus Group from hold to buy, saying the shares look cheap after the recent sell-off. Shares of the telecom operator, spun off from the National Grid, have fallen almost 30% from recent highs, and now provide a buying opportunity.