Market report: Monday close
Shares of nuclear power generator British Energy, up 19¾p at 451⅖p, started their long-awaited recovery today after being listed as one of the most obvious beneficiaries of any cut in US interest rates by the Federal Reserve.
JPMorgan is one of those calling for the Fed to cut rates by at least a quarter-point at its next meeting in September, following last Friday's half-point reduction in the discount rate, which is uses to lend money to other banks.
The US investment bank says it has identified a number of companies best positioned to benefit from a further rate cut, which are trading significantly off their current highs and at low valuation multiples. British Energy tops the list, having slumped from a peak of 588¼p since May.
At the same time, Goldman Sachs has raised British Energy from neutral to buy and added the shares to its pan-European buy list. It says the decline in the share price following first quarter results means there is now scope for a 28% improvement on the broker's revised price target of 536p.
Meanwhile, Goldman has cut its target for Drax from 821p to 778p to reflect lower oil prices and their impact on power prices at the UK's biggest coal-fired generator. The broker insists this leaves scope for a near-30% improvement in the share price, which traded up 12p at 634½p.
Still in the power generation sector, Morgan Stanley has tweaked its target for International Power, up 3¼p at 402¾p, by 5p to 520p while repeating its overweight rating. It reckons the shares offer excellent value, and believes the sell-off has been overdone because the creditmarket turmoil has little impact on IP's business model and use of debt.
Investors in London continued to build on Friday's gains with the help of a strong performance by Wall Street that spilled over into the Far East this morning. The FTSE 100 index rose 14.50 to 6078.70.
The rally was led by the miners on the back of higher prices for raw materials. BHP Billitonrose 21p to 1275p and Xstrata 67p to 2723p.
Sir Tom Hunter's West Coast Capital has bought a further 60,000 shares in Dobbies Garden Centres, 52½p dearer at 1487½p, at 1417p, stretching his holding to 29.3%.
Scotland's wealthiest man bought the shares on Friday - the same day Tesco's 1500p-a-share agreed offer for the 21-store garden centre group was declared unconditional - and now holds 2.93m.
Tesco, down 2¾p to 400¾p, won the battle for control of Dobbies after receiving acceptances representing about 53% of Dobbies' shares. The offer is worth £228m, including debt, and closed yesterday.
Hunter has ruled out a counterbid for Dobbies despite having paid prices up to 1845p a share and plans to hang on as a minority shareholder. This will prevent Tesco from de-listing the shares.
Discount retailer Hitchens continues to go from strength to strength following last week's flotation on Aim at 0.75p, which valued the business at £80m. Today the shares were up 3.2p at 7.38p. That should be good news for Hitchens biggest shareholder, the Littlewoods stores group.
UBS has raised Tullow Oil, 20½p higher at 450p, from sell to neutral and repeated its 500p target. The oil and gas exploration company's shares have fallen 24% in the past month.
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