Market report: Friday close

By Sarah Marks for MailOnline
Updated: 12:14 EDT, 7 September 2007

Shares in London slumped again today as Wall Street reacted to some of the worst US employment figures for years. Commentators who had expected a rise of 112,000 were stunned by news of a 4,000 drop – the first non-farm jobs fall for four years. The Footsie, which had been in positive territory above 6300 for most of the day, plunged in anticipation of a big fall in New York. As the London market closed 122.1 lower at 6191.2, the Dow Jones was off 213 points.

Controversial UK defence contractor BAE Systems jumped 6p to 454p on reports it is set to close a deal to supply 72 Eurofighter Typhoon jets worth £20bn to Saudi Arabia next week.

Hopes of an imminent contract overshadowed the $49m (£24m) deal announced by the engineer today to develop a system for the US Navy that can identify and track camouflaged objects and targets.

However, one analyst said such a long-term deal with the Saudis would generate little profit in the early years, and he 'wouldn't rush to raise forecasts'. But others said a contract this size translated into 50p to 70p a share, and this was not yet reflected in the price.

BAE was one of just a handful of blue-chip stocks to remain in positive territory. Credit crunch bears further tightened the screws on the banking sector with most of the major High Street banks struggling to make headway in a sea of bad news and rumours.

Barclays was sorely punished, down 19p at 589p. Word is that Barclays' $2bn sale of five-year treasury notes, under way this morning, had fallen far short of expectations.

This, together with management's refusal to come clean about its exposure to the subprime mortgage debt, not to mention the ABN Amro situation, meant Barclays suffered heavy selling.

In addition, rumours of an imminent profit warning from Société Générale spooked investors across the sector. Strident denials from the French bank failed to reassure the market and Alliance & Leicester slipped 40½p to 956p, or 4%. Royal Bank of Scotland, another casualty of the ABN Amro uncertainty, fell 26p to 532p. Hedge fund manager Man Group was another loser, down 17p at 477¾p.

But software firm Sage managed to hang on to early gains, up 4¼p at 243p, after UBS upgraded its call from neutral to buy and lifted its target by 20p to 285p ahead of next month's trading update. UBS thinks concerns surrounding the Emdeon unit have been overdone and believes growth opportunities are good.

J Sainsbury also remained safe, 5p higher at 547p. Investors took heart from a report by analysts at SocGen that gave Delta Two's £10.6bn bid approach a 90% chance of succeeding. It argues that neither party can afford to walk away from the deal and notes that the supermarkets group has granted the Qatari-backed bid seven weeks to get its act together compared with the four weeks it bestowed on former bidder KKR.

Delta Two has nearly £2.5bn tied up in Sainsbury's shares through its 25% stake and the French bank has lifted its recommendation from buy to hold.

Outside the FTSE 100, Arena Leisure was lifted by news that its groundbreaking plans to build a casino at Wolverhampton racecourse will get the go-ahead. Up 3¼p at 64¾p, Arena has been told plans for the Racino will not be reviewed by the Secretary of State and therefore planning permission has been secured.

Arena is planning a £23m development including a swimming pool, conference suite and hotel as part of its goal to turn its racecourses into all-year leisure destinations.

With a number of retailers reporting next week, investors were casting an eye over the High Street. Morgan Stanley slashed its target price for Next Group from 2600p to 2450p, saying 'revival appears to have been delayed by a tough summer'. The shares dropped 24p to 1879p.

Home Retail Group, the Homebase and Argos owner, was down 16p at 398¼p.

TAKING STOCK: Market news in brief

BANKING & FINANCE
Water Hall, an Aim-listed waste management company with spare cash to invest, reluctantly accepted the takeover of Premier Asset Management, in which it holds 6.7%. Chairman Raschid Abdullah had objected to the bid price but was outnumbered. Water Hall bought into PAM last October and makes a £650,000 profit.

BUILDING & PROPERTY
Property investment banker Robert Fowlds of JPMorgan Cazenove reckons the London office market will be hit as banks scale back hiring during the financial crisis. He said: 'Banks will think twice about taking on a 200,000 or 300,000 square foot letting. Getting someone from financial services to sign on the dotted line is going to be very hard.'

CONSUMER
Bentley dealer HR Owen's shares surged ahead 7% today following last night's admission that it had received a takeover approach. Nicholas Lancaster, chief executive of the upmarket motor seller, pondered a management buyout last year but the current approach is said to be from an outside suitor.

ENGINEERING
ABN Amro has raised its target for VT Group from 525p to 640p and has repeated its buy rating. It says the joint venture with BAE Systems provides flexibility and certainty and gives the shipbuilder the opportunity to accelerate and enhance the development of its support services businesses. This will be reflected in shareholder value.

HEALTH
AstraZeneca is starting final Phase III clinical trials of an experimental arthritis pain treatment with its US partner Pozen. Codenamed PN400, the pair said they expected to submit the drug for assessment by US regulators in the first half of 2009. Astra will pay Pozen an extra $10m (£5m) in milestone payments.

INDUSTRIALS
Marshalls, the paving slabs maker, saw a slowdown in household projects during the wet summer but said people merely delayed, rather than cancelled, their patio and driveway jobs. Government spending plans for building new schools and hospitals also bode well, the group said. Half-year profits jumped 9% to £27m.

LEISURE
Horseracing group Arena Leisure's plans to develop Britain's first 'racino' gambling emporium at Wolverhampton Racecourse got a fillip today as planning permission was granted. The development will cost £23m and, as well as a casino, will include a 170-room hotel and new conference facilities.

MEDIA
Goldman Sachs has upped its price target for BSkyB from 690p to 720p based on subscriber cash returns, but has maintained its neutral rating. The broker said that one-year earnings multiples were challenging compared with the rest of the sector because of the cost of Sky's investment in new business areas.

NATURAL RESOURCES
Cairn Energy today diversified away from its high-profile interest in India, and headed for Tunisia and Europe. It is paying £23m to take control of Plectrum Petroleum, whose most significant holding is off Tunisia, and is paying £12m for MedOil, which operates off Tunisia and in Albania, Spain and Sicily.

RETAIL
After a strong start to the year at Burberry, HSBC has upgraded it from underweight to neutral and upped the target price from 580p to 650p. The bank believes the fashion group, recently seen as a possible bid target, is filling a niche gap in the US market between Coach and Gucci and its retail potential has previously been underestimated.

SUPPORT SERVICES
Balfour Beatty has signed a £200m contract to carry out new project work in Hong Kong, Singapore, Macau and China. Analysts said it is crucial that the infrastructure construction company wins business in the region. Broker Panmure Gordon has maintained its buy rating on the shares.

TECHNOLOGY
Panmure Gordon has repeated its buy rating on nCipher following yesterday's interim results showing pre-tax profits up from £700,000 to £2m. The broker says results were ahead of expectations and has repeated its 280p target. The company has stabilised majority-owned Abridean, for which it received an impairment charge.

TELECOMS
Vodafone today confirmed it was considering buying telecoms networks in Italy and Spain, including those owned by Tele2, which would allow it to supply fixed-line broadband internet to its mobile customers. The company already offers such a service in the UK as part of a broadband and landline package.

TRANSPORT
Eurotunnel is anticipating a scrum as fans head to France for the Rugby World Cup, estimating that 11,000 more cars than usual will travel to the Continent tomorrow. The cross-Channel service is putting on an extra 49 shuttle trains over the six weeks of the tournament in a bid to meet the demand.

UTILITIES
Quoted carbon credits trader Eco-Securities today said volumes have gone up by almost 20% over the past year, generating first-half revenues of €5.6m (£3.8m). The business has e130m of cash on its balance sheet, helped by a recent share placing and by support from Credit Suisse.