Market report: Tuesday close

By Mickey Clark for MailOnline
Updated: 12:39 EDT, 25 September 2007

Barclays shares fell almost 3% in late trading, virtually scuppering any last-minute hopes it may have held for winning the bid battle for Dutch bank ABN Amro.

With Barclays down 18p at 598p, its offer for ABN Amro is now worth almost €10bn less than the rival €71bn (£50bn) bid from a consortium led by Royal Bank of Scotland.

The shares' fall was blamed on rumours that Barclays' US subprime business FirstPlus was about to disclose large losses. But FirstPlus, part of Barclaycard, told staff it had been assured by Barclays that it was committed to growing the business.

Sources close to Barclays pointed out that the group would have had to reveal any unexpected losses immediately during a takeover bid and that the group had said recently that bad debts generally across Barclaycard were improving.

FirstPlus managing director Neil Radley told staff: 'I remain very excited about our future.'

Just a day after telling shareholders that things would get worse at Wolseley before they got better, chief executive Claude 'Chip' Hornsby has waded back into the stock market and topped up his stake in the builders' merchant.

He splashed out £124,126 on a further 15,429 shares at 804½p each. That takes his stake up to 83,795 shares, or less than 1% of the company. Keeping it in the family was Charles Watters, Wolseley's company secretary and counsel who, along with his wife Teresa, picked up 3560 shares at 842½p. They now hold 6360 shares.

Wolseley yesterday reported a 20% drop in profits last year. Hornsby then sparked a sell-off in the shares by warning that the continuing decline in US housing starts had extended to the refurbishment and DIY market. North America now makes up the biggest percentage of Wolseley's profits, and the sales drop will continue to take a toll of profits in the current year.

Wolseley's shares have crumbled by more than 40% in the past three months. Today they rallied 8½p to 816p, against a peak of 1407p in February. Credit Suisse has raised Wolseley from underperform to neutral and repeated its 850p target because it believes the sell-off has been overdone.

Shares generally lost ground following a warning from the International Monetary Fund about the impact on British banks of the subprime meltdown. The FTSE 100 index fell 69 points to 6396.9. That followed by opening losses on Wall Street on fresh evidence this afternoon of a slowdown in consumer spending.

The threat by Prime Minister Gordon Brown to reverse 24-hour licensing hours does not appear to have cut much ice with the pub chains. Tim Martin's JD Wetherspoonwas never in favour of the new licensing hours, pointing out that no pub in the country stays open 24 hours a day. He does not feel such a reversal would have much impact on Wetherspoon's profits in the long run.

The City does not appear to be worrying too much about the threat either, JPMorgan, in its latest review of the pub industry, does not even mention it, preferring to concentrate on fundamentals. The US investment bank has upgraded rival pub operator Mitchells & Butlers, down 7½p to 607½p, from neutral to overweight, while cutting Greene King, down 44½p to 895p, from overweight to neutral.

M&B had been the weakest operator in the pubs sector during the past three months and the discount to its fair value now looks overdone. The weakness in the shares reflects the postponement of its property joint venture with Robert Tchenguiz. JPM believes the deal remains viable and would be likely to go ahead when liquidity returns to the debt market.

Greene King, on the other hand, has been a strong performer but the shares may now be running out of steam. Wetherspoon shares were down 25p to 536p, along with Punch Taverns down 22½p on 974½p. Shares generally lost ground in another day of thin trading after London took its lead from the setback for investors on Wall Street overnight. The FTSE 100 index lost 69 at 6396.9.

Oil explorer Soco International tumbled 141p to 2156p after plugging and abandoning the first well on Prospect '0' on Block 16-1 in the Te Giac Lam 1X field.

UBS has repeated its buy rating on Rio Tinto, down 113p at 4091p, following a meeting with the mining giant and has set a new target of £50 a share, based on 13 times earnings.

The broker says chief executive Tom Albanese is in upbeat mood these days, but the group continues to be run conservatively despite the recent 'headline grabbing' takeover of Alcan. Key commodity prices have been rising and Albanese remains positive about the outlook for iron ore and coal price negotiations. However, he warns China's current rate of economic growth remains unsustainable.

City coverage and share tips

This is Money carries breaking City news throughout the day. Bookmark Companies & Markets and try these markets links...

• Jump-off page to all market data
• Stock market risers and fallers
• Tips from Financial Mail's Midas and other papers
• Latest gossip on stocks and shares
• Latest FTSE 100 charts
• A list of companies in the news today
• Buy and sell stock market investments

Taking stock - sectors at a glance

BANKING AND FINANCE
Numis has downgraded independent reinsurer Benfield from add to reduce and slashed its target price from 320p to 245p. Prospects for revenue growth are limited as insurance companies are expected to spend less money in 2008 on reinsurance. With the chances of a takeover diminished, the broker predicts shares will underperform.

BUILDING AND PROPERTY
Although the housing market is looking tough, Wolseley's full-year results were broadly in line with expectations. However, Citigroup predicts that as a result of uncertainty in the US markets after the subprime mortgage crisis, earnings forecasts for the British building supplies company will be cut by 5%.

CONSUMER
Sir Ian Gibson, non-executive deputy chairman of supermarkets chain Wm Morrison, has made his first purchase of the company's shares. He has bought 108,055, worth almost £300,000, at 276p each. Gibson was appointed in July, and will replace 75-year old Sir Ken Morrison as chairman who is due to retire by March next year.

ENGINEERING
Antonov has reached agreement with Chinese automotive components maker Loncin Holdings to make a small, sixspeed automatic transmission. The companies will work together during the pilot project and will provide €1.2m (£838m) each to fund the initial phase, which will produce prototype demonstration vehicles.

HEALTH
GlaxoSmithKline's cervical cancer vaccine Cervarix, given the green light for use this week by the European Commission, will compete strongly with Merck's Gardasil, which is currently on sale in the United States through a joint venture with Sanofi-Aventis. Cervarix will go on sale throughout the 27 EU countries within weeks.

INDUSTRIALS
Smiths Group is again seen as a target for a break-up bid following its decision to end talks with GE about the creation of a security detection joint venture. Credit Suisse has begun coverage of the defence contractor with an outperform rating and 1160p. Exane BNP Paribas has raised the shares from neutral to outperform.

LEISURE
Ladbrokes is not looking a good bet after Société Générale downgraded it from hold to sell, noting that the gambling firm's rising share price is at odds with the mediocre performance of its shops. The bank also believes the benefits from the introduction of the Gambling Act have already been factored in to the price.

MEDIA
The commercial sales division of UBC Media has won a contract to sell radio's chart show formats the A-List and Fresh 40. The services supplier to the radio industry is planning to integrate the new programmes into a lifestyle and entertainment group which would give the business an audience delivery of 19m adults.

NATURAL RESOURCES
Non-executive director Stuart Pearson has been buying more shares in Sovereign Oilfield Group. He has spent £9,400 on an extra 10,000 shares at 94p each. This raises his stake in the AIM-listed explorer to 24,000, still less than 1% of the company. The Sovereign price has collapsed from a peak of 277½p last year.

RETAILING
Fill your boots with Tesco. That is the message from Citigroup, which has been cautious of the shares for sometime but has now raised its rating from hold to buy. The broker says interim results could produce the weakest likefor-like sales growth for many years, but the food retailer may follow it up with a bullish view of prospects.

SUPPORT SERVICES
Despite Homeserve's trading update confirming business was on track in the first half of the year, Merrill Lynch retains its sell rating, predicting profits growth will slow dramatically. The investment bank values the emergency repairs company at 1424p per share, about 19% below the current level.

TECHNOLOGY
Chief executive Cary Knapton has bought 17,000 shares in Trakm8 at 28p, lifting his stake to 1.39m shares, or 12.11%. Technical director Matt Cowley has bought 1428 shares at 35p and now holds 773,178 shares or 6.7% of the producer of internet-based global positioning system hardware and software for the vehicle telematics market.

TELECOMS
AT&T has beaten Verizon and Qwest to win the $1bn (£500m) contract to build a new-generation phone, data, voice and video network for the US Treasury. The deal is seen as highly prestigious because, in these troubled economic times, the department is home to some of the world's most powerful civil servants.

TRANSPORT
China's first domestic high-speed passenger train, with a top speed of 300 kilometres per hour, will make its debut by the end of this year. The train will seat up to 600 passengers and will operate along the 115-kilometre Beijing-Tianjin route before the opening of the Beijing Olympics, reducing journey time from 70 minutes to 30 minutes.

UTILITIES
Panmure Gordon thinks the future looks bright for Renewable Energy following the publication of its first half 2007 results. The broker has issued a buy rating for the green technology investor and operator, which has secured a period of exclusivity with the vendors of a site for a proposed windfarm in Wales.