Market report: Wednesday close

By Mickey Clark for MailOnline
Updated: 12:06 EDT, 28 November 2007

Britain's High Street banks are still having to come to terms with the fallout from the subprime mortgage meltdown as brokers continue to downgrade.

Today Barclays shrugged off recent weakness with a rise of 30p to 554p on turnover of more than 45 million shares. This was despite UBS cutting its target from 735p to 690p, blaming higher-than-expected consumption of cash in the second half of the year as reflected in yesterday's trading update. But the broker described the recent disclosure of write-offs at Barclays Capital as 'comforting'.

The shares are trading on a 10-year low in terms of a one-year forward price-earnings ratio. Merrill Lynch has also lowered its sights on Barclays from 800p to 715p in the wake of its trader. It reckons the selling, which has been driven by subprime worries and fears of a profits warning, has been overdone.

Meanwhile, UBS has lowered HSBC's target from 940p to 890p, and sharply downgraded the bank's US consumer finance division Household. It forecasts losses of $2.4bn (£1.16bn) at Household, heavily exposed to the US subprime crisis.

UBS adds that HSBC, 16p up at 819p, remains a well-diversified and well-capitalised stock overall, but continues to rate it neutral. Goldman Sachs reckons the banks are looking good value for money following this year's sell-off. The US broking house is urging clients to switch out of high-flying miners and into the banks.

The miners declined to take heed of the message. Antofagasta rose 44½p to 703p and Kazakhmys 50p to 1310p. BHP Billiton, which is currently offering £61.8bn for rival Rio Tinto, leaped 51p to 1569p.

Elsewhere, investors had to endure another rollercoaster performance that saw shares reverse early gains before roaring back into a lead.

The FTSE 100 index climbed 165.5 points to 6306.2, underpinned by a strong performance overnight on Wall Street.

There was some big turnover in Rank Group with more than 17m shares changing hands as the shares raced up 8¾p to 8¾p, making them one of the best-performing second-liners. City speculators say the shares are being moved by a revival of takeover speculation. Once again, the Mecca bingo and Grosvenor casino operator is seen as a target for Harrah's Entertainment of the US.

Word is an all-share offer by Harrah's has been ruled out, and it is now considering introducing a cash element to the deal. Rank shares fell sharply last month after the leisure group issued another profits warning, blaming the impact of the smoking ban on its bingo outlets and the loss of £500-jackpot fruit machines.

The directors of Pendragon recognise a nice little runner when they see one. They reckon shares in the car dealer are looking cheap, after tumbling yesterday on the back of a profits warning. They were up 1¾p to 37&frac;p as some of the bosses topped up their holdings. Chief executive Trevor Finn and non-executive chairman Sir Nigel Rudd have bought a million shares each at between 35¼p and 35½p. Chief operating officer Martin Casha and David Forsyth have bought 280,000 a-piece at 35½p.

BHP Billiton has exercised an option to up its stake in Falkland Oil and Gas's licences off the Falkland Islands. Falkland Oil, up 9p at 143½p, said BHP has raised its interest from 40% to 51% and will pay it an extra $2.75m.

UBS has raised its rating on St James's Place, up 29¾p at 304p, from neutral to buy while cutting its target from 450p to 330p. The broker says the shares have fallen 44% from their peak.