Market report: Thursday close

 

Lehman Brothers reckons the heavy selling of shares created by the commercial property market slump has been overdone and provides a good opportunity for stock market investors to start buying.

The American broking house expects the prime real estate market in the UK to emerge from the credit crisis 'devalued but basically stable&39;.

The real estate investment trust (Reit) sector has slumped by 37% and the share discounts now being seen are excessive, it says. It has reduced its own forecasts for net asset value and target prices in the sector by some 4% and will focus on the Budget next March for further information.

Meanwhile, Lehman has raised its stance on shares in Hammerson, up 18p at 1056p, from equalweight to overweight based on valuation. But it has lowered its sights on Derwent London, 39p better at 1539p, from 1897p to 1804p; Great Portland Estates, 4p cheaper at 482¾p, from 639p to 601p; Land Securities, 13p higher at 1520p, from 1901p to 1851p; and Mapeley, 28p lower at 1395p, from 3198p to 2893p. All are rated overweight.

Those kept on equalweight include-British Land, 8½p lighter at 931½p, which has seen its target cut from 1375p to 1304p; Brixton, 4¾p better at 301¾p, from 511p to 479p; Liberty International, 5p lower at 1138p, from 1224p to 1182p; and Segro, ¼p off at 450p,from 695p to 659p.

The decision by the Bank of England monetary policy committee to cut rates by a quarter-point to 5.5% produced a feeling of anticlimax in the Square Mile. Dealers complained the move had already been priced into the stock market by the time the announcement came at midday. The FTSE 100 index briefly ticked higher, touching a peak of 6591.8, before eventually moving into reverse to nurse a loss of 8.2 at 6485.6.

Some investors saw confirmation of the lurch towards cheaper money for the first time in two years as a signal to take profits.

On Wall Street, investors are continuing to pin their hopes on a further cut in rates when the Federal Reserve meets next week. Wall Street ticked better this afternoon, extending yesterday's gains. The Dow advanced 22.20 points to 13,467.20.

Dealers warned that the repercussions for the stock market if the MPC had not cut rates did not bear thinking about. As it was, few of them would get rich on the current low levels of turnover. A paltry 1.2bn shares had changed hands by this afternoon.

Royal Bank of Scotland, up 12¾p at 478½p, has managed to limit its write-off on the subprime mortgage collapse to £1.25bn. Collins Stewart has raised its rating from hold to trading buy, and says it will look again at its 466p target.

HBOS was up 13½p at 813p, Barclays was down 1p at 553p and Alliance & Leicester was 14p to the good at 696½p. Bradford & Bingley slipped 8¾p to 283½p despite Goldman Sachs cutting its rating on the mortgage lender from neutral to sell.

Dealers say the cut in interest rates may be a case of too little, too late for retailers in the run-up to Christmas.

More than 23m Debenhams shares were traded as the price retreated 4¼p to 85p, just off its low for the year, while Mike Ashley's Sports Direct International rose ¼p to 101¼p.

ImmuPharma, 1½p firmer at 65p, will start separate phase 2b and phase three trials for its drug IPP-201101 in patients with systemic lupus erythematosus after talks with the US Food and Drug Administration.

The drug company says the revised plans allow it to have additional phase two data, which has the potential to enhance the drug's commercial attractiveness earlier than previously expected.

Interest rate news, advice and predictions

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Bank of England

TOMORROW'S AGENDA

• All eyes will be on easyJet as Britain's biggest budget airline reports traffic statistics for November. The carrier last month posted record full-year results, and chief executive Andy Harrison said he remained upbeat about future trading. But fears are growing that the consumer slowdown will hit passenger numbers. Archrival Ryanair this week admitted it had had its worst November this decade, with its load factor - the percentage of seats filled - slipping to 78%. Rocketing fuel prices remain a further worry for the industry.

• In the US, the Bureau of Labour Statistics releases its employment report, including November's non-farm payrolls. These are closely analysed by the Federal Reserve, and will influence next Tuesday's interest-rate decision. October's figures surprised Wall Street, coming in far above expectations with 166,000 jobs created. Economists feared rising jobless claims indicated a substantial slowdown in growth this month but yesterday's estimate by payroll processing firm ADP, regarded as a good predictor of offical data, made many revise their forecasts upwards

• Surrey-based builder Berkeley delivers first-half results. June's full-year results were strong as London house prices soared, but the interims may disappoint. Concerns are growing for the health of the property market after reams of poor data. Analysts predict pre-tax earnings of about £90m.

Next week's TiM newsletter will include a round-up of interest rate and house price predictions. Don't miss it...