Market report: Friday close
Fresh hopes that struggling High Street bank Alliance & Leicester might be put out of its misery injected momentum into the ailing stock just hours before the market was due to close.
The Evening Standard's Sarah Marks
Alliance & Leicester shot up 30½p to 510p, a rise of more than 5%, as investors detected a takeover message hidden in Lloyds TSB chairman Sir Victor Blank's words.
Sir Victor, speaking as Lloyds announced better-than-expected profits, refused to rule out an acquisition of a rival. He said: 'We will look around all the time to see if there are opportunities', although he underlined the bank's commitment to grow organically too.
Dealers said A&L, in the wake of its falling share price, was now on bid alert and Sir Victor's words could not fail to stoke speculation. A&L's stockmarket value has halved since August last year and now looks like a tasty morsel for a UK or foreign player. Lloyds TSB rose 20¾p to 457½p
After the FTSE 100 spent most of the day below 5900, a shaky opening on Wall Street killed off all hopes that blue-chip shares might end the week above 6000 but the index closed 43.72 points down at 5888.5. In America, a brief opening rally was quickly obliterated as US investors took flight and the Dow Jones dipped 34.20 points to 12,250.10.
In London, the biggest movement of the day was the stampede out of the retail sector, with almost every High Street name clocking up significant falls. The generally invincible John Lewis admitted that last week was one of the 'toughest' in recent memory, and sales were 3.4% down on the same week last year. The City is clearly beginning to factor in a longer and deeper downturn than previously entertained.
Charles Nichols at Iceland's Landsbanki treated his clients to a gloomy 52-page analysis of the retail sector. He warns that a slump in share prices means many stocks look temptingly cheap, but says the worst of the current slowdown is yet to come, and he views 'earnings risks as material'.
Nichols has taken a red pen to his profit forecasts and concludes that 2008 is going to be worse on an aggregate level than 2005. The stocks to avoid are, in his view, Marks & Spencer and Debenhams, both downgraded to reduce, and Next, cut to hold. Marks, down 19p at 398½p, is worth 45% less than it was last spring, while Next was the City's least popular shop, down 66p at 1291p.
Other companies he says should be swerved are the likes of Kesa, 7¾p lighter at 219p, and DSG, down 2½p at 63¾p, which are vulnerable to the internet. Conversely, he says, web-based stores such as ASOS are worth stocking up on. Nichols also favours stocks such as Ted Baker, 5p lower at 485p, and Topps Tiles, off 2½p at 140½p.
The pubs sector also faces weaker consumer spending, and Goldman Sachs advises clients to get out of JD Wetherspoon, 20p adrift at 307¼p, and Enterprise Inns, off 16½p at 413¼p. The broker says the smoking ban and less disposable income will mean lower rental income and a decline in pub freehold values over the next 12 months.
Sportingbet bucked the market trend, rising 1½p to 43p on the back of rumours of a 70p-a-share bid as early as next week. Word is that Austrian outfit BwinInteractive Entertainment, which was sniffing around last summer, is back on the prowl.
Domino's Pizza vice-chairman Colin Halpern cashed in a chunky slice, offloading two million shares at 206p each to cut his stake to 12m shares, or 8%. Domino's was up 7p at 218½p.
Aim-listed property developer Oak Holdings has signed a deal with Rotherham council to build a £350m leisure resort in an abandoned coalfield in South Yorkshire. Oak was up 5p at 33½p.
Stock market information
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MONDAY'S AGENDA
• Associated British Foods, that old-style conglomerate ranging from Kingsmill breadto-Primark fashion, will give us the latest view on two suffering parts of the economy: the High Street and food prices. Poor grain harvests and more expensive fuel have made food the biggest driver of inflation in the UK and show no sign of easing. High Street sales have been battered by the downturn in consumer confidence. Primark has always been among the best managed of the chains and has traded pretty robustly, while also increasing store space.
• Developer Hammerson, which will announce full-year results, got an unpleasant Valentine's Day present from Goldman Sachs, which hacked back its price target on the shares from 990p to 870p and told investors to sell. The shares slid but then rallied to 1096p. Goldman frets about its lack of financing strength and difficulties finding tenants.
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