Market report: Thursday close
BG Group rallied 29p to 1260p today following the shares sell-off yesterday that greeted record first-quarter profits. Judging by today's comments, brokers are unable to agree on prospects for the oil and gas explorer, which has been tipped in the past as a bid target for BP, 6p less at 605p, or Shell, 19p down at 2009p.
Mickey Clark, Evening Standard
BG slumped 6% yesterday despite reporting a 70% rise in operating profits to £1.4bn. But the company also announced the proposed acquisition of Origin Energy, Australia's secondbiggest gas and electricity supplier, for £6.1bn. Citigroup suggests the terms of the bid may be too generous, and appear to have caused 'equity investor unease'.
It continues to rate the shares a sell although it has raised its target price from 1000p to 1100p to reflect the firstquarter results, which came in 22% above its own forecast.
Credit Suisse has none of these reservations about BG. It has jacked up its target from 1385p to 1415p and repeated its outperform rating. It says: 'If the deal gets done at Origin's current share price, it will likely prove accretive to BG's longer-term global gas strategy.'
Shares generally traded in a narrow range, hamstrung by the fact that much of Europe and the Far East is closed today for May Day celebrations. Not even a quarter-point cut in US interest rates to 2% was enough to inject any goodwill into the market place. All eyes are now focused on tomorrow's US nonfarm payroll numbers. But the FTSE 100 index managed to claw back an opening fall to finish unchanged at 6087.3. Wall Street also made headway after a slow start, the Dow adding 51.62 at 12,820.13.
The turnaround again hinged on the mining companies with Kazakhmys climbing 33p to 1615p, Anglo American 65p to 3334p and Xstrata 86p to 4032p. Chilean copper miner Antofagasta rose 10½p to 792p despite Deutsche Bank trimming its target from 766p to 755p, claiming it sees the company's margins coming under increasing pressure as costs continue to grow. It says production levels remain on target but the rising cost of acid and energy is starting to cause trouble. It has repeated its hold rating on the shares.
British Airways led blue-chips higher with a much-needed rise of 16¼p to 243p following a move to hold talks with Continental Airlines and American Airlines about a possible alliance. UBS says BA is likely to apply to US regulators for anti-trust immunity.
Rank Group rose 5¾p to 94¾p on turnover of 70m shares after Evolution Securities repeated its buy rating on the shares. The broker says the Mecca Bingo and Grosvenor casinos operator will benefit from proposed changes to the gaming laws. Minister for Sport Gerry Sutcliffe expects to announce help for the bingo industry within the next few weeks.
Citigroup says the worsening UK economy could spell bad news for the newspaper industry, and this has already been reflected in a slump in classified advertising. But it is puzzled by the outperformance of shares in Daily Mirror publisher Trinity Mirror over those of regional newspapers group Johnston Press. The latter may have more debt, but Trinity's regional newspapers are struggling in the classified advertising market and, says Citigroup, there are additional risks to its national titles from retail advertising.
It remains a seller of Trinity, down 5¼p at 267p, and a holder of Johnston, ¾p cheaper at 123½p. UBS reckons the advertising decline is likely to worsen. It remains cautious on all UK newspaper publishers, and says this will be reflected in the forthcoming interim dividend reporting season. It also rates Trinity a sell.
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TOMORROW'S AGENDA
• After issuing another profit warning last week for its City Link delivery business, parcels-to-pest-control group Rentokil delivers a first-quarter trading statement. It is tipped to report a drop in pre-tax profits to £40m from £52m last time.
• Activity in the construction sector is believed to have slowed in April, for a second consecutive month. Analysts expect the headline Purchasing Managers Index figure from the Chartered Institute of Purchasing and Supply will have dropped from 47.2 in March to 47.0 while its report is forecast to show constructors' costs are continuing to climb because of higher metal and fuel prices.
• April's non-farm payrolls will give an update on the health of the US economy. Experts predict 80,000 jobs will have been lost last month, the fourth month in succession employers have cut staff.
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