Market report: Wednesday close
Rec
Rosamund Urwin Evening Standard
As crude broke through the $130-a-barrel level and a growing number of speculators predicted it will hit $150 by 2010, investors rushed to buy into oil companies.
Oil and gas explorers BG Group and Cairn tussled for the top spot on the Footsie leaderboard, with Cairn eventually emerging victorious, climbing 162p to 3681p. BG put on 72p to 1394p. Tullow Oil followed the duo's lead, rising 35½p to 969p.
Footsie to take elevator down
Our new stock-market watcher Graeme Dickson called Tuesday's drop in the FTSE 100 last week. Read what he says in this week's column
about the Footsie's short-term prospects.
Oil giants Royal Dutch Shell and BP were among the day's other big winners. Shell's A shares advanced by 101p to 2242p while the B shares climbed 100p to 2212p. BP's gain of 21¾p to 649¾p came despite a double whammy of bad news as Gazprom ruled out a joint venture with the company this year, and its Moscow offices were again raided by the Russian security services.
There was evidence investors were on the lookout for bargains as miners recovered slightly from yesterday's mega sell-off. Kazakhmys fell slightly by 3p to 1789p, Anglo American moved 62p higher to 3515p and BHP Billiton was 43p dearer at 2066p. Broker sentiment on the sector also improved, with UBS increasing Vedanta Resources' price target to 3100p from 2600p. The shares shot up 75p to 2712p.
But the strong showing from oil and mining shares did little to boost the FTSE 100. The index lost much of its early gains, and was up just 6.5 points at 6198.1 as investors were spooked by the oil-price spike. In New York, the Dow extended last night's losses, falling 158.12 points to 12,828.68.
Minutes from the Bank of England monetary policy committee's interest rate-setting meeting did little to improve the mood in London, as they reiterated that inflation would limit the scope for rate cuts. Banking stocks were hit hard by the reminder that rates would not fall fast.
As hopes of cheaper mortgages sank, Royal Bank of Scotland fell 12½p to 241½p with more than 170m shares changing hands. Fellow financials HBOS and LloydsTSB also suffered, HBOS sinking 19¾p to 445½p and Lloyds falling 8p to 394¾p.
Despite breaking through the £1bn profits barrier yesterday, Marks & Spencer remained out of favour. In a note typical of analysts' sceptical comments of late, top retail watcher Nick Bubb of Pali International again advised clients to sell the shares. He reckons next year's profits will tumble to £875m as debts rise and cash flows out of the business, and believes 325p is fair value for the stock.
His views were echoed by Société Générale, which cut its target price for Sir Stuart Rose's chain to 328p from 359p. JPMorgan was the only one with anything good to say, raising its target to 370p from 350p although it too warned that market conditions could prove challenging. M&S crashed below 400p yesterday, and were today down 2½p at 393½p.
The rest of the retail sector was also hit, with Argos and Homebase owner Home Retail Group shedding 16¼p to 232¾p as it went ex-dividend and Kingfisher, which owns B&Q, off 5p to 134.9p.
Brokers took against Yell after its decision to slash its dividend sent the shares sinking yesterday. Credit Suisse slashed its target for the Yellow Pages publisher from 275p to 140p but kept its neutral rating, saying cost-cutting measures should help offset the impact of deteriorating revenues. Citigroup reduced its target to 333p from 360p but said it believed the divi cut would increase the company's financial flexibility. The shares slid 23¼p to 130¾p.
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TOMORROW'S AGENDA
• The London Stock Exchange is expected to deliver a 50% profits jump, boosted by high trading levels and its Borsa Italiana buy. But it has been outed as the most shorted stock on the Footsie as traders bet its future will be a lot less rosy. They predict business will drop off and competition from start-ups will grow.
• Analysts say Cable & Wireless will post a fall in revenues but rising profits in its full-year figures. The telecoms giant, which has reportedly started work on the demerger of its UK and international arms, is expected to reveal the findings of its pensions review - considered key to any future separation.
• Baby products seller Mothercare is forecast to shrug off the retail gloom, with profits up almost 50%. But the outlook across the retail sector is likely to prove less bright, with April sales figures from the ONS expected to show trade slowing as consumers curb spending.
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