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Market report: Wednesday close

By Rosamund Urwin
Updated: 12:13 EDT, 9 July 2008

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Southern Cross stormed up the FTSE 250 leaderboard today on reports that buyout groups are circling the care-homes operator.

Market reporter: The Evening Standard's Rosamund Urwin

It was left looking closer to death's door than most of its occupants last week after admitting it was suffering the effects of higher-than-expected 'attrition rates' - its term for a greater number of residents than usual passing away.

Following a miserable trading update, the company drew private-equity attention by losing three-quarters of its market value. Today it was buoyed by talk that Blackstone, Apax Partners and Cinven are interested.

But while its board confirmed it has had enquiries from interested parties, it has yet to receive an offer. Nonetheless, Southern Cross's shares shot up by 15¾p, or more than 18%, to 100p.

The FTSE 100 recovered from yesterday's losses to close up 89.09 points at 5529.6 but on Wall Street, the Dow was 51 points lower at 11,333.2.

In a reversal of recent fortunes, heavyweight banking stocks gave a fillip to the blue-chip index while oil shares put the brakes on the rise. Banks shrugged off a note from Credit Suisse, which cut target prices across the sector, and were boosted instead by talk of new short-selling rules from the FSA and London Stock Exchange.

Lloyds TSB was up 19p at 304¾p, Barclays was 14¼p dearer at 293¼p, Royal Bank of Scotland rose 7.85p to 202¾p and Legal & General put on 5.2p to 101½p.

Yesterday's retail-sector rally continued-somewhat half-heartedly amid scathing comments from brokers. Marks & Spencer jumped 2½p to 234p, Next soared 27½p to 900½p and Home Retail Group put on 2¼p to 206p.

Lehman and HSBC jumped on the bandwagon of brokers turning against M&S in the wake of last week's profit warning. Lehman has downgraded the retailer from overweight to equalweight while HSBC has cut its target price from 400p to 320p.

SocGen stuck the knife into J Sainsbury, believing grocery shoppers will increasingly trade down as they try to rein in spending, and it will be Sainsbury's that loses out. But traders ignored its cautionary note and the shares put on 1¼p to 290p.

ITV also proved popular with investors, climbing 2.9p to 43p, but remained unloved by brokers. This time UBS dealt the blow, slashing its target price for the group from 50p to 28p and reiterating its sell rating.

UBS warned that its dividend is likely to be cut to just 1.8p in 2009 from 3.2p in 2007. It said it could only recommend the broadcaster once a full advertising recession is priced into the shares.

It was a turbulent day for Moneysupermarket.com, whose shares lost 32% yesterday. Investors ditched the stock after the price-comparison website warned that the shock closure of Barclays Bank's FirstPlus secured loans business would hit revenues by up to £5m next year.

It started today as the biggest loser on the FTSE 250 before staging a dramatic turnaround to become one of the mid-cap index's big winners by lunchtime. The shares closed ¾p up at 60¼p.

Speculative support drove eastern Europe-focused chain Coffeeheaven up 3p to 43p during the trading day but it eventually closed 3½p down at 36½p. Vague rumours were that the Aim-listed company had attracted interest from Whitbread, 13p dearer at 1078p, and that the leisure group was considering a bid at 60p a share. Whitbread has been mooted as a potential suitor in the past.

SkyePharma lost ground again, down 0.48p to 3¼p. Shares in the drug developer crashed 32% yesterday after it admitted negotiations to refinance its debts had collapsed.

TOMORROW'S AGENDA

• The Bank of England announces its interest rate decision at noon. Surging inflation and recessionary fears leave little room for the monetary policy committee to manoeuvre, and it is tipped to leave rates on hold at 5% for the third consecutive month.

• Barratt Developments ends a busy week for the long-suffering housebuilders with a trading update that is likely to write down the value of its land holdings by about £100m. Investors will hope the company will also reveal it has renegotiated a refinancing package with its bankers.

• After hitting the headlines last month amid allegations its cheap fashion chain Primark had been using child labour, Associated British Foods will be back in the spotlight as it updates the market on trading. Broker Panmure Gordon expects a solid performance from the grocery division.

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