Market report: Thursday close
Dairy Milk maker Cadbury plunged 48½p to 598½p following a bitter downgrading from Merrill Lynch to underperform from neutral.
The broker sliced more than 10% off its target price to leave it at 575p to reflect more expensive capital and receding M&A prospects. Merrill says the only trade buyer left is Kraft.
Cadbury's downgrade was part of a downbeat assessment of consumer product groups across Europe that left Reckitt Benckiser nursing a 129p fall to 2520p. Merrill said the speed and severity of the price earnings contraction amongst leading consumer staple names had been brutal.
And that would just about describe another volatile day for shares. Renewed fears over the state of the economy triggered a fresh bout of selling during the morning session, but the Bank of England's decision to hold interest rates at 5% held up the flow.
Then fresh worries about the state of the US banking system, in particular the state-owned mortgage providers, saw the Dow Jones back on the slide, off 21.9 points at 11,125.5 and the FTSE 100 followed suit, closing 122.8 points down at 5406.8 - or 2.3%. Buyers were once more elusive. While investors are bombarded by broker notes arguing that at this level, Anyold Plc represents exceedingly good value, it's the sell signs that get the response.
Luxury fashion group Burberry, due to unveil first-quarter sales next week, took a mauling with other retailers, following a note from Goldman Sachs. The mackintosh manufacturer slid 26½p to 403p as the broker downgraded it from neutral to sell as part of a bearish review of the European retail sector.
Burberry still has its fans, though. Citigroup analyst Thomas Chauvet points out it is already 25% lower compared with last year and 15% down in the last month, and represents good value. He reckons management will repeat previous guidance of 10% sales growth for the whole year.
Elsewhere in retail, GS's downgrade saw department store Debenhams sank to 34½p, down ¼p, Next drop 5p to 895½p, and Kingfisher slide 5½p to 99p. Experian's results made it the stand-out performer, one of a handful of blue-chips making headway. It gained 28½p at 389¾p.
Outside the FTSE 100, housebuilders were notable performers, on relief - or acknowledgment - that they can't all go bust. Barratt Developments led the mid-caps, up 13p at 67p, while Taylor Wimpey was 4¾p higher at 35p. Bellway was 27p at 461¾p.
Miner Rio Tinto, up 64p at 5480p, will pocket $495m (£251m) for selling its Kintyre Uranium project in western Australia. Rio has already sold an Alaskan mine for $750m and a Nevada mine for $1.695bn. The sale should demonstrate Rio's commitment to raising $10bn via asset sales this year to reduce debt.
Oil explorer Soco plunged 156p to 1546p despite a second test on a well in Vietnam showing oil deposits similar to the Ca Nu Vang project. Merrill Lynch has slashed its objective by 350p to 2577p to reflect higher risk and thinks that at this price they look good value.
BG's formal bidder statement, sent out today, did little to convince the market it won't have to dig deeper for Origin Energy. Despite setting out its arguments for shareholders to accept its A$15.50-a-share offer, Origin shares remained resolutely above that price and BG was 43p off at 1136p.
Metals and mining are now back to a buying level, says Citigroup analyst Heath Jansen, following a two-week sell-off that has left the sector trading on a forward earnings ratio of 9%. He says copper miner Antofagasta, down 3½p at 579½p, looks good value.
TOMORROW'S AGENDA
• Investors in brewing group C&C will be hoping sunnier weather will have given sales of Magners Irish cider a boost. C&C issued a profit warning in January, admitting drinkers were shunning the once-fashionable drink.
• Retail bellwether John Lewis reports weekly sales figures, with analysts keen to scrutinise them for clues as to how its listed rivals are faring. Last week the department stores group reported sales had plunged 8.3% as consumers reined-in spending. It was the seventh fall in eight weeks.
• In the US, General Electric publishes second-quarter results. The conglomerate shocked Wall Street with miserable figures for the first three months of the year and chief executive Jeffrey Immelt has warned investors not to expect too much this quarter. Some analysts are braced for more writedowns on top of the first quarter's $270m.
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