Market report: Tuesday close
Shares of Marks & Spencer were edging precariously closer to their lowest for eights years today after broker Pali International chose to dump the retailer just days before it unveils first half results.
The price retreated 4½p to 219¼p with more than 10m shares changing hands after the broker cut its rating from neutral to sell. The price is now way below the 653p at which it started the year.
Top retail analyst Nick Bubb at Pali slashed his pre-tax profit forecast for the full year from £550m to £300m. He is braced for a drop in like-for-like sales of between 3% and 4%, but warns they could drop by as much as 6%. 'With more downgrades and a dividend cut now on the horizon, we think M&S's rating can crack further,' says Bubb.
Meanwhile, stock-market investors tried to make hay while the sun shone by taking advantage of share-price rallies in the Far east. The appearance of a few bargain-hunters briefly carried the FTSE 100 index back above the 4000 level, before another nervous start to trading on Wall Street this afternoon saw it pare back its lead to just 68.69 at 3921.28. The Dow rallied 515.48 to 8175.77.
Conditions remain fragile in the face of further possible write-offs by the banks. Dealers warn hedge funds could see the rally as an excuse to dump more stock to meet new margin calls.
BP provided some of the early impetus to the London market with a big surge in profits during the third quarter on the back of a strong oil price. The shares rose 23½p to 461½p.
Third-quarter profit numbers from Aviva, up 13¾p at 259p, were warmly received, and went some way to alleviating concerns over the life assurers in general. Aviva said it is well-capitalised, dispelling rumours of a dividend cut to conserve cash. It was also reassuring about the need for further asset sales. It pointed out that it sold more than £3bn of equities in September when the Footsie 100 was above 6000.
Admiral was up 111p to 904p after Morgan Stanley began coverage with an overweight rating and 1269p target, in light of above-average growth for the group and a significantly better risk profile than that of its rivals.
Morgan started RSA Insurance at equalweight with a 171p target, while Credit Suisse has raised its rating from underperform to outperform and tweaked its target from 146p to 164p. The shares rose 5p to 128.5p.
One of the biggest blue-chip casualty was shares in the London Stock Exchange itself, down 25½p, at a new four-year low of 461&frac1/2;p. The search is on for a new chief executive to replace Clara Furse, but of more immediate concern is the dramatic drop-off in share trading of late.
There is no telling what damage may be caused to the LSe's revenues by a long-drawn-out bear market. Standard Chartered put on 20p at 700p following third-quarter numbers. The international banking outfit also gave reassurances that fur ther funding by shareholders would not be required.
Citigroup has repeated its hold rating and slashed its target for bookie William Hill, up 6¼p at 180½p. It says the fixed-odds betting terminals are under scrutiny because of a possible link to problem gambling, and a Gambling Commission report is due next year. Citi adds there is a distinct possibility of an increase in machine-gaming duty.
GKN continued to hit new lows with a loss of 2p at 104p after yesterday's profits warning. Merrill Lynch has cut its target for the aerospace and automotive parts supplier from 170p to 90p, and repeated its underperform rating.
Citigroup prefers easyJet, 1¾p lower at 268p, to British Airways, 6.6p cheaper 117.9p, in the battle for control of the skies. It reckons profits for the sector during the traditionally busy third quarter will be down about 50% as fuel costs take a toll, but expects easyJet to suffer a smaller decline.
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Tomorrow's agenda
Chief executive Sandy Crombie is expected to face a grilling over Standard Life's capital position when the insurer posts third-quarter figures, after talk the sector may need its own Government bailout. But Goldman Sachs analysts believe the company's balance sheet should still look relatively healthy, partly because of its failure to win the battle for rival Resolution last year. The news will not all be good, however. Goldman predicts a 12% drop in self-invested pension plan sales as consumers postpone investment decisions in response to the market volatility. As the largest investor in Bradford & Bingley and with sizeable holdings in other UK banks, the value of its investments is also likely to have been hard hit.
New mortgage lending plunged to a record low last month as potential buyers faced tighter lending conditions. This month's figures from the Bank of England are tipped to prove equally miserable.
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