Stock market report: Monday close

By Mickey Clark for MailOnline
Updated:

 

Share prices secured a fifth consecutive day of gains on the London stock market today. It is the first time so far this year, and brings much-needed cheer and stability to frazzled City investors.

Traders on the BGC floor

Looking ahead: Better news is expected this week

The prospect of another cut in interest rates, of as much as half a point, later this week and opening gains on Wall Street this afternoon, provided a positive backdrop to sentiment. The FTSE 100 index traded nervously but still managed to get its nose in front, closing 65.9 points up at 4443.3.

Said one trader: 'There really isn't much to cheer on. There is no guarantee that even if the Bank of England cuts rates, the benefits will be passed on by the retail banks.'

The FTSE 250 index, a better bellwether of the domestic economy, was up 171.32 points at 6453.87 in thin trading. In New York, the Dow climbed 40.7 points to 9365.71.

Rival banks may have hogged the headlines today with news of further writedowns, but it was Barclays that attracted some undesired attention from brokers.

The bank, which turned its back on the Government's offer of fresh funding, continued its slide, sinking 7.4p to 171½p as sentiment soured against the group in response to its fund-raising with Middle Eastern investors.

UBS has slashed its target price from 220p to 170p and repeated its neutral rating. The broker points out that existing shareholdings will be heavily diluted by the funding programme. Merrill Lynch jumped on the bandwagon, warning that existing shareholders may take a £3.2bn hit from Barclays' refusal to seek a Government bailout.

Lloyds TSB was static at 197.8p after confirming that its takeover of HBOS, 6.1p stronger at 105.4p, will go ahead despite talk of a counterbid. Royal Bank of Scotland, which is borrowing a further £20bn from the Government, slipped 2.3p to 65.2p. This means its rights issue, priced at 65.5p, is under water.

The miners made the running among blue-chips. Kazakhmys rose 52¼p to 337¾p. Dealers say the shares were oversold last week and are now having to do some catching up.

BT Group rose 1.70p to 116.8p as Morgan Stanley cut its target from 210p to 170p in the wake of Friday's profit warning. It says that until the telecoms giant can explain how its only growth division will earn a proper return on capital, confidence will remain low.

It has also cut its 2009 earnings per share estimate from 22.9p to 20.8p, and for 2010 from 22.2p to 19.9p, and repeated its equalweight rating on the shares. It cut its full-year dividend forecast to 10p. Collins Stewart has dropped its target for BT from 110p to 100p, and warns a dividend cut is inevitable. It remains a seller.

Any ideas investors may have that supermarkets remain safe havens for their money in times of trouble have been kicked into touch by Société Générale. It has downgraded Tesco, off 6.7p at 332.7p, from hold to sell in the face of a weakening grocery market in the UK. It says sales growth has been dependent on high food prices.

Morgan Stanley has raised its target for Shire, up 12p at 831p, from 1252p to 1273p after last week's third-quarter numbers from the drugs giant. It says new-product launches continue to drive growth while the guidance for Vyvanse, its treatment for attention deficit hyperactivity disorder, will help set expectations for next year.

It has repeated its overweight rating and lowered its earnings per share forecast for 2008 from $1.21 to $1.08. But it has raised that for next year from 84 cents to 85 cents.

GKN retreated 1¾p to 117p. Citigroup has halved its target from 250p to 125p in the wake of last month's profits warning, but continues to rate the shares a hold. It has cut its current-year earnings per share forecast by 22% to 22.6p.

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Tomorrow's agenda

All eyes will be on Marks & Spencer as the retailer reports first-half results. Sir Stuart rose, former darling of the City, has come under fire recently, and is unlikely to have a better day tomorrow. The City forecasts pre-tax profits of £290m, down from £452m last year, as cash-strapped customers desert the chain for lower-priced rivals. Pali International's Nick Bubb last week downgraded the shares to sell and cut full-year profit forecasts by £30m to £640m. Analysts at Seymour Pierce also advise clients to sell.

Primark may have been voted the UK's least ethical clothing retailer last week, but its sales have remained strong despite the economic downturn. Whether shoppers are continuing to flock to its stores will be revealed when the budget fashion chain's owner associated British Foods unveils full-year results.

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