Stock market report: Wednesday close

 

The boost to its share price that mining giant BHP Billiton received in return for dropping its £37bn offer for rival Rio Tinto may proved to be short lived.

London Stock exchange

Movers: Latest from the stock exchange

That is the view of ING, which has cut its rating on the shares from buy to hold because of short-term economic conditions. But the broker has raised its 12-month target from 925p to 1025p after seeing the price rally 55p to 1106p yesterday. Today the shares extended their lead, rising 17p to 1567p. The shares touched a peak of 2023p earlier this year.

At the same time, ING has raised its rating on Rio, down a further 49p at 1501p, from hold to buy, having seen the shares lose almost 40% of their value yesterday after termination of BHP's offer worth around 6000p a share.

The broker has lowered its target from 2200p to 2000p and points to Rio's staggering $39bn of debt, which compares with just $6.3bn for BHP. It warns that, without any disposals next year, Rio's leverage will continue to deteriorate, but the group needs to refinance around $9 billion of the Alcan acquisition facility next October.

Meanwhile, Canaccord Adams has cut its rating on BHP Billiton from buy to hold with a target of 1100p, while raising Rio from hold to buy with a target of 2600p. It reckons the sell-off in Rio shares was a "gross overreaction" and it can pay back its debts by 2013 without making asset sales.

The market generally slammed into reverse following the gains of the past few days. In another day of thin trading, the FTSE 100 index fell 18.56 points to 4152.6. Shares also opened lower on Wall Street this afternoon on the back of the biggest drop in durable goods orders for two years and another sharp fall in consumer confidence. The Dow finished up 22.4p to 8501.9 ahead of Thanksgiving tomorrow.

The biggest drag on blue-chips came from the banks and oil producers. HBOS fell 6½p to 90½p and Standard Chartered 55½p to 784½p. The softer crude price left Royal Dutch Shell nursing a loss of 34p at 1678p, BP down 7¾p at 512¾p and the oil-services group Petrofac 6¾p off at 336½p.

JPMorgan has cut its target for Imperial Tobacco, up 74p at 1554p, from 2550p to 2450p and reduced its earnings estimate for 2009 following yesterday's full-year results.

It blames the move on negative currency movements and their impact on the group's debt position. It continues to rate the shares overweight.

Keep an eye on little AIM-listed Futura Medical, which soared nearly 62%, or 8¾p to 23p, before the shares were suspended pending a product announcement. The competent authority, the EU regulator on medical devices, is expected to publish its findings soon on Futura's CSD500 "innovative" condom. Earlier in the day, traders had attributed the rise to the clearance of a forced seller of 2.5m. This block of shares had been overhanging the market since the start of October, driving down the price from 35p to a low of 15p.

Rank Group continues to hover just above its record low of 50p, with the shares falling ¾p at 53½p. Investec raised its rating from hold to buy, with a 95p target. It says Rank is unique among the larger-capitalised gaming groups. Initiatives on machines and VAT claims should act as a positive short-term stimulus in more-difficult trading conditions. Evidence of further stakebuilding by Hong Leon, with 25% of the company, or Genting with 11%, should provide further share-price support.

Taylor Wimpey led second-liners higher with a rally of 1.38p to 5.78p. Word is the debt-laden housebuilder is close to announcing a debt-for-equity swap with its main creditors. At the last count, the group had debts of around £1.8bn. That compares with its stock market value of £46.4m.

City coverage and share tips

This is Money carries breaking City news throughout the day. Bookmark Companies & Markets and try these markets links...

Newspaper graphic and pen

Tomorrow's agenda

Currys and PC World owner DSG International is tipped to sink into the red for the first time in two decades, providing fresh evidence that consumers have stopped splashing out on big-ticket items. Analysts forecast the group will announce losses of about £30m for the first half on like-for-like sales 9% lower than the year before, while they warn the dividend payout may be under threat. The figures will increase pressure on chief executive John Browett, who pledged to transform the group. Talk is that DSG will be forced to sell off some of its European assets.

TUI Travel's board said earlier this month that full-year results will be in line with expectations, so the focus will instead be on the outlook for the year ahead. The tour operator has slashed the number of holidays it is offering this summer, expecting Britons, who have so far clung desperately to their break in the sun, to put their suitcases into storage.