Stock market report: Thursday close
The big income funds, which look after our pensions and life assurance annuities, may have to face up to some lean stock-market pickings in 2009.
Market watcher: Latest share prices
The dividend payments of some of our biggest blue-chip companies now look in doubt as prospects for the global economy continue to dive. One broker yesterday forecast that the best-known name in the high Street will have to cut its payout to shareholders as it experiences some of the worst trading conditions in almost 30 years.
Nick Bubb at Pali International reckons Marks & Spencer, down 3¼p at 224¼p, will reward shareholders this year but will have to slash the payout in 2009 from 22p to 14p as its dividend cover evaporates.
Sales at some of its stores slumped 25% last week, with the two widely advertised '20% discount sales' failing to have much benefit on trading.
Bubb has cut his pre-tax profit forecast for 2009 from £640m to £599m, and expects profits to continue to deteriorate in 2010.
Gossip in the Square Mile claims the biggest dividend payer of the lot is also struggling to reward loyal shareholders.
BP, down 11p at 524½p, accounts for about 10% of the total dividends paid by FTSE 100 companies.
But its generous payout to shareholders may be in doubt next year despite the bumper profits earned this year on the back of a soaring oil price. The last payout was 8.7p, or almost £1.7bn.
The oil price struck a record $147 a barrel in July but has since collapsed to below $50, and that will filter through to the bottom line and dividend at BP.
HSBC slumped to within a whisker of its record low, falling 46¾p to 625¼p as speculation mounted about a possible rights issue from Europe's biggest bank - or a cut in the dividend. HSBC was the first to make big write-offs relating to the subprime meltdown, and now it has held its hands up to losing £1bn (£649m) in Bernard Madoff's $50bn collapse.
Elsewhere, blue-chips retreated with investors unable to draw much inspiration after a late sell-off on Wall Street overnight. Tomorrow may produce further volatility as they cross and unwind the December series of futures and options. As a result, few traders were in a rush to open fresh positions.
The FTSE 100 index closed 6.5 points up at 4330.6. Turnover was among the lowest of the year with fewer than a billion shares changing hands by lunchtime. Wall Street traded nervously this afternoon. A decline in jobless claims of 21,000 was countered by the latest Philadelphia manufacturing index. Even so, the total remains over 550,000. The Dow fell just 4.14 points to 8820.2.
Oil services supplier John Wood rose 1.7p to 200½p after Morgan Stanley raised its rating from equalweight to overweight with a 340p target.
Dresdner Kleinwort has re-rated the food retailers. It has raised Tesco, up 12½p at 343p, from hold to add but dropped its target from 390p to 360p. WM Morrison, 4½p dearer at 272½p, has been cut from add to hold with the target trimmed from 280p to 260p. J Sainsbury, up 9½p at 323½p, is kept at reduce with a 275p target.
AIM-listed Pure Circle jumped 20½p to 156½p after the US Food & Drug Administration issued a 'no objection' letter in respect of Reb-A, a natural zero calorie sweetener. This means the FDA regards Reb-A, as safe to use by experts in food, beverages and sweeteners.
This will enable it to be adopted as a key ingredient in mainstream US food and beverage production. Hanson Westhouse is excited by the news and believes there is substantial scope for improvement in the shares. It has a short-term target of 250p.
Investec has repeated its sell rating and 355p target on Tate & Lyle, up ¼p at 410¾p, following the news from Pure Circle. It says Reb-A is now a rival to T&L's sucralose sweetener, which faces stiffer competition in the US and may be forced to cut prices.
Builder Taylor Wimpey firmed 1p to 11½p. The group continues to talk with its banks about restructuring its £1.8bn of debt. Taylor Wimpey's market value has slumped to £112m.
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Tomorrow's agenda
Changes from the FTSE indices' quarterly shake-up are implemented after the close of trading. Argos owner Home Retail Group, outsourcing group Serco, miner Randgold Resources, sugar giant Tate & Lyle and insurer Amlin will join the top flight, while oil services groups John Wood Group and Petrofac, miners Fresnillo and Lonmin and transport firm Stagecoach are out.
Friday brings GfK NoP's december consumer confidence survey and retailer John Lewis's weekly sales figures. Polls showed hope for the High Street last month with consumers more inclined to spend on big-ticket goods. The stores group will also reveal strong sales of electrical goods.
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