Stock market report: Wednesday close

By Mickey Clark for MailOnline
Updated:

 

Electricity supplier Scottish and Southern Energy has got round the credit crunch by asking shareholders to dig deep into their pockets for almost £479m.

City brokers react to yesterday’s rate cut

Waiting game: Traders are anticipating a cut in interest rates

Today its shares fell 104p to 1159p as brokers Credit Suisse and Merrill Lynch began a bookbuilding exercise in around 42m shares at a discounted price of 1140p. The issue was oversubscribed. SSE wants the cash to make acquisitions it has identified without going cap in hand to banks.

It says the new shares being issued are the equivalent of up to 5% of those currently in issue. The extra cash will provide an additional source of funding aside from the £6.75bn already earmarked for the next five years.

The new shares will also have rights to SSE's interim dividend of 19.8p declared in November. The company is on track to pay a full-year dividend of 66p for the year to 31 March.

Other utilities to be marked lower included National Grid, down 44½p at 666½p, and Centrica, 7p at 270p. Drax, Europe's biggest coal-fired power generator, fell 11½p to 620p after UBS cut its target from 625p to 600p, while continuing to rate the shares at neutral.

Pennon, down 11½p at 540p, will replace British Energy, 3½p off at 770p, as a constituent of the Footsie 100 following its takeover by EDF of France.

Share prices paused for breath following their positive start to the New Year. The FTSE 100 index fell 131.4 to 4507.5 following another bad day on the jobs front.

Wall Street opened lower this afternoon with shares weighed down by the gloomy sentiment surrounding the US economy. The Dow fell 148 to 8867. BP lost 30¾p to 523¾p despite the company denying it had guided brokers' forecasts lower following the collapse in the oil price from a record $147 a barrel struck in July.

Brokers are gloomy about the outcome for the fourth quarter of 2008. Singer Capital Markets says BP's profits will be hit harder than most by the falling oil price because of its exposure to Russian crude oil prices through its TNK-BP joint venture. The average cost of a barrel of oil in the fourth quarter was $55.48, while in Russia it was down at $20 because of high export tariffs.

ING says BP is ripe for profit-taking following a strong performance by the shares and poor finish to 2008. Every dollar drop in a barrel of oil cuts operating profits by $400m (£265m).

A sigh of relief from brokers accompanied the Christmas trading update from Marks & Spencer. The shares responded with a rise of 5.25p to 244p.

Pali International said the outcome was not as bad as feared, but Cazenove has cut its rating from outperform to in-line while Panmure Gordon has jacked up its target from 250p to 300p. JPMorgan warns there could be a cut in the dividend later this year.

Citigroup has raised its price target for Next, down 24p at 1203p, from 900p to 1000p in the wake of yesterday's trading update, which showed a 7% drop in like-for-like sales. The broker reckons 2009 will be a difficult year for the clothing retailer with further margin deterioration. It continues to rate the shares a sell. UBS has upped its target for Next from 1175p to 1250p.

Citigroup has raised Debenhams, no change at 34¼p, from sell to hold based on valuation and repeated its 35p target.

The UK's biggest hedge-fund operator, Man Group, fell 27p to 260p after UBS cut the shares from buy to sell ahead of next week's trading update. It is worried about the growing level of redemptions and the effects of further deleverage. It has also cut its target from 315p to 260p.

The bears continue to feel the squeeze at private-equity investor 3i Group, with the price rallying a further 24½p to 366¾p. The shares, which continue to trade at a hefty discount to their net asset value, were sold during the run-up to Christmas.

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TOMORROW'S AGENDA

Policymakers at the Bank of England will make history when they cast their votes on interest rates, possibly cutting the cost of borrowing to its lowest level in the Bank's 314 years. Economists are unanimous in forecasting a cut from the current 2% - already the lowest rate for 54 years - and they say the only question is whether the Monetary Policy Committee will opt for a half-, three-quarter or full-point reduction. rate-setters will be responding to a string of dismal economic news, gloomy trading updates from big name retailers and a growing list of High Street casualties.

J Sainsbury is tipped to buck the trend of miserable sales figures from retailers when it kicks off the reporting season for the major supermarkets. The group reported a 4.3% jump in sales in the second quarter and recent data from market researchers TNS and Nielsen suggest that sales growth remains strong and that customers are not deserting its stores for cheaper rivals. Analysts, however, remain concerned over its long-term strategy.

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