Market round-up: New week, new rate cut
The latest bank rate cut was greeted with predicted scepticism but housebuilders managed to enjoy a bounce. Investing correspondent Philip Scott rounds up the stock market week.
London Stock Exchange: We round up the week's trading
Thursday's bank rate cut arrived with a shrug of the shoulders – with pundits repeating that the UK's economic problems were rooted not in the cost of money but in its availability.
However, builders - who undoubtedly welcomed the further cheapening of money as well as the news from Halifax that house prices rose 1.9% in January - enjoyed a week of gains.
A grim trading update from Bellway, didn't stop the group from rising 16% to 669½p. Persimmon rose 18% to 340¾p, Berkeley Group put on 10% at 875p, Bovis Homes, 8% to 415p, Barratt firmed 16% to 80½p and Taylor Wimpey advanced 16% to 18¼p.
The FTSE 100 index of the UK's top firms managed to make headway too, up 3.4% to close the week at 4282.0.
As controversy raged in the non-business press over bonuses still being handed out by RBS and other banks, broker Credit Suisse has reduced its price targets for the High Street lenders. It pointed to the considerable uncertainty surrounding Government plans to sort out their balance sheets.
The broker remains cautious and does not expect to see returns above the cost of equity for many years to come.
It has cut Lloyds Banking Group, 19% ahead at 108p, from 125p to 90p with a neutral rating. Royal Bank of Scotland, up 9% at 24p, is also rated at neutral with its price reduced from 65p to 40p.
Barclays was 1.2% lighter at 104.8p while HSBC rose 1.2% to 549½p.
In oil, record full-year profits from BP, up 3.3% at 511p, were recorded despite a fourth-quarter loss – its first in seven years - due to the dropping oil price. Royal Dutch Shell gained 1% to close at 1,744p.
In India, Cairn Energy received permission from the state government of Rajasthan to build an oil pipeline. Over the week it is up 5.6% at 1922p.
The miners had a robust week with Xstrata soaring by 41% to 802½p, the strongest riser within the Footsie. Goldman Sachs upgraded Vedanta, up 19% at 656p, and said Kazakhmys, up 29% at 290p, as well as Xstrata, were the most attractive shares at present prices.
Traders are keeping a close watch on cash-strapped Rio Tinto with the market concerned that a major rights issue is on the way. Over the week it managed to climb by 30% to 1,957p, while Eurasian Natural Resources firmed by 20% to 380¼p.
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News of a 25% rise in fourth-quarter profits at BG Group was well-received, and the shares rose 14% to 1,085p.
Rail and bus transport look set for a harsh period according to Goldman Sachs, which anticipates that both UK and European public transport levels will decline over the coming two years as unemployment rises. The banking giant highlighted Spain in particular, where the number of jobless has doubled.
It believes that among the worst-hit will be Arriva, down 1% at 453¾p. It has also downgraded London's biggest bus operator to sell with a reduced target of 385p and repeated its sell rating on FirstGroup, 6% better at 289p, which operates the Great Western rail franchise, with a reduced target of 260p. Stagecoach, up 7% at 129½p, has been promoted from sell to neutral.
Food and household goods giant, Unilever, which has a history of setting - and missing - various targets, is scrapping its performance indicators altogether - news that was not welcomed among City traders. Over the week it lost 9% to 1389p, making it worst blue-chip performer. Other steep Footsie fallers over the week included Cadbury, down 6% at 523p, Imperial Tobacco, 6% lighter at 1778p and Brambles, down 8% to 273p.
On Monday, the spotlight will be on Barclays as it posts full-year results. Its shares plunged last month alongside the rest of the sector. Chief executive, John Varley said that 2008 profits would be 'well ahead' of market targets and above £5.3bn.
Other finals arrive from Rolls-Royce Group and Smith & Nephew. Broker Hargreaves Lansdown posts interims on Wednesday.
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