Yesterday's trading: US boost sends BAE skywards
Shares of BAE Systems came in with all guns blazing after US defence secretary Robert Gates' recommendations for the 2010 US defence budget proved a lot more positive than analysts had expected.
Fighting fit: The US could prove a valuable client for BAE.
The proposals, which still have to be approved by Congress, sent them soaring to 356p before they closed 19p better at 347½p.
Broker Bernstein said the Pentagon's commitment to the F-35 military strike fighter plane, for which BAE builds the back end in Lancashire, is particularly positive.
BAE may also benefit from the commitment to increased support for Intelligence, Surveillance and Reconnaissance spending, through its US-based Electronics, Intelligence & Support unit. Its target price is 405p.
Rival Credit Suisse has a 475p target and said the F-35 programme, which is critical for future growth, remains in tact ahead of market expectations. UBS advised clients to buy up to £5 because US-based earnings should continue to grow given the outlook presented by Mr Gates.
Cobham, a world leader in advanced digital military vehicle communication systems, added 3.9p at 180.4p.
The Footsie went on the defensive as investors took some profits following the impressive 13%-plus rally from the March low. An initial 45-point gain was replaced by a midday deficit of 84 points before it closed 63.02 points lower at 3930.52.
London gained no support from Wall Street, which plummeted a further 186.29 points, still unsettled by billionaire investor George Soros's comments that the bear market is certainly not over and that the US banking system is basically insolvent.
News that US mortgage delinquencies are up 50% year on year also increased fears that the housing market has yet to hit bottom.
That affected sentiment across the pond too as did worries about the forthcoming first quarter earnings season which aluminium giant Alcoa kicked off after-hours' yesterday.
Reports that the International Monetary Fund has forecast that toxic assets on the balance sheets of banks and insurers could spiral to $4trillion sparked heavy profit-taking in both sectors.
Royal Bank of Scotland, in which the UK government now owns 70.3%, fell 3.1p to 26.7p after losing its place in the DJ Stoxx index.
Still awaiting confirmation of the £3bn sale of its iShares exchange-traded fund unit to CVC Capital Partners, Barclays shed 14.9p to 157.7p. Lloyds Banking Group lost 6.8p to 72.9p after Credit Suisse downgraded to underperform from neutral.
Having risen an incredible 80% over the past month, UBS advised clients to sell international bank Standard Chartered. Many did and the close was 60p lower at 900p.
The biggest casualty among insurers was Legal & General, 3½p down at 47½p.
Electrical equipment group Morgan Crucible advanced 4¾p to 97p on a Jeffries International recommendation ahead of the AGM on April 17. Its target price is 115p. The broker expects the valuation gap with peers will narrow over time.
SHARES ADVICE & TOOLS
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After signing an agreement to refinance its £250m core bank facility with a €360m facility expiring in April 2012 with six banks, waste management group Shanks jumped 9p to 80p. An accompanying trading statement said that the UK market has stabilised and trading conditions, whilst remaining challenging, have improved from the low in November.
Many dealers called for a 'stewards' after shares of highly-speculative oil explorer BowLeven crashed 30½p to 45¼p on hearing that talks regarding a possible bid for the firm have been terminated. What a surprise!
Alarm bells were ringing after the company said on March 27 that the original possible cash offer of 150p a share had been revised downwards to 100p. Evolution now advise clients to sell down to 25p.
Car dealer Inchcape was quoted at 13p (down 65¾p) ex-the 9-for-1 rights issue at 6p a share. Broker SociÈtÈ Generale is positive and says the fundraising has transformed the group's financial position. Management is implementing a clear strategy to withstand the slowdown, which will leave the group as an attractive way to play a recovery in the global automobile industry.
Aim-listed finance house Private & Commercial Finance accelerated 1½p to 11½p after saying annual results for the year to end-March 2009 will be in line with expectations. Daniel Stewart has been appointed shop broker.
The progress of the FTSE 100 over the past month
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