FTSE 100 close: Rexam shines amid gloom

By Adrian Lowery
Updated: 12:06 EDT, 26 May 2009

Stocks in London took a fillip from Wall Street this afternoon after a morning in the doldrums.

Market watcher: Will shares shake their bank holiday hangover?

The FTSE 100 index closed 46.4 points up at 4,411.7, after US shares opened unflustered by the North Korean missile launches that followed the underground atomic tests over the weekend. The Dow Jones was 2% up at 8446.3 at the London close.

The stock market's massive two-month rally has started to come into focus given the uncertainty surrounding the global economy.

'The Footsie may now find sufficient support to finish in the black, although this is going to be largely driven by sentiment,' says Jimmy Yates, head of equities at CMC Markets. 'But with a generally quiet week ahead on both the economic and corporate calendars, traders will be picking over each item they do find for meaningful direction.'

Rio Tinto fell 16p to 2753p after it said it had agreed to reduce its iron ore prices by a third with Nippon Steel. Kazakhmys was also hit, and led the fallers' board with a 1.3% fall - off 9p at 673.5p - followed by Anglo American, down 5p at 1620p.

Lloyds Banking Group was one of London's biggest fallers after a newspaper report on Sunday said it was looking to sell stakes in up to 60 companies acquired when it bought Halifax Bank of Scotland.

Shares fell 1.8p to 66.8p, a drop of 2.6%. Among the other banks, RBS fell 0.7p to 40.2p and Barclays drifted 2.5p to 289.25p.

Shares in telecoms provider Cable & Wireless dropped 2.7p to 134.5p after Credit Suisse downgraded its rating to 'underperform' from 'neutral' and lowers its price target to 135p from 160p.

'2008-09 results last week came in below our expectations,' Credit Suisse said in a note. 'We are downgrading our forecasts to reflect a more cautious outlook and recent currency moves.'

Some analysts say Cable & Wireless' 2010 outlook issued last week was weaker than hoped. Its shares have fallen more than 14% so far this year.

Water utility shares suffered after Bank of America Merrill Lynch decided to cut its rating on Pennon and Northumbrian from neutral to underperform.

Pennon lost 1.5p at 480.25p and Northumbrian was down in early trading but finished 1p up at 246.5p. Water utilities have traditionally offered good dividends and they are not expected to follow other top companies in cutting their payouts.

Nevertheless, Bank of America Merrill Lynch reckons the two stocks are overvalued. But it believes that Severn Trent, up 13p at 1139p, is the cheapest water stock on fundamentals.

Shares in Rexam were up after Goldman Sachs upgraded its rating for the beverage can manufacturer to 'buy' from 'neutral' and added the stock to its 'conviction buy' list.

The broker makes the move in a review of the European paper & packaging sector, saying it views the stock as significantly undervalued based on its current forecasts, as well as on a mid-cycle scenario.

Goldman Sachs also noted that Rexam shares - 10.25p up at 312.75p - have underperformed the sector by 31% in the year-to-date.

Holidaybreak were up 15.5p to 293.5p despite the travel firm announcing a widening in half-year losses, driven by a write-down at its Explore adventure travel division. Thomas Cook and Thomson owner TUI Travel were also lower in the top flight, down 10p at 224.75p and 4p to 253.75p respectively.

Millwall Football Club suffered a second hangover after its 3-2 defeat by Scunthorpe United in the League One play-off final on Saturday. Millwall Holdings fell 47% - or 0.02p - to 0.022p, having missed out on promotion to English football's second tier.

Millwall, whose shares more than doubled in value ahead of the final, will miss out on higher television and gate revenues after the defeat.

'The market expected Millwall to go up and that's why the stock jumped so much in May but their shares have come back down to earth with a bang now that they will miss out on the revenue opportunities promotion brings,' says Capital Spread's trader Angus Campbell.

'Millwall's shares will probably hang around at the level they were at before the final for the next year until they have another crack at promotion.'

TOMORROW'S AGENDA

Investors at northern Foods will want to know if the food giant can avoid a dividend cut, as it posts full-year results tomorrow. The Fox's biscuits and Goodfella's pizza producer is expected to report profits of £43.41m down from £45.4m the year before.

Overall, the broker Panmure Gordon doesn't expect northern Foods to cut the divi because it has leeway with banking facilities but it did say: 'We wonder whether northern Foods will decide that the 70%-plus payout ratio is too high, and cut the dividend.'

Analysts at the bank added that investing in another biscuit factory could tip the balance.

An interim trading update from topps tiles - the UK's largest flooring and tiling company - might beat expectations despite the housing market slump. The surge in homeowners carrying out improvements rather than moving house is expected to provide a boost to profits.