FTSE week: Lloyds, Next up; Autonomy off
The Footsie endured a rocky week, tossed on the waves of the US third-quarter reporting season but closing with aplomb amid some shockingly bad economic growth figures.
All smiles: Giles Thorley, chief executive of Punch Taverns, will be toasting the OFT's decision on the beer-tie
The surprise 0.4% fall in GDP for the third quarter, revealed on Friday morning, could not dent the FTSE 100's ardour: it remained well up on the day yesterday and finished the week 1% or 52.3 points ahead of Monday's open at 5,242.6.
Each day seemed to bring a change of sentiment from across the pond, with a downgrade for Wells Fargo bank one day and upbeat news from Amazon the next.
Lloyds Banking Group was a major gainer over the week: fund managers sold shares of other financial stocks over the week to raise cash for the long-awaited mega fund-raising by the 42% Government-owned bank.
That chased Lloyds 3.4% higher over the week to 96.23p amid gossip that the bank had gained the necessary support for a much bigger-than-expected rights issue which will help it avoid the government's Asset Protection Scheme and plug its £21bn capital deficit.
Dealers were also of the opinion that once Lloyds' cash needs are met and the uncertainty removed, it will prove not only bullish for Lloyds but for the market in general.
In an upbeat note this week, Evolution advised clients to fill their boots, believing there is 41% upside from the current level.
After US telecoms giant AT&T reported solid earnings thanks to sales of the iPhone, mobile phone giant Vodafone, which is set to sell the handset in Britain next year, showed a 3% gain on the week to 137.5p.
Another healthy set of weekly trading figures from John Lewis Partnership lifted retail stocks, with Next ahead 5% at 1,870p and Argos owner Home Retail Group 3% stronger at 305.6p.
Shares in Autonomy, the software firm, were the major top-flight loser, dropping almost 9% to 1,444p after its third quarter results disappointed investors.
Profit margins were hit by higher than expected launch costs for a new database product. Had it not been for a lower tax charge, earnings may have undershot City forecasts.
Founder Mike Lynch was keen to stress that figures for the third quarter were a hiccup. 'We did a big product launch and had a set of one-off costs for that,' he explained.
There were doubles all round in the boardrooms of some of Britain's big pub groups yesterday after competition regulators gave the industry a clean bill of health.
In an unexpected move, the Office of Fair Trading ruled the controversial 'beer-tie' did not hurt customers, and chucked out a complaint made from the real ale drinkers' group, Campaign for Real Ale.
The 90-day investigation into the arrangement, which means that thousands of tenants have to source beer and other supplies exclusively from the big pub companies, was widely expected to result in a further competitions probe.
So the OFT's move gave a huge lift to the bedraggled FTSE 250 sector. Enterprise Inns was at the vanguard, with its shares up 14% to 138.3p, but Punch Taverns was not far behind with a 7% rise to 97.7p.
Media stock Centaur revealed it had rejected a bid approach from the acquisitive Critical Information Group. Shares of the publisher of Lawyer and Marketing Week touched were 20% better on the week at 53p as the market waited for Critical to return with an attractive formal offer.
Dealers are confident it will after previously failing with an unsuccessful approach to Incisive Media.
Floated in June, Critical Information is run by former Informa bosses David Smith and Tony Foye. They want to buy and build in the business-tobusiness (B2B) publishing and events space. Centaur fits the bill.
KBC Peel Hunt's analyst Malcolm Morgan is looking for a good recovery in Centaur's earnings, as the recession has hastened the pace of change at the group. It still retains a strong market position in legal, marketing and financial publishing.
Goldman Sachs removed the London Stock Exchange from its influential Conviction Buy List and the shares dropped 3% to 880p. The broker's target price is £10 but it feels there is now better value elsewhere.
SMALL CAPS FOCUS:
Finnish nickel and zinc producer Talvivaara Mining advanced 1.03% to 393½p after announcing that its upgraded and redesigned crushing circuit has been successfully installed and commissioned.
FinnCap is bullish and says that Talvivaara is among the cheapest stocks in the mining sector. Rival broker Ambrian is a seller. It says that as the commissioning phase drags on, the additional demands on working capital could result in financial issues.
Home shopping group Findel rose 12% to 42p on persisting speculation that a private equity buyer is about to put the company out of its misery. Turnover swelled to 6.8m after a hefty line of 4.4m shares changed hands at 37¼p.
Emblaze soared 21.43% to 51p after the company unveiled a ground-breaking mobile platform, the Else Intuition, which is the basis of the new revolutionary mobile application device that will be launched this year by Emblaze Mobile.
Contract news lifted Kewill 6.4% to 99¾p. Dutch logistics supplier, Steinweg, has agreed to purchase Kewill Warehousing, replacing an existing in-house solution. Investec's price target for the computer services company is 115p.
Aim-listed eLearning and compliance courseware solutions business Intellego rose 18.18% to 0.65p. It has been awarded a contract by BPP Holdings for the implementation of its new product, Xyleme Learning Content Management System. Value of the first phases of the project will be approximately £400,000.
Israeli telecoms equipment group BATM added 4.98% at 58p after KBC Peel Hunt lifted its target price 17% to 70p. The fundamentals behind BATM's core market is set to improve so there is growing capacity for earnings to exceed current expectations.
Oil and gas producer Circle Oil jumped 9.35% to 38p. Sea Dragon Energy, its minority partner in the Al Amir field in Egypt, reported the successful completion, testing and placement on production of a fourth well. With the well now on stream, oil production should soon exceed 7,000 barrels of oil per day.
Circle is expected to issue a further bullish report within the next few days.
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