Market report: Friday close
SELL recommendations on Tesco shares are about as rare as alcoholics at temperance meetings. But there was one such call today, and it succeeded in holding the stock back on a day that saw the Footsie hit fresh four-and-a-half-year highs.
French bank Société Générale did the deed after reducing its rating from hold to sell and lowering its price target from 349p to 311p. It has told clients its does not expect shares of the supermarkets giant to outperform in 2006.
SocGen says that - after a year of underperformance against the stock market when Tesco, down 3p at 321¾p, was trading well - it does not expect the shares to outperform now sales growth is slowing. Short-term trading could disappoint and rising costs mean earnings growth this year could slip to 7.5%.
Trading may have picked up in December, but it was likely that much of Tesco's non-food range did not sell at full margin before that. SocGen said price-cutting in November supported its view that margins could show a material decline this year, with rivals such as Asda being more aggressive on price in 2006.
Elsewhere, share prices clawed back yesterday's losses to extend their strong start to the year. The FTSE 100 index rose 40.6 to 5731.8 - its highest since April 2001. It was buoyed by US payroll numbers, which appeared to indicate American interest rates do not have far to rise. Wall Street posted gains this afternoon.
More than 82m Invensys shares changed hands as the price dipped ¼p to 18¼p. Two lines of stock totalling 40m shares went through on the ticker at 18½p followed by a line of 21m at the same level.
Interdealer broker Icap rose 1p to 399½p with US broker Morgan Stanley reckoned to be looking for a buyer for 6.5m shares at 395p. Insurer Kiln ticked ¼p better at 93½p after a line of ninem shares went through at 93.8p.
Broadcaster ITV rose 4¾p to 119¼p on reports it may become a takeover target for BT. Leaving aside the speculation, broker Killik sees ITV as a 'strong pick' in the media sector as the shares are already trading at low levels because of downbeat advertising spend forecasts.
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The BT story is being treated sceptically in some quarters. Followers of ITV say such a deal is unlikely because BT has its own television strategy.
Troubled retailer MFI shaded 1¾p to 79&frac50;p. Broker Seymour Pierce is a long-term bear of the shares and has slashed its profit forecast for 2006 from £35m to £15m. Seymour's Richard Ratner reckons trading in recent weeks has been grim and continues to rate the shares a sell. 'I just don't want them,' he says.
Ratner feels much the same about Floors-2-Go, down 1p at 24p, after revealing that sales had slumped by a quarter. The firm warned profits would be at the lower end of expectations. Broker Numis had been forecasting £5.9m but has now downgraded to £5.1m. But it has repeated its buy rating on the shares, and its 23p target price.
ACP Capital started trading on Aim following a placing of 50m shares at 100p by Collins Stewart. The shares started life at 102½p. ACP is the brainchild of chief executive Brian Vago, the man behind Japanese bank Nomura Securities' European portfolio.
He set up the company last August to focus on asset-backed markets and provide mezzanine and equity financing on assets in continental Europe and the UK. ACP plans to develop a series of third-party funds, which it will manage.
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Recruitment consultant Michael Page dipped 3½p to 268½p. Thirdquarter gross profits climbed almost 24% to £70.2m. The group expects full-year revenues to come in at £267.5m, up from £210.6m the previous year. The shares have risen from 175p since the start of 2005.
Aim-listed SerVision, up 2½p at 33½p, has been awarded a $100,000 (£57,000) contract by European observers and Israeli security to monitor the Rafah border crossing between the Palestinian Authority and Egypt.
The slump in sales at Games Workshop left the shares 56p lower at 319p. Broker Bridgewell Securities has slashed its pre-tax profit estimate for 2006 by 61% to £3.9m. Rival Panmure Gordon has moved from hold to sell and cut its profit forecast from £9m to £3.3m.
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