Market report: Tuesday close
Shoppers may be turning up their noses at its food and clothing ranges, but Marks & Spencer has finally found some friends in the City, just in time for tomorrow's AGM.
Market reporter: Rosamund Urwin, Evening Standard City Desk
Its shares, which crashed by almost a third last week, turned the tide today to top the Footsie leader board with a rise of 14¼p to 231¼p.
Traders were split as to the explanation for the resurgence, with some dismissing it as short-sellers closing their positions, noting that the percentage of M&S's stock on loan had fallen from 7% last Thursday to 6% today, while the more optimistic attributed the rise to renewed bid talk.
There was even a wild rumour that Topshop tycoon Sir Philip Green may be eyeing the retailer again after he and M&S boss Sir Stuart Rose were spotted chatting at a Fashion Academy do this morning. Four years ago, after a rather more triumphant annual meeting than Rose will see tomorrow, Green withdrew his £9.1bn, 400p-a-share bid.
Other candidates mooted as possible bidders included supermarkets chain J Sainsbury and Qatari fund and former Sainsbury's suitor Delta Two.
But analysts questioned who would stump up the cash to finance such a major acquisition at a time like this, and noting that the group's heavy debt and pension deficits would be a major turnoff for bidders. M&S's bounce boosted the rest of the retail sector, however, with Next climbing 17p to 873p, DSG International gaining 1½p to 36¼p and HMV adding ½p to 106¼p.
The FTSE 100 briefly entered a bear market on growing recessionary fears but later rallied to close down 72.2 points at 5440.5. On Wall Street, the Dow didn't manage to defy the gloom, falling 56.58 points to 11,231.96.
M&S's Rose won't be alone in facing a roomful of irked investors tomorrow with the London Stock Exchange also holding its AGM. Chief executive Clara Furse is tasked with explaining to investors how its share price has plunged from almost 2000p at the start of the year to 671 today, as it lost another 51p.
The sell-off came despite the LSE reporting yesterday that equity trades were up 18% in June on the previous year as fears resurfaced over the impact of increased competition on trading volumes. Despite Furse's denials, investors are nervous Project Turquoise, the investment bank-owned equity trading system that goes live next month, is a major threat to the LSE.
The value of its recently announced alliance with Lehman Brothers has also been called into question after Lehman signed up to Turquoise.
Broadcaster ITV gave up ground after Investec cut its rating from hold to sell. The broker warned advertising revenue would fall 4% in the coming year as the market deteriorates further and ITV's ratings continue to drop. Its shares fell another 1½p to 40.1p.
British Airways defied broker pessimism, adding to yesterday's gains with a jump of 11¼p to 217¼p. The rise came despite Royal Bank of Scotland slashing its price target from 200p to 170p, and advising clients to rid themselves of the stock.
The broker said an alliance between the flagship carrier and American Airlines should be approved, but the benefits of the deal will not be felt until 2012. It added that it sawno grounds to change its cautious stance on the company.
Cadbury proved less than sweet for analysts at Investec, who downgraded the confectionery company from hold to sell and slashed its target price from 600p to 550p, sending the shares down 2½p to 632p. Investec says the merger of Mars and Wrigley will make trading more challenging and will hit Cadbury particularly hard in the key UK market.
TOMORROW'S AGENDA
• Sir Stuart Rose faces investors at Marks & Spencer's annual meeting a week after the retailer's shock profit warning sent its shares crashing. Retail experts anticipate around a quarter of investors will abstain or vote against Rose becoming executive chairman.
• Bovis Homes is expected to add to the housebuilding sector's misery in its trading update. It has already warned results will be significantly below previous forecasts with UBS analysts predicting a 50% slump in volumes for the first six months of the year. Rival Redrow is also due to report, having recently revised down its completion estimates.
• A rare piece of good news on the economy is expected, with analysts predicting the UK's trade position will have improved. The trade deficit is forecast to have narrowed from April's £7.6bn to £7.4bn in May as exporters benefited from weaker sterling.
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