Stock market report: Thursday close
Stock market bears, who have been selling the life assurers aggressively short in recent weeks, claiming they would be the next casualties of the banking crisis, were feeling the pain today as their shares soared.
Taking stock: Latest from the exchange
Better-than-expected numbers from sector leader Prudential, showing annual profits 17% higher, have alleviated many of the fears that have recently dragged them lower.
Those fears stemmed from Aviva's decision to carry on paying a dividend despite worries it could not afford to.
The city warmed to the news from the Pru, which included a boardroom reshuffle, and the shares leapt 33¾p to 285½p after touching 322½p, putting them among the best blue-chip performers.
That had the short-sellers scrambling to cover their open positions. It also drove other prices in the financial sector higher at the expense of some of the more defensive stocks such as National Grid, down 30p at 548&Frac12;p, AstraZeneca, 118p lower at 2255p, and Associated British Foods, off 30½p at 613p.
Legal & General joined in the fun as a sigh of relief was heard in the Square Mile. Its shares jumped 6.9p at 38.1p while Aviva put on 21.35p at 218¾p and Old Mutual added 2.7p at 44p. The exception was Standard Life, floated at more than 200p three years ago, 7.9p easier at 165.1p. The revival of fortune among the insurers and a strong showing by Wall Street overnight helped drive the rest of the London market higher, although the Dow was in retreat this afternoon losing 48.75 at 7437.83.
Some of the London gains can also be attributed to window-dressing by institutional investors as the first quarter starts to draw to a close. The FTSE 100 index recovered from a hesitant start to close 11.9 up at 3816.9.
But traders remained on alert amid whispers one big bank is poised to take advantage of recent stock-market gains and flick the switch on a £2bn sell programme based on the final auction price this evening.
British Land put on 9¾p to 396p following the success of its rights issue to raise £740m. Shareholders have taken up 96.6% of the 291m new shares issued at 270p. The rump of 11.67m shares have been placed with institutional shareholders at 372p. HSBC has cast its expert eye over the real estate investment trust sector following a plethora of heavily discounted rights issues running into billions of pounds, and has cut its target for BL from 435p to 320p.
It has also slashed the target for retail outlets developer Liberty International, 5¾p better at 362p, from 320p to 190p. Hammerson, up 16¼p at 272½p, is dropped from 320p to 190p. Great Portland Estates, up 14½p at 247p, is cut from 180p to 160p and Derwent London, 56½p higher at 712½p, from 430p to 400p. Most of the companies targeted have been rated at underweight. The only exception was Brixton, up 5p at 22p, which has been raised from underweight to overweight, although its target is reduced from 110p to 80p.
Mounting speculation that Centrica, 10¾p cheaper at 236¼p, will have to raise its offer for Venture Production lifted the latter a further 21p to 755p. That compares with the 725p offered by the British Gas operator, which has already snapped up 23% of the shares. Hanson Westhouse agrees Centrica will have to pay more. It points out that Dana Petroleum's recent acquisition of Bow Valley was made at the equivalent of $9.47 a barrel. That means Centrica will have to offer the equivalent of 780p to match this.
Jefferies has begun coverage of Sage with a buy rating and 195p target. That compares with the current price of 167.6p, down 1.4p. It says Sage offers attractive defensive qualities during tricky times. The company is firmly established as a leading vendor in the business management software market.
Goldman Sachs has lowered recruitment agency Michael Page, 1¼p up at 185¼p, from neutral to sell and dropped its target from 222p to 171p. It expects earnings and cashflow will fall substantially in the next two years with Page only just breaking even in 2010.
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Tomorrow's agenda
Stamps and autographs dealer Stanley Gibbons issued a profits warning in January, sending its shares plunging by a fifth. The company said that a one-year money-back guarantee given to some buyers would eat into annual earnings as it had decided to hold over profits on the transactions until next year to be on the safe side. Brokers expect a 15% fall in profits to just shy of £4m. However, sales are thought to be holding up strongly as investors continue to shun the markets and look for alternative havens for their cash.
Companies looking to cut costs by hiring Regus's flexible offices are thought to be boosting business at the serviced offices group. It is tipped to report a 20% jump in pre-tax profits for last year to about £143m. However, analysts at UBS warn that market conditions are deteriorating, with a growing number of small and medium-sized businesses going bust. They expect to see signs that margins are being squeezed and that occupancy rates are now starting to fall.
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