FTSE 100 latest: BT soars on upgrade
Gains for pharmaceutical stocks and telecoms cancelled out falls for mining stocks this morning to leave the index treading water.
Watching brief: Traders will wait on the reaction to the Barclays deal.
The FTSE 100 stood 19.92 points lower at 4,441.95. The index is up around 20% since hitting a six-year trough in March, but has held in a tight range between about 4,400 and 4,500 for the last month.
'Things are fairly quiet, we are just hoping to see if this rally is something a bit more than a bear market rally,' Micky Mahbubani, strategist at IG Index, told Reuters.
'The trend this week has been perceived increased appetite for risk. Data yesterday in terms of US retail sales and labour markets in the US seem to be a bit more positive than the market expected,' Mahbubani said.
The Dow Jones Industrial Average opened down slightly as investors remained cautious about US inflation and pessimistic over signs of economic recovery.
Shares in BT Group gained 4% to 96.8p after Bank of America-Merrill Lynch upgraded the telecoms giant to 'buy' from 'neutral' and raised its target price to 130p from 110p.
Merrill Lynch reckons the market has now had time to absorb the hit that BT has taken on its Global Services contracts and its pension scheme troubles.
The broker says cost savings are in the pipeline and the regulator Ofcom's pricing reviews have been favourable for BT's Openreach and Wholesale divisions. Rival Cable & Wireless added 1.6p to 129.20p and Vodafone rose 0.05p to 114.7p.
Pharmaceutical companies added the most points to the index as investors shifted into the defensive sector. AstraZeneca jumped 112p to 2,629p after UBS raised its target price on the drug company.
GlaxoSmithKline meanwhile was ahead 57p to 1,115.5p. GSK is planning to cut prices of many of its leading medicines in emerging markets, CEO Andrew Witty told the Financial Times.
Barclays shares are under scrutiny after US investment giant BlackRock announced it had struck a deal to buy Barclays Global Investors for a total of £8.2bn.
The deal will boost Barclays' capital position, but with no competing offer likely to emerge shares retreated 12.5p to 292p. In contrast, Lloyds Banking Group fell 1.4p to 65.3p and Royal Bank of Scotland added 0.2p to 39.9p.
Miners led the fallers' board after a strong run for the sector earlier in the week. Vedanta Resources led the way with a drop of 8.47% or 148p to 1,599p, while Fresnillo shed 37p to 648p and Antofagasta fell 30p to 673.5p.
Shares in GKN cheered 7¼p to 140¼p after Cazenove issued a note saying the car and aerospace parts group is 'well placed for the auto industry recovery', while repeating its 'outperform' rating.
The broker says a restructuring programme at GKN should enable it to continue to grow its 44% global market share, with estimated margins rising to 6% in 2011.
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