Market Report: A&L and French Connection hit by bearish talk
Wednesday 15 December 2004
Short sellers certainly had a great time of it yesterday as a plethora of bearish stories circled the Square Mile and sent share prices tumbling. Among blue chips,
Alliance & Leicester was targeted by bears who spread rumours that today's trading statement from the mortgage bank will be downbeat and could contain a profits warning. Analysts were not so sure but A&L stock lost 22.5p to 878p in heavy trading.
Short sellers certainly had a great time of it yesterday as a plethora of bearish stories circled the Square Mile and sent share prices tumbling. Among blue chips, Alliance & Leicester was targeted by bears who spread rumours that today's trading statement from the mortgage bank will be downbeat and could contain a profits warning. Analysts were not so sure but A&L stock lost 22.5p to 878p in heavy trading.
French Connection also came under the attack of bears as they bet that the fashion retailer is likely to have a disappointing Christmas. FC dropped 18.75p to 221p, a level last seen at the start of 2003. Retail analysts believe that this year will not be a good one for the sector with sales at the likes of FC, House of Fraser, off 3p to 108p, and Marks & Spencer, 2.25p weaker at 335.5p, likely to be some way below those achieved last time around.
Meanwhile, Avis Europe hit a fresh all-time low of 55.25p, down 2.75p, ahead of tomorrow's trading statement from the car rental giant. Dealers reported heavy hedge fund activity. Investors fear that the update could contain a profit warning. Back in October Avis complained that it was struggling to deal with weakening sales. Kidde dropped 8p to 154.75p as investors feared that the takeover offer from United Technologies was in danger of failing. More than 35 million Kidde shares changed hands.
Corus was the most heavily traded stock on the exchange as 887 million shares changed hands. At the start of the session Credit Suisse First Boston got investors interested in the steel maker with a bullish note about its prospects. The Swiss broker, which initiated coverage of the company with an "outperform" rating, said that 2004 will have been a good year for Corus and suggested that 2005 will be even better. Such words sent Corus shares strongly higher but halfway through the session it emerged that CSFB had a lot of stock to sell. As investors got wind that the Swiss broker was in the process of placing the bulk of the Russian tycoon Alisher Usmanov's stake in Corus some 400 million shares accounting for about 10 per cent of the company they rushed for cover. CSFB is said to have placed the holding at 53.5p, which is where Corus closed, down 0.5p on the day.
Imperial Tobacco jumped 9p to 1,390p on reports in the Spanish press that the UK tobacco group is considering a merger with Iberian rival Altadis. According to the newspaper Expansion, the companies have held talks over a possible deal aimed at creating the world's fourth-largest tobacco company. However, a spokesperson for Altadis denied the speculation outright. Sector analysts argued that a tie-up between the two companies is unlikely given the high stock market valuation of Altadis at present.
Dresdner Kleinwort Wasserstein slashed its recommendation on the Morrison Supermarkets group to "reduce" from "hold" and argued that the City underestimates the challenges facing the company as it tries to integrate its recent acquisition of Safeway. The German broker forecast a sharply weaker than expected profit recovery at Morrisons in the wake of the tie-up.
Meanwhile, Morgan Stanley, which re-stated its "underweight" stance on the stock, slashed its earnings forecasts for the group by 6 per cent for 2005 and 2006. Despite such downbeat developments, Morrisons managed to close 1.25p better at 215.75p, while profit taking left the FTSE 100 index 14 points lower at 4,722. The FTSE 250 dropped 13 points to 6,715.
Burren Energy soared 41p to 434p after issuing a positive drilling report from its M'Boundi field in the Congo. Brokers believe the field could contain up to 500 million barrels of recoverable oil. However, late on during the day there was talk from one well-informed corner of the Square Mile that a number of the company's early stage backers are looking to take advantage of Burren's amazing share price performance since its float by selling down their holdings. Word has it Seymour Pierce was last night putting the finishing touches to the multimillion-pound share disposal. Burren floated last December at just 130p a share.
Lower down the pecking order, Wolfson Microelectronics jumped 13p to 141p as word spread that the company's chips will be used in Sony's portable PlayStation product. Sony expects to sell 3 million of the devices by the end of March, which is obviously great news for Wolfson. XP Power added 5p to 466.5p on news of a global supply deal with Premier Farnell.
Savoy Asset Management, which is chaired by the former chancellor Kenneth Clarke, boasted of a solid rise in interim profits. During the first half of its year Savoy also saw its funds under management increase to £1.2bn from £1.1bn. Its shares were pegged at 145p.
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