Market Report: Barclays attracts on talk of job cuts
Monday 19 November 2012
The jobs cull at UBS has paved the way for other banks to start swinging the axe in their investment bank divisions, City sources reckon. If Barclays is sharpening its axe for the new year, it could be time to start buying its shares, according to analysts at Goldman Sachs. They think potential "balance-sheet shrinkage, cost cuts and an exit from sub-scale businesses" at Barclays Investment Bank and a "restructure [of] its operations at the group's strategy review" in February would be a "source of opportunity".
Goldman Sachs analysts said in a note: "If Barclays delivers on a business plan to generate returns that match the group's cost of capital, the stock could offer sector-leading upside, on our analysis." They gave it a buy rating and raised their target price to 320p. The shares shot up on the news and ended at the top of the benchmark index, up 15.55p to 249.75p.
Fellow bank HSBC got a price-target upgrade to 630p and a buy rating from Investec's Ian Gordon, who thinks the "downgrade cycle may finally be over". The shares edged up 22.5p to 618.3p after the bank said it received an approach for its 15.6 per cent stake in the Chinese insurer Ping An ,and is considering selling it in a deal which might raise more than $9bn (£5.7bn).
The FTSE 100 index recovered the sharp sell-off seen on Friday and raced up 132.07 points to 5,737.66 as optimism swept across Wall Street and the City on hopes the US is making progress towards avoiding the feared fiscal cliff next year. Meanwhile, mediation efforts in Israel, with UN Secretary General Ban Ki-moon heading to Egypt, also helped calm nervous investors. With the appetite for risk back on, mining stocks moved up the blue-chip index.
After BP was hit last week by a record United States criminal fine of £2.8bn over the Gulf of Mexico disaster, the energy giant was still in focus amid speculation it could be vulnerable to a takeover.
The oil major is the cheapest of the non-state oil companies by market value relative to reserves, earnings and output, according to Bloomberg, sparking theories it could become a target.
Also getting the Square Mile chattering around BP are reports that it is planning a share buyback of at least $4bn, using the proceeds from the sale of its half of its Russian joint venture to Rosneft. The buyback could go some way to compensating investors who have been hit by the share-price fall since the Gulf of Mexico spill in 2010, and BP's shares surged 15p to 431.6p.
News of a £36m placing from online supermarket Ocado will have hit hedge funds that have been shorting the stock. Financial information group Markit said it is the fourth-most borrowed stock in the FTSE All Share Index, with around 16.5 per cent of stock out on loan. The shares checked in a 14.45p gain to 75p, topping the mid-cap index.
Oil rig maker Lamprell's fifth and worst profit warning laid bare all its issues and investors decided it was time to start buying its shares. They gushed up 12p to 81.25p.
On AIM, shares in Petrel Resources, the Irish-based oil and gas explorer, were gushing again and lifted 7.12p to 23.25p. Earlier this month, its shares spurted up more than 300 per cent after it said it had made a potential billion-barrel discovery.
Synthetic fuels group Oxford Catalysts has raised £1.3m through the sale of 933,687 shares to a subsidiary of US-based Ventech Engineers at a 44 per cent premium to the mid-market share price. The deal fuelled a share price rise of 19p to 112.5p.
Wolf Minerals received credit approval of £75m towards the funding of the Hemerdon tungsten and tin mine in Devon, and its shares dug up a 1.12p gain to 14.25p. Software group WANdisco has bought Silicon Valley-based Alto Stor to help it increase its "big data" ability, and its shares lifted 10p to 447.5p.
FTSE 100 Risers
Randgold Resources 6,655p (up 305.0p, 4.80 per cent) Investors were willing to invest in riskier stocks again and miners and banking stocks were back in favour. The Mali-focused miner got a boost from analysts at RBC Capital, who gave it an outperform rating.
ARM Holdings 747p (up 36.0p, 5.06 per cent) The computer microchip designer was one of the top gainers in a rising market.
FTSE 100 Fallers
Melrose 206.9p (down 2.0p, 0.96 per cent) The engineer failed to recover from Friday's falls after it warned on the outlook for 2013. Analysts at Panmure Gordon reduced their share price target to 225p from 270p and rated it a hold yesterday.
G4S 242.4p (down 1.7p, 0.70 per cent) The security firm that has been trying to recover from its Olympics fiasco was hit by a downgrade from Credit Suisse, reducing it to neutral.
FTSE 250 Risers
Lonmin 515p (up 43.7p, 9.27 per cent) The platinum miner gained clearance to proceed with a crucial $817m (£513m) rights issue after shareholders voted in favour.
London Stock Exchange 987p (up 51.0p, 5.45 per cent) The share price of the exchange soared despite getting a rating cut from analysts at JPMorgan. They reduced the target price to 886p, and rated it underweight.
FTSE 250 Fallers
Mitie Group 280p (down 10.0p, 3.45 per cent) The outsourcer expects a revenue increase over the next six months after a clutch of contract wins but its pre-tax profit in the past six months only moved up 1.9 per cent.
Supergroup 617.5p (down 21.0p, 3.29 per cent) The fashion group failed to recover after Numis Securities' Andrew Wade reduced his rating to sell on Friday.
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