Market Report: Corus hurt by rival's warning on steel costs

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The Independent Online

Corus shares ended the week on a negative note yesterday after disappointing results from its rival ThyssenKrupp.

Corus shares ended the week on a negative note yesterday after disappointing results from its rival ThyssenKrupp.

Corus featured as one of the worst performers in the FTSE 100 for much of the day, ending down 2p at 40.5p, after the German group posted weaker-than-expected second-quarter results and complained about falling steel demand and rising costs.

Things are certainly far from rosy for steel makers these days. Thyssen's results were poor across all its divisions but things at its steel business were particularly weak. The German group also warned that industry growth rates are set to weaken making it inevitable that production cuts are on the way.

The latest inventory data shows that steel stocks are at record levels, which can mean only one thing: prices are likely to retreat in the near future. Credit Suisse First Boston forecasts soft steel prices for at least the next six months. In a recent report the broker said: "Prices are unlikely to rise again in Europe before October at the earliest in our view but, importantly, if destocking is well managed steel prices may not fall much between then and now."

Meanwhile, Rolls-Royce registered the best performance in the blue-chip index, rising 7.5p to 260p, thanks to Merrill Lynch, which added the stock to its Europe 1 list. The list consists of the US broker's favourite European stocks. The FTSE 100 closed 6 points lower at 4,886.

SABMiller dropped 15p to 813p as ABN Amro urged its clients to reduce their exposure to the brewer before next week's annual results. The broker said: "South Africa has been SAB's largest profit pool and contributor to growth for two years. We now believe growth will slow in the home market and that earnings momentum is peaking for the group."

Rumours that SAB is on the look-out out for acquisitions have circled the group in recent weeks. Scottish & Newcastle, up 1.5p to 481.25p, has been touted as a likely to have attracted the attention of SAB, but ABN suggests the group may struggle to complete a major acquisition while Altria retains a 34 per cent shareholding.

The oil sector had a bad day as the price of crude dropped to a three-month low. BP fell 2p to 533p, BG Group gave up 1.25p to 405.5p and Shell lost 4p to 464.5p. Second-line players suffered more. Premier Oil gave up 28p to 535p, Burren Energy lost 24.5p to 468.5p, Dana Petroleum fell 25p to 548p and Paladin Resources retreated 6.75p to 175.25p.

Elsewhere, Commerzbank was heard to have finally closed its proprietary trading desk in London as the German bank continued with the restructuring of its business. Although the move has been well flagged, it nevertheless caused investors to worry about what will happen to some of the desks bigger positions. Among them are stakes in Evolution Group, down 2.5p to 139p, and Regal Petroleum, off 16.5p to 252.5p.

Those working on proprietary trading desks use a bank's money to place large bets on the market. Commerzbank refused to be drawn on what would happen to its stakes in Evolution and Regal as investors worried it will decide to sell them.

Britannic roared 27p higher to 472p, with dealers reporting demand for the stock from tracker funds. The insurer is due to enter the MSCI at the end of May and those funds which track the index are believed to be desperate to get their hands on Britannic shares beforethe move.

Thus added a further 0.5p to 14.25p on whispers that some form of corporate action is just around the corner at the alternative telecoms carrier. Market professionals believe that if there is going to be action at Thus, it will most probably be prompted by Columba Venture, the US private equity firm which controls 10.3 per cent of the group.

Rumours that Cable & Wireless' soon-to-be-announced results will make pleasant reading for shareholders pushed its shares 1.25p higher to 126p. There was also vague talk that C&W could be tempted to buy Gresham Computing, with which it has a joint venture with. The speculation failed to stir Gresham, down 3.5p to 174p.

Lower down the pecking order, Integrated Asset Management rose 1.5p to 58p as Nick Levene, an executive at the hedge funds group, bought 270,000 shares at 56p. Emanual Arbib, IAM's managing director, picked up a more modest 35,000 at between 54p and 56p.

There was also director share buying at Axis Shield, 5p better at 271p. Erik Hornnaess, a non-executive at the biotech group, bought 30,000 shares at 269p. ImageScan added a penny to 9.5p on hopes the group is close to securing a major contract win.