Market Report: Barclays back on the rise after losing fifth of value

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The Independent Online

Barclays offered a surprise glimmer of hope in a mostly overcast market yesterday, as the banking giant defied its financial competitors to register a 1.6 per cent jump in its share price. With investors shying away from high-risk options, such as banks, Barclays shares increased by 2.95p to 189.1p after UBS raised its rating on the stock from "neutral" to "buy".

UBS argued that Barclays shares have fallen by about a fifth since it reported a "good set" of first-quarter results on 26 April, while Deutsche Bank reported less favourable figures on the same day, yet its stock is only down 12 per cent, it argued.

"This has brought Barclays shares to a point where the risk/reward looks attractive.... Recent share price retrenchment has largely been driven by concerns over Barclays' exposure to Spain, where we think a more realistic approach to impairment over the last few years should limit the impact of higher provisioning from the proposed Royal Decree to between £50m to £70m," UBS said in a note.

If Barclays' performance offered a ray of sunshine, Ophir Energy, the FTSE 250 Africa-focused oil explorer, was a meaty beam. A day after delivering an encouraging trading statement, the company, backed by the billionaire steel magnate Lakshmi Mittal, announced a hefty gas discovery off the coast of southern Tanzania.

The discovery of "55 metres of natural gas pay in good quality sands" about 45km from the Tanzanian coast by Ophir's joint venture with BG Group sent the minnow's shares up by 65p to 580p.

Shares in BG – which owns 60 per cent of the venture, to Ophir's 40 per cent – dipped slightly by 4.5p to 1,270p because the find was far less significant for the much bigger group, which suffered at the hands of the more general market malaise.

The FTSE 100 index tumbled again yesterday, falling by more than 1 per cent to below 5,400 points for the first time since mid-December, before rising slightly in afternoon trading to end the day down 32.4 points, or 0.6 per cent, at 5,405.25.

Alex Guy, the head of execution at TJ Markets, said: "The mood amongst traders remains grim as equities continue their descent. The issues regarding Greece and the wider eurozone aren't going away in a hurry and until they are resolved, we expect the choppiness to continue."

Worst hit were the miners, as fears about the outlook for the global economy dragged down the price of copper to a fresh four-month low.

Xstrata was among the worst performers, down by 13.2p to 985.8p, as – making the second of three appearances in today's markets column – UBS downgraded its recommendation on the miner's shares to "neutral" from "buy" in the wake of disappointing production data. UBS also downgraded its rating for Glencore to "neutral" from "buy", sending its shares down by 7p to 363.15p.

The grim global economic outlook also dragged down the price of Brent crude oil by as much as $1.21 a barrel to $111.03.

Even a bullish trading update from Bovis Homes only prompted a small share price rise – of 3.2p to 446.7p.

The housebuilder reported strong trading in the 19 weeks to 11 May, with private net reservations rising by a third compared to the previous year, and said its prospects for the rest of the year were good.

Despite a note from JPMorgan saying that B&Q-owner Kingfisher has such beefy cash reserves it could afford to hand around £600m back to shareholders, the stock still declined by 3.9p to 281.2p.

Elsewhere, shares in the PartyPoker owner Digital Entertainment fell by 7.3p to 131.5p as the group reported a 3 per cent drop in first-quarter sales to €52.2m (£41.6m).

Meanwhile, the digital radio maker Sepura saw its shares jump by 3.0p to 64.5p after it announced the acquisition of Tetra infrastructure company 3T Communications for up to €13m.

Looking to the future, Georgia fleshed out its plans to list its state railway service on the London Stock Exchange. Announcing that trading in Georgian Railway is likely to commence on 24 May, through global depositary receipts (GDRs) listed on the LSE, the company set an IPO price range of $15.25 to $19 per GDR. With each GDR representing 20 shares, that translates into 76.25 cents and 95 cents a share.

The offer of Georgian Railway GDRs represents the sale of up to 262.4 million shares – or 13.1 million GDRs – and will raise between $200m (£125m) and $250m. Representing a quarter of the share capital, the IPO will value the company at between $800m and $1bn.

The move is part of the rapidly growing former Soviet state's broader privatisation strategy, in which it aims to attract foreign investment.