Market Report: Bid talk helps Home Retail avoid the slump

The markets' severe plunge may have shown few signs of abating yesterday, but the return of talk that its Argos business could attract buyers meant Home Retail was one of the few stocks finishing ahead.

As the FTSE 100 suffered a fourth straight session of three-digit falls for the first time ever, the retailer – which also owns Homebase – managed to power forwards 3.9p to 123.7p on the mid-tier index after Morgan Stanley talked up its takeover potential.

Pointing out the company has lost over 75 per cent of its share price since peaking at 497.5p in 2007, the broker's analyst Geoff Ruddell said that "given how lowly Argos and Homebase are currently being valued by the market, we think some form of takeout remains a very plausible scenario".

Bid rumours have often appeared around the group, with one frequent tale linking it to a potential approach from Walmart. Mr Ruddell suggested Argos would "strategically, be a very attractive asset" for the US owner of Asda, as it would, he said, to the other UK supermarket chains.

Highlighting the fact the broker was "turning buyers for the first time ever," Mr Ruddell upgraded Home Retail's rating to "overweight", saying that "both Argos and Homebase remain viable businesses and are far from worthless, which is what [its] current share price is very close to implying". The analyst added that the strong condition of its balance sheet meant it was in a better condition than a number of its rivals to wait out the current economic pressures facing the high street.

After Standard & Poor's decision late on Friday night to rid the US of its AAA credit rating, investors suffered a nervous weekend as they worried over whether the move was going to prompt a seventh straight session on the slide for the blue-chip index. Despite a small climb in initial trading, by the bell – with the Dow Jones Industrial Average in the US down nearly 3 per cent – the FTSE 100 had been driven back 178.04 points to 5,068.95; its lowest closing level for 13 months.

Once again, the miners were taking the brunt of the damage, including Rio Tinto, which dropped 234.5p to 3,387.5p, after it announced overnight that it was teaming up with Japan's Mitsubishi to make a $1.56bn move for the Australian miner Coal & Allied.

Yet, as gold prices soared above the $1,700-an-ounce level for the first time, the precious metal producers were benefiting from their defensive appeal. Randgold Resources ended up finishing at the only riser on the top-tier index, putting on 425p to 6,145p, as Deutsche Bank said its recent figures "will go some way to restore market confidence in [its] ability to convert exploration success into sales".

The broker upgraded its rating to "buy" and also increased its target price for Fresnillo – down 20p to 1,804p – to 2,000p from 1,480p.

After a week in which it revealed it had lost £3.25bn over the first half of the year and its share price retreated nearly 25 per cent to its lowest since 2009, for most of the day Lloyds Banking Group looked as if it was going to close in the blue for the first time in seven sessions.

However, a late slump meant at the close it was behind just 0.04p to 32.81p, while – despite the European Central Bank kicking off its plan to buy Italian and Spanish bonds and Nomura changing its rating to "neutral" from "sell" – Royal Bank of Scotland was knocked back 0.92p to 27.26p.

After dropping 451.16 points to 9,861.97, the FTSE 250 was at its weakest for almost 12 months, but City scribblers still said IG Group should be celebrating the recent turmoil. Pointing out that last year the spreadbetter's profits were dampened by fairly calm markets, Nomura's James Hamilton said that "if current market conditions persist... into the much busier month of September and beyond we would expect to see consistent upgrades as the year progresses."

Given the current fears over the state of the US economy, it was not too surprising that Ashtead – which has a significant presence Stateside with its Sunbelt Rentals business – lost 25 per cent last week.

Yesterday the equipment rental group plummeted a further 13.5p to 107p, despite Seymour Pierce attempting to halt the fall by highlighting the positive read-across from its US peers.

Both United Rentals and RSC have issued reassuring comments recently, prompting the broker to say that "notwithstanding the current concerns over the US economic outlook, we continue to believe we are in the expansion phase of the cycle for equipment rental companies".

Down among the small-cap stocks, International Ferro Metals managed to buck the general trend by shifting up 1.75p to 16p – an increase of over 12 per cent. The ferrochrome producer, which had dropped by more than a quarter over the previous four sessions, rose after announcing it had managed to complete a key upgrade at its Sky Chrome project in South Africa both on budget and on time.

FTSE 100 Risers

Tesco 361.9p (down 0.5p, 0.14 per cent)

Supermarket outperforms the market thanks to its defensive qualities.

Standard Life 172p (down 0.9p, 0.52 per cent)

Insurer is among the top stocks ahead of the release today of its third-quarter results.

International Power 286.3p (down 2.2p, 0.76 per cent)

Utility manages to limit its losses after signing Canadian wind power deal.

FTSE 100 Fallers

Vedanta Resources 1,287p (down 132p, 9.3 per cent)

Miner drops after subsidiary buys 51 per cent stake in Liberia's Western Cluster for $90m.

Amec 834p (down 66p, 7.33 per cent)

Oil services group slides despite Seymour Pierce upgrading its rating to "buy" from "add".

Tullow Oil 951.5p (down 60.5p, 5.98 per cent)

Energy company knocked by Deutsche Bank reducing its target price to 1,150p from 1,405p.

FTSE 250 Risers

Premier Foods 13.77p (up 0.81p, 6.25 per cent)

Hovis owner sees a bounce after dropping on Friday in the wake of its interim results.

Centamin Egypt 91p (up 1.35p, 1.51 per cent)

Gold miner finds support from the price of the yellow metal rising.

Cable & Wireless Communications 32.25p (up 0.3p, 0.94 per cent)

Telecoms group rises for the first time in seven sessions.

FTSE 250 Fallers

Thomas Cook 45.51p (down 8.59p, 15.88 per cent)

Troubled tour operator takes the wooden spoon, stretching its losing run to an eleventh day.

Lamprell 285p (down 47p, 14.16 per cent)

Oil rig company's latest fall means it drops to its lowest share price since last March.

Misys 249.2p (down 31.1p, 11.1 per cent)

Software group still retreating after the takeover attempt from FIS fell apart last week.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Syria civil war: Meet the military commander who says his soldiers will not rest until every inch of their war torn country is free of Islamist 'terrorists'

‘We won’t stop until Syria is back to normal’

Near the front lines with Islamist-controlled towns where Assad’s troops were besieged just last month, Robert Fisk meets a commander confidently preparing his soldiers for battle
The inside story of how Bill Clinton built a $2bn global foundation may undermine Hillary's chances

The inside story of how Bill Clinton built a $2bn global foundation...

... and how it may undermine Hillary's chances in 2016
12 best olive oils

Extra-virgin, cold-press, early-harvest, ultra-premium: 12 best olive oils

Choosing an olive oil is a surprising minefield. Save yourself the hassle with our handy guide
Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back