Market Report: BP break-up mulled as FTSE 100 rally ends at last

As the blue-chip index's rally finally came to a halt, the future of BP was back under discussion in the City. There have been an increasing number of people calling for a demerger of the oil giant as a way to revive its depressed share price, but yesterday analysts from Royal Bank of Scotland decided to swim against the tide.

Hopes that the group, which remains over a third lower than before last year's Gulf of Mexico disaster, could split its upstream and downstream operations have been buoyed by the fact that a number of its peers have recently embraced the idea, including the US company ConocoPhillips.

However, RBS said large oil companies demerging "goes against industrial logic", adding that "even in cases of pronounced undervaluation... [it is] a risky method of financial engineering".

Instead, scribblers from the broker said BP – which edged up 0.7p to 405.85p – should concentrate on further disposals, pointing out that it has already gained more than $1bn from asset sales since the oil spill. While they estimated the group had a break-up valuation of 941p a share, they argued that this "highlights the merit of the group's ongoing disposal programme" rather than supporting the prospect of a demerger.

Overall, a late rally failed to stop the FTSE 100 finishing in the red for the first time in a week, ending a run in which it had advanced more than 9 per cent. By the bell the blue-chip index was a mere 3.3 points worse off at 5,395.7, with trading desks cautious ahead of last night's vote in Slovakia on the eurozone bailout fund.

Investors were also being unsettled by the analysts at Moody's Analytics who warned there was still a risk the United States could suffer a further downturn. It certainly did not improve sentiment around Wolseley, given that two-fifths of the building supplies company's revenues come from across the Atlantic, and it moved back 19p to 1,722p.

BAE Systems shot up 10.7p to 281.1p to take pole position after vague chatter suggesting that a break-up bid for the defence giant could be in the pipeline emerged once again. City voices also highlighted the award earlier in the week of a contract to supply helmet technology parts for the F-35 fighter jet, as well as positive developments over a project to replace thousands of Humvees for the US Army and Marine Corps, as signs that budget cuts in the country will not be as bad as feared.

There was little other takeover gossip for traders to get excited about, although there were reheated mutterings from the States that the troubled camera maker Eastman Kodak may be attracting interest from private equity.

Meanwhile, the French broker Société Générale argued that there would be a rush of corporate activity in the near future, claiming that "European companies need to make acquisitions" to "counterbalance weak economic prospects in [the region]". It drew up a list of 40 names it believed could become targets, including Shire (up 8p to 2,022p) and Meggitt (up 5.7p to 356.9p).



The recovery of Mothercare – which shed over 40 per cent in one session after its profit warning last week – gathered pace as the troubled baby products retailer announced that its chief executive, Ben Gordon, would leave after next month's interim results. In response, it pushed up 9.19 per cent to 210.2p on the FTSE 250, with Guardian Stockbrokers' Atif Latif saying the change "allows a shift of strategy that should appease investors".

It was a strong session for the sector in general, thanks to sales figures from the British Retail Consortium showing that last month had not been as bad as feared, and Argos owner Home Retail jumped up 5p to 131.5p while Sports Direct was 4.2p better off at 218.9p.

Debenhams was also ahead, shifting 0.95p higher to 65.25p, with Morgan Stanley raising its rating for the department store to "overweight". Geoff Ruddell, an analyst at the broker, said the group was likely to introduce a share buyback programme "surprisingly soon", claiming its excess free cash flow was high enough to "retire around 10 per cent of its share capital each year".

Multi-tasking Rentokil Initial was still rising, easing ahead 0.45p to 69.65p, in the wake of bid speculation returning on Monday. However, Petrofac – also the subject of takeover whispers earlier in the week – slipped 18p to 1,280p after its chief executive played down the rumours.



Fusion IP rocketed up 17.54 per cent to 33.5p on the Alternative Investment Market as the university research group revealed a £1m profit for the year – its first-ever pre-tax profit.

Also spurting up was Rockhopper, despite the Falkland Islands explorer admitting it had drilled a dry well. Nonetheless, it still closed 12.67 per cent higher at 191.25p after increasing its estimates for its Sea Lion prospect.

Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
Arts and Entertainment
Inside the gallery at Frederick Bremer School in Walthamstow
tvSimon Usborne goes behind-the-scenes to watch the latest series
Life and Style
A picture taken on January 12, 2011 shows sex shops at the Paris district of Pigalle.
newsThe industry's trade body issued the moratorium on Friday
News
Winchester College Football (universally known as Winkies) is designed to make athletic skill all but irrelevant
Life...arcane public school games explained
PROMOTED VIDEO
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
Life and Style
Silvia says of her famous creation: 'I never stopped wearing it. Because I like to wear things when they are off the radar'
fashionThe fashion house celebrated fifteen years of the punchy pouch with a weighty tome
News
i100(and it's got nothing to do with the Great British Bake Off)
News
Angelina Jolie with her father Jon Voight
peopleAsked whether he was upset not to be invited, he responded by saying he was busy with the Emmy Awards
News
Bill Kerr has died aged 92
peopleBill Kerr appeared in Hancock’s Half Hour and later worked alongside Spike Milligan and Peter Sellers
News
news It's not just the world that's a mess at the moment...
Sport
footballPremiership preview: All the talking points ahead of this weekend's matches
News
Keira Knightley poses topless for a special September The Photographer's issue of Interview Magazine, out now
people
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
News
i100
Sport
Mario Balotelli pictured in his Liverpool shirt for the first time
football
Life and Style
tech
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

Data Scientist (SQL,Data mining, data modelling, PHD, AI)

£50000 - £80000 per annum + benefits+bonus+package: Harrington Starr: Data Sci...

SAS Business Analyst - Credit Risk - Retail Banking

£450 - £500 per day: Orgtel: SAS Business Analyst, London, Banking, Credit Ris...

Project Manager - Pensions

£32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

KYC Analyst, Birmingham - £200-£250 p/d

£200 - £250 per day + competitive: Orgtel: KYC Analyst, Key Banking Client, Bi...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone