Market Report: Broker downgrade bears down on Bellway

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Bad broker sentiment bore down on Bellway, the FTSE 250-listed housebuilder, which lost 16.5p to 706.5p yesterday.

Goldman Sachs, whose analysts weighed in on the housebuilding sub-sector, dealt the blow, downgrading the stock to "sell" from "neutral".

"We are cutting our volume and pricing forecasts as tighter mortgage credit contributes to weaker demand and pricing, which is accelerating our expected downturn in UK housing," the broker said. It forecast a 24 per cent slump in volumes in 2008, and an 8 per cent slump in 2009. "... We believe UK housebuilders continue to look expensive as a sub-sector," Goldman added.

The broker also set a "sell" rating on Taylor Wimpey, which was down 1.35p at 127.75p. Barratt Developments, on the other hand, was upgraded to "neutral" from "sell" to reflect recent underperformance and rose 1.5p to 251.25p.

Elsewhere, speculative support took the newspaper publisher Trinity Mirror up by 11.25p to 255.25p. Early rumours suggested the company may have attracted the interest of Axel Springer, Germany's largest newspaper publisher.

Some market sources, however, were sceptical about the idea. "This is a surprising one," said one sales trader, adding: "It has to be said that you never know about these rumours, but I'm not convinced. Also, it's a Friday," he added, referring to the end-of-week rumours, many of which subside by the time trading resumes on Monday.

Overall, the FTSE 100 was up 52.5, or 0.8 per cent, at 6,304.3. A sluggish start on Wall Street, while pulling the London benchmark off earlier highs, failed to extinguish the cheer among investors – a combination of bid activity and positive earnings news giving strength to the index.

British Energy claimed fist place on the leader board, rising 35.5p to 715.5p, after saying that it had "received a range of proposals from several parties". British Airways, at third place, up 9p to 233p, was the other notable riser after restoring its dividend and posting strong full-year results.

Oil companies rose as the oil price continued to go from strength to strength – to almost $128 per barrel. Tullow Oil climbed 30p to 954.5p, while Dana Petroleum added 12p to 1,899p. JKX Oil & Gas, which published an interim management statement yesterday, climbed 6p to 515p and Venture Production was up 5.5p at 835.5p.

Cairn Energy built on Thursday's record run, the stock closing up 15p at 3,547p.

The banking sector had a mixed day as analysts commented on Barclays, which posted a £1bn writedown earlier in the week but refrained from launching a rights issue.

"We believe Barclays will fail to reach its target equity tier-1 ratio of 5.25 per cent without some form of balance sheet management," said Citigroup.

It added: "We estimate that Barclays needs £7bn to reach an equity tier-1 ratio of 6.5 per cent (assuming no additional writedowns), meaning a rights issue appears the only practical solution.

"However, management may still be considering other options, such as a scrip dividend or the sale of new shares to a sovereign wealth fund."

Barclays was down 8.5p at 410.25p, HSBC lost 0.5p to 891.5p and Royal Bank of Scotland was down 9.5p at 266.5p. Alliance & Leicester was up 1.25p at 441p, HBOS gained 4p to 469.25p and Lloyds TSB added 2p to 411p. The FTSE 250-listed peer Bradford & Bingley was down 2p at 133p.

On the FSTE 250, bid speculation was evident around Inmarsat, the satellite services specialist, which was up 8.5p at 475.5p. The company was the subject of rumours which suggested that a 600p-per-share bid may be in the offing soon.

The building materials group Marshalls was down, losing 10p to 215p, after Citigroup cuts its target price for the stock to 255p from 300p. Noting that the outlook for the domestic market is "increasingly uncertain", it also moved the stock from a "buy/low risk" rating to a "buy/medium risk" rating.

Logica shed 2p to 125.5p, after Goldman Sachs revised its rating on the stock to "sell" from "neutral". "Following its recent rally, we believe Logica now looks expensive," the broker said. It added: "A strong [first quarter] leads us to raise our 2008 expectations, but does little to alleviate concerns about the outlook in 2009."

On AIM, the software group Macro 4 was weak, losing 5p to 112.5p, after issuing an update which prompted Panmure Gordon to cut its target price for the stock to 113p from 126p.

"Once again, Macro 4 is suffering from the 'difficult environment'," the broker said, reducing its 2008 earnings-per-share forecast to 12.6p from 14p, but maintaining its "hold" recommendation.

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