Cable & Wireless Worldwide swung to pole position on the benchmark index last night, with traders buying in on hopes of market share gains.
The stock was marked up more than 4 per cent after a Goldman Sachs poll of IT managers chimed with the company's claim that its UK corporate telecoms or enterprise business could grow its market share from 19 per cent to the high 20s. "We find nothing to suggest that CWW's UK enterprise business is at risk of losing share," the broker said, helping the stock end the session at 77.55p, up 3.35p.
Goldman also tackled fears surrounding the Government's austerity drive, arguing that public sector risks were already reflected in both the share price and forward-earnings estimates. "We believe management must assure on austerity pressures and the quality of its UK enterprise business to drive forecast upgrades and a re-rating, and the first half results in November offer such an opportunity," the broker added, moving the stock to "buy".
In wider telecoms sector, BT was under pressure, losing 4.4p to 140p, after Morgan Stanley warned that the Pensions Regulator could propose a deficit reduction schedule of "10 years rather than 17 years". This, the broker warned, "would imply no spare free cash flow beyond pension top-ups and dividend – even though changes to the cash paid in by BT would likely need to wait until the next actuarial review in December 2011".
Overall, the market fell back, with the FTSE 100 losing 15.42 points to 5,540.14 and the FTSE 250 closing at 10,442.12, down 52.15 points. Sentiment was weak following news that UK retail sales had slipped in August, reigniting worries about the outlook for consumer confidence. The data was somewhat offset by positive newsfrom Kingfisher, which was 0.9p up at 219.8p, the John Lewis Partnership and Kesa Electricals, which was 2.1p ahead at 137.5p, but the market remained focused on the road ahead. A Bank of England survey showing that inflation expectations had risen and an uninspiring CBI poll on industrial trends only added to the gloom.
The mining sector was unsettled as the Japanese PM raised the prospect of further interventions to curb gains in the yen. But the tide turned after an unimpressive set of jobless claims data weighed on the dollar, supporting metals prices. The shift helped Xstrata bounce off a session low of 1,140p, down 20p, to close at slightly higher at 1,160.5p, up 0.5p. Kazakhmys went from a low of 1,338p, down 17p, to 1,365p, up 10p, by the end of the day.
The Eurasian Natural Resources Corporation outshone its peers, swelling by nearly 4 per cent or 32p to 898p after Credit Suisse turned positive, moving the stock to "outperform" from "neutral". Citing the recent run of weakness in the shares, the broker said that not only was all the bad news now priced in, but that, even though the "the high quality Kazakh asset base" remained the core value driver for ENRC, sentiment and newsflow was being coloured by concern about disputed copper assets in Democratic Republic in Congo, pointing to a buying opportunity.
In the wider sector, the mid-cap precious metals producer Hochschild Mining fell to 407.3p, down 7.7p. The decline was pegged on Bank of America Merrill Lynch, whose analysts abandoned their "buy" stance following recent gains in the Hochschild share price. "We believe a further re-rating towards peers such as Fresnillo and Randgold [Resources] is only possible once the company starts to deliver on its organic growth pipeline," the broker said, lowering Hochschild to "neutral" with a revised 425p target price, compared to 435p previously. At the close, Fresnillo 8p down at 1,181p, while Randgold rose by 50p to 6,295p as gold prices touched a new record.
Elsewhere, Imperial Tobacco stood firm, edging up by 2p to 1,927p, partly owing to a general dip in the market's appetite for risk, which helped defensives, and partly because of Morgan Stanley, which labelled it the "cheapest stock in global tobacco". "While the recent volume disappointment needs resolution and the growth strategy needs clarification, we think the discount is unjustified," the broker said.
Further afield, the engineer IMI was 4.5p behind at 733p after Goldman lowered the stock to "neutral" in a capital goods sector roundup. The broker was keener on Invensys, which was broadly unchanged at 276.9p, down 0.2p, despite being upped to "buy" in the same note. Cookson, which hung on to its positive rating and continues to feature on the broker's "conviction buy" list, was higher, adding 7p to end at 485p.
Speculators were left licking wounds following news that private equity firm Oak Hill Capital had sold 12 million shares in Telecity, the data centre operator, which fell by 24.5p to 500p. The company has long been rumoured to be a bid target, but the transaction weighed against the speculation. The rumour-mongers also had little luck around ASOS, which lost 36p to 1,100p as bid talk failed to gain any traction for a second session in a row. Though seen as an attractive target, the online fashion specialist was said to be too expensive to attract deal interest at current levels.Reuse content