Market Report: Cairn eases as broker warns on valuation

Cairn Energy fell back last night, trading lower as the London market flirted with levels not seen since November. The oil and gas explorer and producer was 26p behind at 1,871p after Morgan Stanley called time on the valuation, telling clients that its recent strength and the narrowing of the discount between the Cairn share price and that of its India-listed business weighed against the stock.

The broker added that there was little chance of positive news in the short term, as the company was unlikely to release any new material information on its key development in the Indian state of Rajasthan.

"We have increased confidence in the resource base in Rajasthan and the company delivering first oil in the third quarter of 2009," the broker said. "However, with the [business] understandably focused on meeting this target, we see limited short-term catalysts for the shares."

Morgan Stanley also played down the possibility of a bid, arguing that suitors were like to wait in the wings until the Rajasthan development was onstream and oil was flowing through the pipeline.

Overall, the FTSE 100 touched an intra-day low of 3,772.45 – its lowest level since November – before recovering to 3,816.44, down 34.29 points, at the close. Investors were unsettled by new problems at AIG, the American insurance giant which was said to be in talks regarding another government-sponsored bailout, and worries about Citigroup, the banking giant which has endured some heavy selling over the past week.

The FTSE 250 also weakened, losing 13.59 points to 5,905.75, as UK-focused investors digested news that tighter credit conditions had precipitated a sharp fall in business investment in the three months to December.

Worries about US financials affected parts of UK-listed banking and in-surance sectors, which gave back gains from earlier in the week. Friends Provident was the hardest hit, falling by almost 10 per cent, or 7.4p, to 67.8p, while Prudential lost more than 7 per cent, or 22p, to 266.75p.

Besides the general shift in sentiment, the sector was also hit by chatter about a possible rise in short-selling activity and news that Standard & Poor's was considering changing ratings for so-called multi-line insurers, which bundle the risk exposures of multiple insurance obligations into one contract. Aviva, a FTSE 100-listed multi-line insurer, was down just over 5 per cent, or 14.5p, at 272p.

Among banks, Lloyds Banking Group, down 5.1 per cent, or 2.9p, at 53.9p, was the weakest. HSBC was down 2.25p at 472p, while Standard Chartered eased 8p to 653.5p.

Royal Bank of Scotland kept its gains, however, adding more than 4 per cent, or 0.9p, to 22.1p, as in-vestors awaited more details on its restructuring plans, which are ex-pected with the company's full-year results tomorrow.

Elsewhere, Vedanta Resources was 4.5 per cent, or 25p, behind at 529.5p after Citigroup reduced its target price for the mining group's stock from 790p to 725p.

"We had assumed fairly rapidly declining costs at Vedanta to arrive at our earlier earnings expectations. However, we believe that other mining groups have demonstrated quicker action at the project level than Vedanta in attempts to cull costs..." the broker said, cutting its earnings per share forecast for the current year from £1.71 to $1.35.

Also on the downside, Invensys lost 4.2p to 149.2p after Morgan Stanley set an "underweight" rating on the technology group's stock. The broker said: "We believe the earnings risk for 2010 is likely to dominate the debate on Invensys as our proprietary checks suggest significant cuts to capital expenditure for the oil and gas sector, the core end market for the [company's] Process Systems [division]."

GlaxoSmithKline was 12p behind at 1,106p after the high-profile hedge fund manager Crispin Odey said defensive stocks such as those in the pharmaceutical sector presented attractive short-selling opportunities owing to their high price-earnings ratios.

Among smaller companies, JJB Sports fell by 6.5 per cent, or 0.6p, to 8.99p on rumours that a buyer had dropped out of the race to acquire its fitness clubs business. No names were mentioned.

NetPlay rose by 4.1 per cent, or 0.7p, to 18.7p after the gaming firm unveiled an exclusive TV distribution deal with Channel Five to launch its Eurotelemillions.com service.

The coal miner New World Res-ources fell to 200p, down almost 9 per cent, or 19.7p, after Arbuthnot repeated its "reduce" recommendation on the back of the company's preliminary results.

Allied Gold, on the other hand, jumped to 22p, up 6 per cent or 1.2p, after the company raised $30.7m via an oversubscribed placing of 61.5 million shares. Ambrian, which maintains a "buy" rating on the company's stock, welcomed the move. "While the downside is clearly dilution, we think that, like its larger peer Centamin, a strong balance sheet should not only attract new investors, but also effectively enable the company to make hay while the sun shines," added the broker.

Arts and Entertainment
books
Voices
Nigel Farage arrives for a hustings event at The Oddfellows Hall in Ramsgate on Tuesday
voicesA defection that shows who has the most to fear from Ukip
Arts and Entertainment
The Doctor and the Dalek meet
tvReview: Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Sport
Diego Costa
footballEverton 3 Chelsea 6: Diego Costa double has manager purring
PROMOTED VIDEO
News
Dr Alice Roberts in front of a
peopleAlice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Arts and Entertainment
The 'three chords and the truth gal' performing at the Cornbury Music Festival, Oxford, earlier this summer
music... so how did she become country music's hottest new star?
Life and Style
The spy mistress-general: A lecturer in nutritional therapy in her modern life, Heather Rosa favours a Byzantine look topped off with a squid and a schooner
fashionEurope's biggest steampunk convention heads to Lincoln
Voices
Caustic she may be, but Joan Rivers is a feminist hero, whether she likes it or not
voicesShe's an inspiration, whether she likes it or not, says Ellen E Jones
News
i100
Arts and Entertainment
Star turns: Montacute House
tv
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
i100Steve Carell selling chicken, Tina Fey selling saving accounts and Steve Colbert selling, um...
Arts and Entertainment
Unsettling perspective: Iraq gave Turner a subject and a voice (stock photo)
booksBrian Turner's new book goes back to the bloody battles he fought in Iraq
News
i100
Arts and Entertainment
Some of the key words and phrases to remember
booksA user's guide to weasel words
Life and Style
Brave step: A live collection from Alexander McQueen whose internet show crashed because of high demand
fashionAs the collections start, Alexander Fury finds video and the internet are proving more attractive
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

Law Costs

Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...

Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

DevOps Engineer (Systems Administration, Linux, Shell, Bash)

£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

Day In a Page

The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor
She's dark, sarcastic, and bashes life in Nowheresville ... so how did Kacey Musgraves become country music's hottest new star?

Kacey Musgraves: Nashville's hottest new star

The singer has two Grammys for her first album under her belt and her celebrity fans include Willie Nelson, Ryan Adams and Katy Perry
American soldier-poet Brian Turner reveals the enduring turmoil that inspired his memoir

Soldier-poet Brian Turner on his new memoir

James Kidd meets the prize-winning writer, whose new memoir takes him back to the bloody battles he fought in Iraq
Aston Villa vs Hull match preview: Villa were not surprised that Ron Vlaar was a World Cup star

Villa were not surprised that Vlaar was a World Cup star

Andi Weimann reveals just how good his Dutch teammate really is
Bill Granger recipes: Our chef ekes out his holiday in Italy with divine, simple salads

Bill Granger's simple Italian salads

Our chef presents his own version of Italian dishes, taking in the flavours and produce that inspired him while he was in the country
The Last Word: Tumbleweed through deserted stands and suites at Wembley

The Last Word: Tumbleweed through deserted stands and suites at Wembley

If supporters begin to close bank accounts, switch broadband suppliers or shun satellite sales, their voices will be heard. It’s time for revolution