Market Report: Cairn's Greenland woes leave shares in the cold

Environmentalists would have been toasting the sight of Cairn Energy stranded at the bottom of the index yesterday, after the Edinburgh-based oil explorer announced that it had suspended drilling at the controversial Alpha-1S1 well in Greenland before reaching the intended depth. The operation has been targeted by Greenpeace campaigners, who boarded the Stena Don platform in August in an attempt to delay the exploration.

Cairn had further bad news from the region at the close of the Arctic drilling season, as it revealed that its two other wells had been plugged and abandoned, with one failing to discover any significant sign of hydrocarbons. As the first drilling expedition in Greenland for a decade, the wells have great significance for any future attempts at finding oil in a region that, according to the energy consultancy Wood Mackenzie, could hold reserves of 20 billion barrels of oil. With Evolution Securities cutting Cairn's target price to 501p and Bank of America-Merrill Lynch downgrading the company to neutral, yesterday's trading left its shares 29.5p lower at on 382.50p.

Despite yesterday's release of official figures that showed the economy grew by 0.8 per cent in the third quarter, rather than the expected 0.4 per cent, the FTSE 100 shed 44.7 points and fell to 5,707.3 as the miners failed to build on Monday's successes. They were hit by a read-across from a profits warning at ArcelorMittal, the world's biggest steel-maker. The index also suffered as the banks headed down after Swiss rival UBS's investment arm reported losses for the third quarter.

Another sector struggling was the insurers after a sector note from Bank of America-Merrill Lynch, which downgraded four companies after a "strong share price performance of late". The broker added: "It is now time to be more cautious." Of the four, the worst-hit was Old Mutual, which ended up 3.3p down on 131.1p after it was downgraded to "neutral".

ARM Holdings may have hoped that its solid third-quarter results would have been welcomed by the market, but it failed to smash expectations and Texas Instruments, one of its biggest customers, made some bearish comments overnight, forcing the chip designer's price 23p lower to 366.2p.

One company that enjoyed a better day was Reckitt Benckiser, whose takeover of SSL, the maker of Durex condoms and Scholl footcare products, took a significant step forward as the move was given conditional EU regulatory approval late on Monday.

Goldman Sachs reacted to the regulator's green light by lifting the British consumer goods company's target price from 3,550p to 4,300p, upgrading it to "buy", and stating that it "expect consensus estimates to increase as analysts incorporate SSL's earnings into their forecasts for Reckitt Benckiser". The market responded positively to the latest developments, and the company closed 18p higher at 3,436p.

Joining Reckitt near the top of the pile was the media giant Pearson, the publisher of Penguin books and The Financial Times. The company had experienced a drop of 28.5p on Monday despite releasing a profits forecast upgrade, but yesterday it performed much better in spite of broker Nomura taking the knife to its target price and cutting it to 932p from 1,009p. It ended on 966p, a rise of 18.5p.

On the mid-tier, the transport giant Go-Ahead Group added 85p to close on 1,358p after it reported a 7 per cent increase in tickets sales at its rail division, as well as increased revenue from its bus franchises. Go-Ahead also announced that its chief executive, Keith Ludeman, is set to retire in July 2011 and will be replaced by David Brown, who is currently the managing director of Transport for London's surface fleet. Helping the positive reaction from traders was a note from Investec, which raised the company from "hold" to "buy".

BSS was another riser, after the Office of Fair Trading (OFT) said the £558m takeover of the builders' merchant by Travis Perkins had not thrown up any nationwide competition concerns.

It will not be all plain sailing for the takeover, as the OFT did find some regional overlap. It announced a public consultation into Travis Perkins's offer to sell stores in 20 areas. Shares in BSS closed on 454.3p, a rise of 22.1p.

Brit Insurance saw its price rise by 24p to 1,045p after the company recommended a £888m takeover bid from private equity investors CVC Capital Partners and Apollo.

At the opposite end of the FTSE 250, Fidessa – whose share price rose by 92p on Monday – fell 138p to 1,584p after releasing a trading statement that confirmed its previous belief that growth in 2010 would not match figures for the previous year.

On the AIM, the Off-Plan Fund, which invests in residential properties, jumped after announcing a £1.1m insurance claim payout from Zurich Insurance. This followed the closure of Henry Homes earlier this year. The fund, which is set to be wound up, finished 19p up at 56.50p.

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