Market Report: Cazenove note leaves Enterprise hungover

Enterprise Inns was the weakest on the FTSE 100 yesterday after Cazenove, worried by data from a subsidiary, downgraded the stock to "underperform" from "in-line".

The broker said that third-quarter data from the group's Unique division, which, according to Cazenove, accounts for 46 per cent of Enterprise's pubs, showed a "marked deterioration" in trading, with net income from beer sales down 8.4 per cent in the quarter.

"This is in contrast with ETI's robust performance in H1 [the first half] when Ebitda [earnings before interest, tax, depreciation and amortisation] was held flat. We had taken this as reassurance that ETI was outperforming the weak on-trade beer market but the Q3 [third quarter] data and trading update from July suggest otherwise," the broker said, sending Enterprise's shares down by 4.35 per cent, or 14p, to 307.5p.

Overall, the FTSE 100 was up 57.4 points at 5,528.1 and the FTSE 250 was up 3.5 points at 9,137.1. Strength among the resources stocks, which were lifted by firmer commodity prices and early gains on Wall Street, where investors celebrated better than expected durable goods orders, helped the London market bounce back from earlier looses.

Looking ahead, David Jones, chief market strategist at IG Index, said: "The next day or so could prove key for the UK market to see if this strength is set to continue. This month has seen the FTSE run out of steam ahead of the 5550/70 area once already and the temptation to book some profits on the back of the past week's gains could prove too tempting for traders."

On the FTSE 100, firmer base metals prices boosted the mining sector and Eurasian Natural Resour-ces Corporation climbed to 1,043p, up 4.2 per cent or 42p.Vedanta Resources gained 69p to 1,853p and Antofagasta, which posted in-line interim results yesterday, was up 22p at 592p.

Royal Bank of Scotland was up 4p at 221.75p after unveiling a board room reshuffle. The company announced the appointment of three new non-executive directors to its board, each with significant banking experience. Reacting to the news, Cazenove said that while the move was positive, it did not regard the appointments as "material for the share price".

"It is more important that the group meet its £4bn target from disposals, though recent comments from managements have raised doubt that it will," the broker said.

Collins Stewart initiated coverage on the real estate sector, telling investors to "sell" Land Securities, which was down 26p at 1,290p, Hammerson, which lost 23p to 901p, and British Land, which closed at 724.5p, down 22p.

"Our sector view is cautious, with the risk remaining to the downside. Net asset values will continue to be written down and earnings per share growth is coming under pressure," the broker said. "London office vacancy rates are increasing and retail sales volumes are down to recessionary levels. In the last cyclical downturn, this pushed rents down in both office and retail sectors. This will continue to weigh on share price valuations."

On the FTSE 250, a "buy" note from Goldman Sachs boosted Trinity Mirror, the newspaper publisher, which added 3.5p to 103p. Goldman was less fond of Johnston Press, which it moved to "sell" in advance of its interim results. "In valuing Johnston Press, we believe that the market is overlooking Trinity's more diversified revenue base," the broker said. "Fifty per cent of Trinity's revenues are derived from circulation, versus 25 per cent of Johnston, and we favour Trinity's national/regional mix in preference to Johnston's pure-play regional exposure in the current environment."

At the close, Johnston was down 3.5p at 47.5p, at third place on the mid-cap loser board after posting its results.

Taylor Wimpey eased back to 48.25p, down 3.75p, after posting interim results, revealing a slump in pre-tax profits and confirming that, contrary to recent trade press reports alluding to a deal with lenders, discussions on debt were still ongoing.

The announcement bore on the wider housing sector and Bellway lost 8.5p to 594p. Persimmon was down 5.75p at 348.75p.

Citigroup made things harder for Bovis Homes, which lost 13.75p to 427.5p after the broker reduced its target price for the stock to 460p from 480p to reflect its expectation of lower profits in the short term.

Elsewhere, Citi aided International Personal Finance, which gained 15.75p to 316p after the broker increased its target price for the stock from 290p to 325p.

On AIM, online retailer Asos was up 19.25p at 381.25p after Goldman Sachs initiated coverage on the stock with a "buy" rating and a 455p target price. "Asos is well positioned to outperform the overall UK clothing retail market as it benefits from the continuing structural shift towards the internet," the broker said.