Market Report: Footsie ends on a high but Cairn Energy misses out
It may have been boom time in the Square Mile, but not everyone was along for the ride. While the Footsie closed last night at its highest since last July, Cairn Energy was among the stocks missing out on the rally amid fears the oil explorer is about to come under sustained pressure.
The group – which has faced heavy fire from Greenpeace for its controversial, and so far unsuccessful, drilling programme in Greenland – is trading ex-dividend on Monday for the $3.5bn, or 160p a share, it is returning to shareholders following the sale of part of its Cairn India stake.
However, UBS warned yesterday that this is one of just a number of hurdles on the horizon. Cairn is also being kicked out of the MSCI World benchmark index on the same day, a move which the broker calculated will spark the selling of nearly 70m shares – the equivalent of 11 days' volume.
If that was not enough, Cairn looks set to be relegated from the top-tier index in next month's reshuffle of the London indices, and the scribblers predicted this will result in another trading day's worth of shares being sold.
UBS analyst Melanie Savage said this "significant selling pressure" was "likely to lead to near term downside to the shares". Although she pointed out its valuation may be attractive "once the dust has settled", she added that the story for the year ahead appears "fairly slow-burning". As a result, Cairn spent most of the day in the red, and although it managed to close 1.8p ahead at 288.8p, it still lagged behind the vast majority of its fellow blue-chip stocks.
It was not a good session for the oil groups in general, with BG sliding 7p to 1,425p as traders cited concerns that next Thursday's full-year results could be accompanied by a possible fund-raising, although analysts have recently played down the likelihood of this being required.
Overall, there was no stopping the FTSE 100. Mightily impressive jobs data from the US left the benchmark index 105 points better off at 5,901.07 – a level it has not seen since last July before a run of awful economic news resulted in it losing almost 10 per cent in just five days. With data from the UK and China also helping yesterday, the Footsie has now managed to gain over 300 points this year alone, although not everyone was so optimistic – "it will all end in tears," warned one trader.
Admiral drove up 7.9 per cent to 1,038p after extending its UK car reinsurance partnerships at no increase to costs. The insurer has been rather quiet since November's profits warning, so the news was being taken as particularly reassuring, as was a positive update from reinsurance giant Munich Re's on Thursday.
Elsewhere, Old Mutual climbed 6.3p to 157.8p after the financial conglomerate announced a special £1bn dividend, while Glencore (up 20.85p to 482.55p) and Xstrata (up 52.5p to 1,283p) were still on the rise following Thursday's announcement of merger talks between the two. International Power, which finished 3.5p better off at 343.8p, was the subject of vague speculation that France's GDF Suez may want to snap up the remaining 30 per cent of the utility it does not already have, although takeover rules mean it will have to wait a while.
Down on the FTSE 250, Tui Travel was lifted 8.6p to 207.3p amid talk its parent company Tui AG is getting closer to selling a chunk of its stake in the Hapag-Lloyd shipping line. There has been constant speculation that a disposal of the holding would be a step towards the German company moving for the 45.5 per cent of Tui Travel it does not already own.
Although Misys initially fell after revealing it was discussing an all-share merger with Swiss peer Temenos, by the bell the software group was 4p better off at 329.5p. Market gossips refused to give up on the idea that US firm FIS – which abandoned a £1.4 billion bid back in August – could have another go, while recent vague speculation has suggested there could be possible private equity interest.
Traders noted that, following the Misys and Xstrata announcements this week, a number of other stocks which have been recently the subject of takeover rumours were on the rise as well. Argos owner Home Retail and engineer Invensys ticked up 6.8p to 117.1p and 9.9p to 212.8p respectively, while Hays was lifted 5.8p to 85.75p despite dealers playing down the revival of speculation earlier in the week that the recruiter could be a target for Swiss giant Adecco.
Game Group was feeling rather relieved after the struggling computers games retailer – which powered up 24.58 per cent to 6.64p – managed to strike a deal with its banks to keep it operating.
Punters were piling into Worldlink after the mobile data group announced it had received an approach . The news of discussions with the US company One Media Technology over a possible takeover saw the group surge up 70.83 per cent to 41p.
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