Market Report: Footsie shrugs off bad news to rise again
Saturday 20 February 2010
After a choppy session in London, the FTSE 100 ended the week on its fifth straight gain as investors shrugged off lousy retail sales, the US Federal Reserve decision to tighten its monetary policy and the drag of the miners. The top tier closed up 33 points at 5358.1.
Anglo American sank to the bottom of the blue chips as it put out its full-year results. Investors were unhappy as the group failed to reinstate its dividend, unlike several of its rivals this month, despite earnings before charges coming in better than expected. The group also said it would find further cost savings beyond the previous target of $2bn. Goldman Sachs expects the management to pay a final dividend "in respect of full year 2010 in full year 2011" and added that "overall, the operational performance was stronger than we expected". It gave up 44.5p to close at 2457.5p.
Close behind was Fresnillo, the Mexican silver and gold producer, as the US decision to lift its banking lending rate to 0.75 per cent fuelled fears that demand for gold would fall. Metals prices easing also pushed the miner down 11.5p to 774p. Randgold Resources also gave up 66p to 4699p.
Publishing group Reed Elsevier fell further after the muted reaction to its full-year results on Thursday. The company received a fair bit of backing from the analysts yesterday, who all upped their price targets to at least 70p above the current levels. Even Goldman Sachs, which cut its target, believes the stock should hit 610p. The market was not listening yesterday and the stock gave up a further 3.8p to close at 482.4p.
On the upside, the soaraway winner was Shire, the pharmaceuticals company which released what it called "excellent results in a transformational year" for the company. Investors applauded as the shares broke free of the mediocrity to post a 60p rise, a boost of 4.5 per cent, to 1370p. At one stage the shares hit a nine-year high as the company's full-year results beat expectations. The management said revenues and earnings would grow this year after it posted better than predicted revenues of $3bn for 2009. A Thomson Reuters poll of 11 analysts had expected revenues of $2.8bn.
The rest of the market was struggling for direction, with investors taking refuge in a few defensives and a ragbag of risers beyond that. Consumer product group Unilever, which makes Flora margarine to Dove and Persil, rose 51p to 1947p after a positive read across from results posted by Swiss rival Nestlé.
Tullow Oil was also among the high-ish fliers following bullish remarks from the group's chief executive Aidan Heavey. The group is to drill seven wells off the coast of West Africa, and is looking to bring in partners to help develop oil fields in Uganda to bring the output to 350,000 barrels a day by 2013. It also emerged yesterday that the group remains the last in the running to buy Ugandan assets from Heritage. The market's approval sent the shares up 22p of the back of the move to a close of 1232p.
Defensive stocks found some traction, and a bullish note from Nomura meant British American Tobacco shares were smoking. The cigarette giant rose 55p to 2225p as Nomura reiterated its "buy" rating and lifted its price target from 2130p to 2350p.
Telecoms giant BT Group has been under pressure pretty consistently since it revealed it had a pension fund black hole of £9bn, and that the Pension Regulator was not overly happy with its plan – supposedly over the time suggested to pay it off. Well it received a welcome boost yesterday from Fitch Ratings. The agency said that while the deficit was "undoubtedly a negative factor," the payments could be absorbed by the group's operational cash flow in the short to medium term. The stock rose 2.8p to 118.6p.
Millennium & Copthorne Hotels, which operates 120 hotels in 19 countries around the world including one at Chelsea Football Club's home ground Stamford Bridge, was the mid tier's hot shot, rising 41.2p to 417.7p. The close marked a 21-month high after the group beat full-year forecasts. Profits in 2009 fell a fifth to £81.9m.
Also storming up off the back of full-year numbers was rat catcher Rentokil Initial which reported profits were up 54 per cent to £166.5m, another company to beat expectations, and had cut net debt year on year from £1.3bn to £1.1bn. The rise of 11.4p came despite the management deciding not to pay a dividend. In reaction Investec upped its "sell" rating to a "hold". The stock ended up 11.7 points at 129.7p.
At the other end of the scale Charter International was in the mire despite hiking its dividend. The engineering group spiralled 51.5p lower to 692p after announcing it had launched an investigation into irregular payments made by one of its subsidiaries
Elsewhere on the sliders, Wolseley gave up 26p to 1439p as UBS pulled the stock from the most preferred list of European Construction.
In the wider market, West African miner Cluff Gold soared 13 per cent to 80p – forgetting the woes of larger colleagues – after announcing a bid approach from an unnamed suitor.
Leaf Clean Energy was not so lucky as its deal collapsed, sending the shares down 2p to 60.5p.
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