Market Report: Foreign investment talk boosts British Airways

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The Independent Online

Rumours that British Airways had been targeted by Emirates failed to get off the ground last week, but the shares soared yesterday on talk of potential foreign investment.

While there was vague talk of stake building in the market – although the gossips weren't putting Emirates in the frame – BA rose 4.32 per cent to 289.5p on backing from Goldman Sachs.

The broker called the carrier a "strategically attractive asset due to its Heathrow position and its returns". It added that the potential foreign ownership issues would be surmountable in the wake of the Air France-KLM deal . "A Middle Eastern or Asian carrier backed by sovereign wealth would likely face no constraints on taking a large minority stake," Goldman said, lifting the rating to "buy". BA closed up 4.32 per cent at 289.5p.

Property stocks rebounded despite another negative day for the market. British Land was pick of the day, closing top of the table up 4.37 per cent at 920.5p. Talk initially linked the move to news this week that Laxey Partners was set to invest in the sector. One trader said: "I don't believe it would have pushed the stocks up this much today. I think the rises are driven by bear closing." British Land was also lifted as it was revealed as one of JP Morgan's top sector picks. Another, Segro, on the mid tier, closed up 6.23 per cent at 473.5p.

The market was yo-yoing faster than Hiroyuki Suzuki (a former yo-yo world champion). The FTSE 100 spiralled 117 points in the morning in the wake of falls overnight in the US and then in Japan. It edged above the psychologically important 6,000-point level in the afternoon as JP Morgan revealed in the US that its sub-prime losses were not as bad as feared.

Yet the market failed to hold and it retreated 82.7 points at the close to 5,942.9. One trader said: "The question now is 'where's the bottom?'".

The London Stock Exchange has been in freefall this year, after hitting an all-time high of 1,977p on 2 January. It fell a further 5.67 per cent to 1,614p on a note from Sanford Bernstein. The broker said revenues were exposed to "pricing pressure, volume growth decline and market share loss" and put a 1,600p target price on the stock.

The mining majors drag-ged the index down as fears of weakening demand hit metal prices. The sector contributed eight of the worst nine performers yesterday. Lowest was Antofagasta, which closed 6.8 per cent lower at 589.5p.

A bearish note hit Cable & Wireless, down 3.46 per cent to 164.5p. Morgan Stanley downgraded the stock to "equal-weight" after disappointing news from its Jamaica business.

The FTSE 250 slid an alarming 249.9 points yesterday, but rallied to close 138.9 points lower at 9,626.9. Among the worst was Bluebay Asset Management, a stock that tends to plummet as confidence wanes in the financials sector. It closed down 9.26 per cent at 276.75p.

The profit takers piled in at Restaurant Group after several days of it keeping the M&A rumour mill turning. Investors sent it 9.56 per cent lower at 123p.

United Business Media was hit 27p to close at 517p after a JP Morgan downgrade. The broker put a "neutral" rating on the publisher, saying it expects the group to suffer "poor macro sentiment and see less scope for further cash returns announced in the short term."

A few still managed relief rallies. One stock to rebound after a devastating start to 2008, was DSG International. The electronic goods retailer has fallen 35 per cent in the new year, brought on by devastating post-Christmas numbers. It rallied 4.17 per cent to 75p as bargain hunters piled in. The toy maker Character Group fell off a cliff in Dec-ember as it warned of slower than anticipated sales over Christmas. The company, which distributes toys including SpiderMan, was looking more heroic yesterday morning as it jumped 12.5 to 81p. The rises followed a trading update which anticipates "substantial revenue growth" for the second half of the year.

Another stock to benefit from a positive update was ClinPhone. The group, which provides technology for clinical trials, said full year 2008 results would be materially ahead of management expectations, sending it 18.22 per cent higher to 63.75p. This is good news for a troubled stock that lost over 70 per cent of its value last year after two profit warnings.

There was little to toast at Food & Drink Group as it delayed its results until the end of the month. The shares plunged 53.44 per cent to 98p. The group said its finance director continues to be on compassionate leave, and the audit in his absence has taken longer than expected. Pre-tax profits for the year are expected to be £600,000.

Woolworths was down a fifth after its full year update. Investors refused to pick 'n' mix, sending the shares lower to 8p.