Market Report: Great Portland slips on Goldman gloom

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The Independent Online

A "SELL" note from Goldman Sachs drove investors out of Great Portland Estates, the property developer which lost 15p to 340.5p yesterday.

Anticipating a softening in occupier demand, the broker said that it expects office rents in London's West End to fall by another 20 per cent by the end of 2009.

"While the market appears to apply large discounts to companies with exposure to City offices, companies with West End exposure enjoy far stronger ratings. Given our expectations for the West End market, we believe that Great Portland's premium rating is unjustified," the broker said, initiating coverage on the stock with a "sell" rating and a 300p target price.

The broker also advised investors to "sell" Derwent London, which closed up 31p at 1,106p. Shaftesbury, which is rated "neutral" at Goldman Sachs, was up 14.5p at 445.5p.

Overall, the FTSE 100 was down 108.55 points at 5,088.47 while the FTSE 250 lost 160.21 to 8,274.44. The indices eased as investors waited for news from Washington, where the US government's $700bn (£381bn) bailout plan was being thrashed out between Democrats and Republicans.

"With the decisions and details dragging on this week, the end result when it finally comes may not well live up to those early hopes that this would be an all-encompassing plan," said David Jones, chief market strategist at IG Index.

"Investors are bracing themselves for a muted reaction from markets whenever this deal is finally done," he added.

News of the collapse of Washington Mutual, the Seattle-based lender, also spooked investors, and the nerves were evident in the banking sector, which was predictably unsettled by the day's developments. Bradford & Bingley was down 5.88 per cent or 1.25p at 20p, as traders wondered whether it may be subjected to a firesale. The speculation was based on reports in the weekend press, which suggested that the Financial Services Authority, the UK market regulator, was sounding out potential buyers for the mid-cap mortgage lender.

The concern about B&B was also evident outside the equity markets for, as the shares fell, the cost of insuring against a default on the bank's debt rose.

In the wider sector, HBOS was down 5.82 per cent or 10.7p at 173.3p, while Lloyds TSB eased back to 251p, down 8.14 per cent or 22.25p, as investors waited for more news on the American bailout plan.

Insurance stocks were also sold and Old Mutual, which claimed first place on the senior index on Thursday, was the weakest on the FTSE 100, down 9.68 per cent or 8.5p at 79.3p. Prudential lost almost 6 per cent or 34.5p to 542.5p, while Legal & General eased back to 106p, down 3.46 per cent or 3.8p.

On the upside, the supermarket chain J Sainsbury gained 12.75p at 364.5p, claiming second place on the FTSE 100 leader board, amid renewed chatter about a possible offer from the Qatar Investment Authority, which owns around 27 per cent of the company. Despite the strength in the share price, traders played down the rumour.

QIA is likely to be still interested in the business, they said, but it would probably want to wait until the markets stabilise.

Imperial Tobacco was down 14p at 1,854p despite positive comment from Dresdner Kleinwort, which increased its target price for the stock to 2,150p from 1,859p.

"We believe now is the time to buy good leverage exposure: that is, indebted names that have strong and sustainable cash flows," Dresdner said. "Central bankers are working to ensure liquidity in the system. Therefore, fears that even good-quality names may find it difficult to access the credit markets should abate."

Dresdner was also positive on pubs stocks, which nonetheless continue to trade lower ahead of an update from Enterprise Inns next week.

Citing recent underperformance, the broker advised investors to buy JD Wetherspoon, which was down 7.5p at 254.5p, and Greene King, which lost 6.75p to 493.25p.

"Greene King is well managed, enjoys the flexibility of the integrated model, has strong brands, and the performance of Bellhaven has helped limit downgrades relative to peers," the broker said. It added that while JD Wetherspoon was the tenth most shorted stock in the market, it was "ideally positioned to weather the economic malaise".

Enterprise, which is Dresdner's top pick in the sector, was down 5 per cent or 9.25p at 175.75p.

The prospect of a bid battle between two of India's largest IT groups boosted Axon, which was the strongest on the FTSE 250, up 7.57 per cent or 48p at 682p. HCL Technologies made a 650p-per-share offer for the company, trumping the earlier 600p-per-share bid from Infosys. Both offers include Axon's interim dividend.