Market Report: IG's progress is halted as Footsie gets stuck in a rut
The blue-chip index is stuck in a rut. Indecision among punters means the FTSE 100 has barely moved this week, with a mere 20 points between its highest and lowest closing levels. Yesterday was no different as the benchmark index rose just 19.54 points to 5,895.47 despite Greek politicians finally reaching an austerity deal.
Uncertainty over whether markets are in line for a major correction or a continuation of their recent rally means many investors have stayed on the sidelines, which is not good news for someone like IG Group. The mid-tier spreadbetter thrives on sharp movements, but last night it closed in the red amid fears its next set of results will disappoint thanks to a lack of recent volatility.
Last month the firm revealed that its first-half pre-tax profits had jumped 28 per cent thanks to the dramatic see-sawing seen over the summer. Yet City voices were warning that the benchmark index's steady rally over the last few months means IG's growth figures will not be as impressive next time around.
Downgrading his advice to "hold", Numis Securities' James Hamilton suggested that IG's clients could be suffering from a "volatility hangover" and as a result were returning to a trading tactic of "buy and hold". In response, Mr Hamilton cut his price target from 616p to 536p and reduced his profits forecasts, prompting IG to dip 4.7p to 471.8p.
However, the analyst added that investors who remain bearish on the situation on the Continent should not give up hope, saying that "those who believe in a disorderly eurozone solution should remain fully invested" in IG.
He was also supportive of the firm's prospects generally, claiming it "offers a great medium-term growth story" and that fears of a rise in competition were unfounded. "We expect smaller competitors to vanish and IG to continue to gain market share," he said, calculating rivals would need a fifth of the market share just to break even.
Overall, the decision by the Bank of England to introduce a fresh round of quantitative surprised no one, while the lack of any concrete details on the Greek agreement – plus Switzerland's Credit Suisse reporting its first quarterly loss in three years – kept the banks depressed.
Barclays could only ease back 0.5p to 233.1 as investors braced themselves for its full-year figures today. Elsewhere, Lloyds was 0.2p worse off at 35.59p despite analysts at Société Générale choosing it as their top sector pick, saying the presence of Antonio Horta-Osorio at its results in a fortnight "will help the market move on from his leave of absence".
In a busy session for results, forecast-beating figures from BG saw the oil group advance 45.5p to 1,491.5p. Meanwhile, the price of black gold was also being given a push by jobs data from the US as Tullow Oil and Cairn Energy powered up 31p to 1,514p and 4.6p to 353.2p respectively, the latter also supported by Numis Securities upgrading its advice to "add".
Elsewhere, BT crept forwards 0.8p to 213.5 following the news that the former health secretary Patricia Hewitt, who is a non-executive director at the telecoms giant, had snapped up over £10,000-worth of shares.
Takeover talk was giving Oxford Instruments a push as the firm – which makes tiny tools for use in nanotechnology – shot up7.53 per cent to 1,100p on the FTSE 250 to set a new all-time high. Keeping his "buy" advice, Liberum Capital's Ben Bourne suggested that the group may "appear on the radar of larger US peers" while he also claimed that it could "double its profit, or more, within three years".
The cardboard box maker DS Smith flew up 8.7p to 174.5p after Oriel Securities reiterated its "buy" recommendation. Saying promising results from the group's Irish rival Smurfit Kappa earlier in the week supported the planned acquisition of SCA Packaging, the broker's analysts predicted that the €1.6bn deal would prompt a re-rating and upgrades to forecasts.
There was a retreat of 2.7p to 244.7p for Northgate as traders cited a rather unusual read-across to Vodafone. Third-quarter results from the mobile telecoms giant (up 0.9p to 174.5p) showed a massive 8.8 per cent drop in its service revenues from Spain, causing fear over the van rentals firm given large exposure to the country.
Also on the leaderboard was Kesa Electricals, which bumped up another 4.7p to 85.05p on persistent hopes that the activist shareholder Knight Vinke may want to up its stake.
Down on AIM, Croma was 28.99 per cent stronger at 2.22p after the security service firm announced that it had won a contract worth £1.15m a year. Investors had to guess as to the identiy of the customer, however, with Croma rather mysteriously saying it was a "a major listed London property group".
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