Market Report: Insurer chat re-emerges but US GDP drags FTSE

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The Independent Online

The insurers had dominated Thursday's session with traders pointing to positive news leaking from Davos.

The rise continued yesterday morning, but this time it followed reheated takeover chat and RSA Insurance was once again the focus. Rather than Zurich Financial in the frame though, Aviva was being linked.

Bid rumours circled the stock 10 days earlier, with few results. The momentum failed to hold yesterday as wider events overtook the sector. The GDP numbers from the US showed growth but missed forecasts and the unrest in Egypt dragged the FTSE 100 lower, only exacerbated by weakness on the Dow. The blue chip index fall turned into a rout as the week ended down 83.7 points to 5,881.3. The insurers fell with it. RSA closed down 1.3p to 135.3p. Aviva fell 2.3p to 450.2p.

The lacklustre morning had been dragged lower by the miners, as commodity prices waned. Worst of the day was Vedanta Resources, which ended down 109p to 2,291p.

The retailers also struggled for a second day. After being dragged lower by unexpectedly poor results from Sweden's H&M, the losses extended as consumer confidence hit its nadir for almost two years, according to a GfK NOP survey. Worst hit was Next which gave up 34p to close at 1,994p.

Of the few to remain with their heads above water at the close, satellite group Inmarsat was the strongest. It rose 16p to 681.5p after LightSquared, a partner in the US, paid the first $20.1m of a spectrum-sharing deal. The announcement brought backing from Liberum Capital, which said uncertainty had been removed, and upped its target price from 900p to 950p in response. The deal, which will allow mobile phones to use the satellite spectrum, will see Inmarsat receive $115m a year over the five-year deal.

There was a bullish note in Tesco from Nomura, but it just failed to drag the stock into positive territory. Analyst Nick Coulter expects food inflation to be a "long-run phenomenon, providing support to the earnings of food retailers". He thinks Tesco represents a microcosm of the trends in the sector, adding its UK business is "unappreciated". He believes its savings, services growth and expansion of small Extra hypermarkets will drive "mid to high single-digit EBIT growth". The shares still closed 0.7p lower at 397.1p.

Top of the second string was gambling group Partygaming, storming up 5.8 per cent as the FTSE 250 fell, to close up 10.8p at 196.7p. This followed news that shareholders in bwin, its Austrian rival, had voted through the £3.3bn all share deal to merge the companies. The new company will be listed on the London Stock Exchange.

There was plain sailing at Amlin, with a slight bump in stock as the group announced a deal to buy Lead Yacht Underwriters, a company which provides superyacht insurance. It expects to handle $34m of gross written premiums this financial year. The shares rose 1.8p to 392.1p.

Aveva Group, which provides engineering data and design IT, scraped into the black at the close yesterday after a mixed update. The investors were sated by talk that the year would be a success, yet it admitted the tough conditions in central Europe would persist and recovery would remain slower than other regions. The shares closed 3p up at 1,649p.

The housebuilders were under pressure after a review of the sector from Liberum Capital, which cut its price targets across the board. The update came on fears over "all the things that matter to housing decisions especially job security," as well as an "imminent rate rise". It picked on Persimmon as the most likely to underperform most starkly, cutting its recommendation from "hold" to "sell" sending the shares 16.7p lower to 402.2p. Despite a "buy" recommendation on Barratt Developments, it ended the worst sector performer on the day, closing down 4.8p to 92p.

There was a similar narrative to the day before among the premium risers and fallers on the small-cap index. Outsourcing group Eaga was up again after Thursday's well received update. It rose a further 2.25p to 76.7p yesterday. There was also more of the same from Severfield-Rowen, the UK steel group after its Thursday update. The profits warning continued to weigh and the shares closed the day 10p down at 230p.

Shares in Renewable Energy Generation raged up the growth market yesterday, gaining 27 per cent as it revealed an approach at 67p per share. The fact it had rejected the bid that valued the company at £70m did not dampen investor enthusiasm. The wind farm operator said it had rejected the approach from the unnamed financial suitor after consulting large shareholders "on the basis that it very significantly undervalued the company". The stock ended up 9p at 53p.

Things were not so rosy for spread betting group Worldspreads which tumbled 15.35 per cent as it warned on profits. The group said it could tumble into a loss this year rather than show a profit after revenues from its new offices abroad failed to materialise as quickly as expected. Boss Conor Foley said the board remained convinced the overseas expansion strategy would pay off, but not until the next financial year. The shares closed 8.75p lower at 48.25p.

FTSE 100 Risers

Man Group 296p (up 4.6p, 1.5 per cent)

The world's largest listed hedge fund sees gains extend into second day on back of Numis support.

Randgold Resources 4847p (up 38p, 0.79 per cent)

Investors once again rush to gold as fears over US GDP continue to weigh.

Legal & General 113.2p (up 0.4p, 0.35 per cent)

Insurance rivals failed to hold early momentum on takeover gossip, but L&G creeps into the black.

FTSE 100 Fallers

Tui Travel 259.8p (down 12.1p, 4.45 per cent)

Travel agency group takes a kicking following a downgrade from Natixis to "neutral".

Rio Tinto 4281.5p (down 132.5p, 3 per cent)

The mining sector retreats over fears for demand off the back of weak GDP numbers.

GKN 206.4p (down 5.1p, 2.41 per cent)

Goldman Sachs cuts rating from "buy" to "neutral" and says there is limited upside relative to rivals.

FTSE 250 Risers

Hansen Industrial Transmissions 56.6p (up 2.6p, 4.81 per cent)

Wind turbine group finally pulls out of tailspin after seven days of declines.

Telecity Group 497p (up 22p, 4.6 per cent)

Company enjoys lift following positive readacross from rival InterXion pricing at top of range.

Michael Page International 543.5p (up 8.5p, 15.9 per cent)

Royal Bank of Scotland upgrades recruitment company to "buy" from "hold".

FTSE 250 Fallers

Redrow 118.7p (down 5.2p, 4.2 per cent)

Note released by Liberum Capital trimming price targets across the housebuilders does for the sector.

Centamin Egypt 131p (down 4.9p, 3.6 per cent)

Volatile day for the stock that tops FTSE 250 in the morning before trouble in Egypt escalated.

Debenhams 65.55p (down 2.25p, 3.32 per cent)

Retail sector takes a beating for a second day after GfK NOP numbers disappoint.