Market Report: Insurers fall as quake weighs on the blue chips

  • @MrNickClark

The economic impact of the earthquake in Japan piled pressure on an already fragile market yesterday, with insurers among the worst performers of the day.

The Asian markets were already under pressure following a weak session in the US overnight, and after the natural disaster struck the Nikkei tumbled 1.7 per cent to a five-week low.

The ripples spread to London and the insurance companies, with RSA Insurance the worst on the day, giving up 3.5p to close at 133p.

After early losses the FTSE 100 recovered some ground in the afternoon, but ended in negative territory, giving up 16.6 points to finish with 5,828.6. The fears over the financial impact of the earthquake added to other factors already weighing including uncertainty in the Middle East and North Africa, and the renewed threat of a sovereign debt crisis after Moody's had downgraded Spain on Thursday.

The sentiment from the credit rating agency's report continued to weigh on the financial sector. Barclays was the lowest of the sector down 2.6p to 298.7p. Worst performer was Experian which gave up 24p to 740p.

Enthusiasm for the UK real-estate investment trust sector dried up as Nomura reduced its support after a good run in the past fortnight. Analyst Mike Prew said the sector was "not as under-owned as it was" adding: "The easy money has probably been made with little more to go for." Land Securities retreated 4p to 745p after the Japanese broker downgraded its rating from "buy" to "neutral". Mr Prew added that unless the dividend growth can be stepped up from 3.9 per cent "we are probably near the sector's performance ceiling".

Another stock to suffer from a broker's lack of enthusiasm was high street stalwart Marks & Spencer. Deutsche Bank reduced its price target to 360p and kept the stock on a "hold" rating yesterday. It pointed to rising cotton prices and the plan to modernise stores taking longer than expected as the reasons for cutting its forecasts for the next financial year by 3 per cent.

Its analyst Rod Whitehead said: "The shares look good value at the current level, but the timescale of the store modernisations is likely to appeal only to longer-term investors: 2011-12 will be planning and trials, 2012-13 will see major disruption, and the benefits will only flow in 2013-14." M&S gave up 4.3p to close at 335.7p.

The semiconductor group Arm Holdings, whose chips can be found in hundreds of smartphones and tablet devices, stormed to the top of the blue chip index in the morning following support from Royal Bank of Scotland. The analysts reiterated their "buy" rating as they said the fears of a tablet oversupply had weighed enough on the shares to make them a good buying opportunity. RBS's Didier Schemma believes that Arm's long-term fundamentals are intact. "Medium term we continue to expect Arm to gain market share in notebooks, desktops and servers." Yet it retreated after lunch and scraped 0.5p higher to 523p.

BG Group ended at the summit, lifting 41p to 1460p as investors bet that gas prices would rise in the UK following the earthquake as imports get diverted to Japan.

Top of the second tier was JD Sports Fashion, as shareholders breathed a sigh of relief that it had walked away from a bid for JJB Sports. JD said that following early stage discussions and a closer look at its target's CVA proposals it "has decided it does not intend to make an offer". The shares rose 47p to close at 930p.

Temporary power provider Aggreko recovered slightly after a disappointing session on Thursday. The stock had fallen 5 per cent after it released in-line full-year numbers, as investors were unhappy with the outlook. Yesterday, it climbed 17p to 1407p.

At the other end bus and rail company First Group jumped the rails, giving up 12.8p to 347.4p after it warned that the student business in the fourth quarter had been "disappointing". Management added the group would still hit overall earnings targets for the year and said trends in UK rail and its Greyhound bus business were encouraging.

After a brief respite, the set-top box maker Pace's fall from grace continued to gather, erm, speed. The shares had tumbled on Tuesday after it revealed a delayed order. It recovered the next session but has nosedived since. Pace closed down 4.8p to 165.6p yesterday.

In the wider market, shares in Nautical Petroleum had the wind in their sails as the company upgraded estimates for oil at its Kraken prospect in the North Seal It rose 24p, more than 5 per cent, to 433p after upping the target from 60 million barrels to 100 million. Release the Kraken indeed.

Also cooking up a storm was Aga Rangemaster, as pre-tax profits soared from £500,000 in 2009 to £19.9m as sales of the Rangemaster and the classic AGAs picked up. The shares stormed up 13 per cent, or 16p, to close the day at 138p.

The results weren't so positive at Cenkos Securities which gave up 6p to 95p. This came as the outlook remained cautious, the pre-tax profits dropped and it lowered dividends.

FTSE 100 Risers

Eurasian National Resources Corporation 912.5p (up 10p, 1.11 per cent)

Kazakh-based company benefits from market's support for miners.

GlaxoSmithKline 1195p (up 7.5p, 0.63 per cent)

Shares in the pharmaceuticals giant climb despite drug failing Type 1 diabetes study.

Vodafone 178.9p (up 0.25p, 0.14 per cent)

Competition heats up for Polkimtel, one of the non-core assets Vodafone has put up for sale.

FTSE 100 Fallers

Legal & General 115.2p (down 2.3p, 1.96 per cent)

Following the earthquake in Japan, the insurance sector retreats.

Standard Chartered Bank 1591p (down 20p, 1.24 per cent)

Banks fall out of favour on the FTSE over economic fears in Asia and Europe.

Bunzl 722.5p (down 10p, 1.37 per cent)

Shares in the packaging distributor retreat for a second day after UBS withdraws support.

FTSE 250 Risers

Sports Direct International 183.8p (up 4.2p, 2.3 per cent)

A day after SFO gives the all clear, shares lift after positive readacross from JD.

Dairy Crest 363.8p (up 3p, 0.83 per cent)

Shares in the dairy group rise a day after group receives support from Goldman Sachs analysts.

JD Wetherspoon 438.3p (up 2.8p, 0.65 per cent)

No frills pub chain falls as pre-tax profits fall 11 per cent in the first half.

FTSE 250 Fallers

Cable & Wireless Worldwide 68.75p (down 3.8p, 5.2 per cent)

Telecoms group reveals financial director Tim Weller will leave in July.

Halma 342.7p (down 10.4p, 2.9 per cent)

Losses extend to a second sessions as profit takers moved in after Medicel acquisition.

Computacenter 436.6p (down 9.1p, 2.08 per cent)

A Panmure Gordon note raising target price fails to stem the losses following update.