Market Report: JPMorgan bullish on Thomson Reuters link-up

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The Independent Online

A bullish broker report has rescued Thomson Reuters from yet another day in the red. The stock, which until Tuesday had closed down every day since its debut last week, gained 31p to 1,563p after JPMorgan said that "the market is discounting an overly pessimistic operating performance" for the company's Markets division.

"Unlike [the individual positions of the two companies] in the 2001-03 downturn, the combination of Reuters and Thomson Financial diversifies revenues geographically, by asset class and customer type," the broker said. "Development of new revenue streams since the last downturn... should also improve performance this time."

JPMorgan set an "over-weight" rating for the stock with a 1,935p target price.

Elsewhere, rumours gave a boost to Blacks Leisure, which rose by 1.50p to 177.50p. Market speculation suggested that Sports Direct, Mike Ashley's sports retail chain, was about to bid for the company. Sports Direct already owns around 29.9 per cent of the company, and the rumours suggested that it was about make an offer for the remainder of the shares. The talk bore no clue about the level or the timing of the offer. At close Sports Direct was down 6.75p at 112.25p.

Overall, the FTSE 100 was up 48.9, or 0.8 per cent, at 6,083.6. After spending most of the day in negative territory, depressed by vague rumours of new credit-crunch writedowns at two unidentified banks and by early weakness on Wall Street, where the bond insurer Ambac posted a wider than expected loss, the London benchmark rallied on the strength of mining and oil stocks. The FTSE 250 was also firm, adding 18.1, or 0.2 per cent, to 10,087.7.

Alliance & Leicester, which went ex-dividend, was the biggest loser on the FTSE 100, down 7.45 per cent, or 39.50p, to 491p. Other banks, including Royal Bank of Scotland, which was down 13p to 345p; Barclays, which lost 5.25p to 455.75p; and Lloyds TSB, which was down 9.25p to 430.50p, were also off-colour yesterday.

Among the miners, copper producers got a boost from Lehman Brothers, whose analysts revised their copper price forecast to $3.90 from $3 per pound for 2008, to $4.50 from $2.50 per pound for 2009 and to $4 from $2 per pound for 2010. "The basis for these copper price upgrades is that we expect a combination of slower than expected supply growth and growing demand for cooper," the broker said.

Lehman added: "We expect the mining sector to continue to perform very well and we suggest that investors increase exposure to this sector despite the recent strong performance."

The broker chose Xstrata, whose Xstrata Copper business is the world's fourth-largest copper producer, as its top pick in the European mining sector, helping the stock gain 103p to 4,101p. BHP Billiton, which gained 45p to 1,927p, and Anglo American, which rose by 59p to 3,508p, were also highlighted in the report. Rio Tinto also extracted some mileage out of the Lehman report, adding 79p to 6,464p.

Positive broker sentiment gave a boost to BAE Systems, which added 13.25p to 472.25p. Citigroup said that concerns about the recent UK High Court ruling in the Serious Fraud Office-Saudi arms contract case (BAE stock is since down 8 per cent) had been "overdone". "On 22 April the SFO [said] it wants to appeal... [and] UK politicians in both major parties have also said they disagree with the High Court and will pass a new law if needed to allow a [government] to intervene when 'national security' is at stake," it said. "Consequently, we do not expect the SFO investigation to be reopened."

Also on the FTSE 100, Shire swung to the second place on the leaderboard after the US Food and Drug administration approved Vyvanse for the treatment of attention deficit hyperactivity disorder in adults. The news took Shire up by 6.59 per cent, or 60.50p, to 979p.

On the FTSE 250, Melrose gained 2p to 164p even as Citigroup lowered its target price for the stock to 190p from 218p. Following the company's recommended cash offer for FKI, Citi said: "Analysing an investment vehicle like Melrose has been a difficult task... given that we have not known what it would buy, when or how much it would pay for it. Now that we known exactly which businesses are going to be in Melrose's portfolio, we have been able to take a more objective view of the group's valuation."

FKI remained firm on the back of the bid, up 0.50p to 85p.

Dana Petroleum surged by 17.36 per cent, or 241p, to 1,629p after announcing an oil discovery at its West Rinnes field in the North Sea.

On AIM, Qonnectis lost 20.97 per cent, or 0.325p, to 1.30p after placing 125 million shares at 1p per share with institutional and other investors. The placing, which was arranged by FinnCap, will raise £1.25m, which will be used as working capital and to fund the expansion of the business.

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