Market Report: L&G gains ground as traders eye rebound

Insurance issues were in focus last night, with Legal & General leading the sector higher as bargain hunters piled in. Credit Suisse said that while the market continued to view the sector with a degree of caution, discounting concerns about capital or regulation, the worries were set to recede in the year ahead.

Full-year results should answer concerns about capital, with insurers likely to emphasise the strength of their buffers, while greater clarity on planned European reforms should address worries about regulation. These developments will be key to a rebound in sector share prices, the broker explained, expressing a preference for life insurers such as L&G, which gained 2.8p to 78.95p.

"In all the macro and regulatory newsflow, it would seem the market has forgotten that Legal & General has one of the better and broader life, pensions and asset management franchises in the UK," Credit Suisse said, switching its stance to "outperform".

On the prospect of deal activity, the broker said that while the company would indeed be attractive to anyone seeking to gain scale in the UK market, given the uncertain regulatory backdrop, "it is difficult to see L&G as a bid target at the moment". This could change if regulatory proposals begin to "move in the right direction", and "acquirers gain confidence in the outcome", Credit Suisse added, revising its target price for the stock to 113p from 91p.

Overall, the blue-chip FTSE 100 index fell below the 5300-point mark, easing by 42.68 points to 5260.31, while the FTSE 250 lost 32.1 points to 9293.12 during a relatively quiet session. Sentiment was weak as traders circulated the latest missive from Teun Draaisma and his team of Morgan Stanley strategists, who cautioned on the changing fiscal and monetary framework as authorities around the world move away from "crisis mode". "Sell into strength, as authorities have switched from 'all-out stimulus' to 'let's start some stimulus withdrawal'," they said in a new circular. "Tightening measures are coming in thick and fast around the world."

Similar worries contributed to weakness in the mining sector, which has been under pressure following recent signs of monetary tightening in China. Stocks were also hit by some softness in commodity prices, with Xstrata declining to 1102.5p, down 22.5p, Antofagasta falling by 8.5p to 933.5p and Vedanta Resources easing to 2523p, down 122p. Rio Tinto, down 72p at 3220p, and BHP Billiton, down 20p at 1914.5p, were in focus as European Union regulators opened an antitrust inquiry into their plans for an iron ore joint venture.

Elsewhere, the banks bounced back as traders moved in to capitalise on the weakness sparked by the Obama administration's regulatory proposals last week. As a result, Barclays, which was hit amid concern about the potential impact on Barclays Capital, gained 4.65p to 276p, while the Royal Bank of Scotland climbed to 35.36p, up 0.68p, Standard Chartered gained 17p to 1445p and HSBC firmed 1.2p to 674.8p.

Lloyds was 0.68p behind at 52.92p as Barclays Capital analysts considered the potential impact of the capital reform proposals recently put forward by the Basel committee of the Bank of International Settlements. The proposals could potentially lead to a £3.6bn capital deficit in 2013, the broker said, mooting the prospect of a sale of the bank's life assurance business to plug the gap.

Further afield, the online gaming group Partygaming was 8p stronger at 293.5p after Numis upped the stock to "buy". Last week, Partygaming said it was in discussions regarding potential consolidation opportunities with a number of companies in the gaming sector.

Austria's Bwin is mooted as the frontrunner, with Numis saying that while it was not clear whether anything would emerge from these talks, "consolidation in the sector is inevitable". "We perceive a compelling strategic logic for a Party/Bwin merger," the broker said, raising its target for the stock to 350p.

UBS lifted the mood around JD Wetherspoon, the pubs group, which was 9.6p ahead at 456.9p after the broker moved it to "buy" from "neutral", pointing out that while the growth outlook had improved, refinancing worries were diminishing. "Given the experience of the business in the last year and the improvements in the credit market, we do not anticipate [that] the company will have difficulty replacing its December 2010 facility," the broker said, upping its target for the stock to 530p from 500p.

Also on the upside, Numis aided Debenhams, the department store retailer, which was 0.55p firmer at 65.95p. "After a tough post-Christmas run, Debenhams shares are now trading at [an around] 20 per cent discount to the sector, and are now not expensive even in a 'double dip' scenario," the broker said, revising its stance to "buy" from "add". "Crucially for a value play, we do not, by any stretch, believe [that the] Debenhams business model is 'broken'," Numis added. "Indeed, although there are pressures on the department stores, Debenhams continues to make strides in developing its offer and range."

Start your day with The Independent, sign up for daily news emails
Sport
England's women celebrate after their 3rd place play-off win against Germany
Women's World CupFara Williams converts penalty to secure victory and bronze medals
Arts and Entertainment
Ricardo by Edward Sutcliffe, 2014
artPortraits of LA cricketers from notorious suburb go on display
News
newsHillary Clinton comments on viral Humans of New York photo of gay teenager
Arts and Entertainment
The gang rape scene in the Royal Opera’s production of Gioachino Rossini’s Guillaume Tell has caused huge controversy
music
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'