Market Report: LogicaCMG fails to catch market updraught

The IT services specialist LogicaCMG missed out on a market rally after attracting some bearish broker sentiment yesterday.

Citing the company's "weak strategic market positioning", Morgan Stanley cut its target price for the stock from 130p to 110p.

"The company is neither a global player nor a niche specialist and its cyclical business mix offers limited recurring revenues," the broker said, adding: "We also fear that if market conditions were to get tougher, the weak balance sheet could become a problem."

The broker also struck a note of caution about the company's ongoing strategic review: "Although we recognise the strategic review could address some of the issues, we believe the margin's upside potential is limited... The stock looks fairly valued at current levels. We would recommend that investors sell the stock if it gets above 120p and would-be buyers at levels below 90p."

The negative assessment kept the company's shares weak and they closed at 105.50p, down 1.25p.

Overall, the FTSE 100 mounted a comeback yesterday, climbing by 75.30 points to 5906.90. The London benchmark was lifted by some positive company news: supermarket group Tesco published strong preliminary results, allaying investor fears about trading and gaining 7.29 per cent or 28.50p to 419.50p; drug marker AstraZeneca announced the settlement of its Nexium patent infringement litigation against India's Ranbaxy Laboratories, securing future sales of the medication and helping its stock climb by 7.12 per cent or 141p to 2,122p; and energy giant BG Group rose by almost 5.40 per cent or 66p after Brazil's National Petroleum agency said an oil find in which the company has a stake may be the world's biggest discovery in 30 years.

A mixed start on Wall Street took the index off earlier highs, but failed to drag it into the red. US investors were cheered by an unexpected rebound in manufacturing activity in New York in April and by above-forecast profits at healthcare products giant Johnson & Johnson, but worried by rising inflation.

Elsewhere, the FTSE 250 was up, gaining 58.70 points to 9,904.20. The mining sector stood out for its strength yesterday. Metals prices continued to rise, taking the Eurasian Natural Resources Corporation to fourth place on the FTSE 100 leader board, up 60p at 1,260p.

Rio Tinto gained 185p to 6,007p as rumours suggested that BHP Billiton, which rose by 64p to 1,770p, may supplement its all-share bid with a cash sweetener.

Other miners, including Xstrata, which climbed 18p to 3749p, Vedanta Resources, which added 24p to 2374p, and Anglo American, which gained 43p to 3264p, also remained firm.

Housebuilders, on the other hand, fell by the wayside after figures from the Royal Institute of Chartered Surveyors tendered fresh evidence of a downturn in the domestic property market. Seventy-eight and-a-half per cent more chartered surveyors reported a fall instead of a rise in house prices in March, the lowest figure since1968.

The news bore on Persimmon, which slumped by 16p to 659p. Berkeley Group Holdings lost 36p to 988p while Bellway was weaker by 23.50p at 760.50p.

Others in the sector, including Barratt Developments, which lost 10p to 349.75p, Bovis Homes, which was down 16.50p at 528p, and Taylor Wimpey, which lost 3.50p to 158.25p, were also off-colour yesterday.

On the FTSE 100, Friends Provident was up 2.40p at 118.90p after Panmure Gordon upgraded the stock to "buy" from "hold".

"We have only ever had a Hold or Sell recommendation on [Friends Provident] since we initiated coverage a year ago," the broker said, "However, we believe that [Monday's] 11 per cent share price fall [in response] to news that JC Flowers will not increase its initial offer above 150p is an over reaction."

Panmure added: "If discussions open the share price will bounce, [but] if Flowers walks away we do not believe that there is any real downside."

On the FTSE 250, M&A speculation was evident around JKX Oil & Gas, which gained 15.50p to 492.75. Market talk suggested that JKX may merge with, or bid for, Regal Petroleum, the smaller oil & gas exploration and production company. "The rumour is based on the fact that both have interests in Ukraine," said one trader.

Regal, which announced the appointment a new fin-ance director yesterday, rose by 15.25p to 156.50p. On AIM, Tanfield swung to the top of the AIM UK 50 index after launching a new zero-emission electric vehicle in collaboration with Ford.

The company's trading division, Smith Electric Vehicles, launched the Ampere van, which utilises the Ford Transit Connect chassis, at the Commercial Vehicle Show in Birmingham yesterday.

Tanfield's shares closed at 116.75p, up 12.26 per cent, or 12.75p.