Market Report: Mall owner Capital hit by falling shop rental prices

Evidence of declining rents for retail space triggered weakness around Britain's biggest mall owner, Capital Shopping Centres, which was held back as the market ended the week on a negative note last night.

The stock was marked down by 1.8p to 388.1p as analysts weighed in on industry data showing that retail rents continued to fall in September. Figures from Investment Property Databank led Panmure Gordon to repeat its "sell" view on Capital, whose shares have enjoyed a strong run since the middle of August.

The broker said the rally meant Capital's shares were now valued at levels close to the likes of Great Portland Estates, up 0.8p at 350p, and Derwent London, down 28p at 1,550p – both of which trade in the recovering London office market. On Panmure's numbers, Capital is also trading at a premium to British Land, which closed 1p lower at 504.5p, and Land Securities, which ended down 4p at 679.5p last night. "We remain cautious about the outlook for consumer spending in 2011 in the light of austerity tax measures and public sector unemployment," said Panmure in a note to clients.

"With occupier demand remaining low and no new flagship retail schemes currently in progress, we believe the balance of rental negotiating power is likely to be shifting more in favour of the retail tenants. We believe retail landlords will be under continued pressure to offer highly discounted leases on new lets and renewals to maintain occupancy levels."

Overall, the markets were lower, with the FTSE 100 falling 23.84 points to 5,703.37 and the FTSE 250 shedding 49.15 points to close at 10,833.51. The insurer Old Mutual led the blue-chip losers, slumping by up to 7.4 per cent before recovering. It ended down 6.9p, or 4.75 per cent, at 138.3p after HSBC ended talks to buy a majority $8bn stake in South Africa's Nedbank. Old Mutual owns just over half of Nedbank. HSBC's shares fell 9p to 653.3p.

In the wider banking sector, Barclays gained ground, rising by 5.05p to 285p, following recent reports that it was looking at ways to bolster its capital base without issuing equity. Royal Bank of Scotland was also higher, firming up by 1.1p to 46.4p, but Lloyds fell back by 0.3p to 70.18p. Standard Chartered added 11.5p to close at 1,899.5p after analysts at Fitch upped its rating for the group. In other news, the bank also denied rumours that, following HSBC's departure, it was looking to move into Nedbank.

Elsewhere, the engineering giant Rolls-Royce rose by 7p to 635p after Goldman Sachs recommended the stock in a defence and aerospace sector round-up. The broker said that although the civil aerospace market was recovering and aircraft deliveries were proving better than it had hoped, cuts in the Government's defence budget looked set to be at the lower end of expectations. Goldman went on to revise its view on Rolls-Royce from "neutral" to "conviction buy". However, it remained bearish on BAE Systems, which closed 0.7p lower at 365.8p after Goldman reiterated its "sell" view.

"While the actions BAE has taken this year are encouraging, we continue to believe the company faces the most challenging outlook in the sector, given that it derives about 98 per cent of sales from defence, with around 70 per cent from the US and 20 per cent from the UK," Goldman explained.

On the upside, BT led the blue-chip risers after reassuring investors about the fate of its public-sector business. The telecoms group said it had signed a memorandum of understanding with the Coalition following talks with the Cabinet Office minister, Francis Maude. "All of BT's central government contacts were covered by these discussions and remain in place," the company said. The news improved sentiment towards the company, whose shares were driven up 4.2p to 147.4p.

On the second tier, ITV was strong, swelling by 3.75p to 66.7p on growing confidence in broadcast advertising trends. The cheer was prompted by Morgan Stanley, whose analysts said they were more optimistic about the outlook for sustained advertising growth next year. Factoring in higher forecasts, the broker went on to switch its view on the stock "overweight" with a target price of 80p.

Salamander Energy, on the other hand, fell 39.9p to 230p following some disappointing news about the Dambus-1 exploration well operated by Serica Energy off the coast of Indonesia. Serica, which has a 30 per cent interest in the well alongside partners including Salamander, said it had failed to find gas in commercial quantities. Its shares were 24.3 per cent, or 12.75p, worse off at 39.75p at the close of play.

The television production company Ten Alps came under pressure, shedding more than 30 per cent of its value, after saying that the Government had scrapped Teachers TV, the online training site for schoolteachers which it co-owns with ITN.

The stock fell by 5p to 10.5p after the company said the Department of Education was cancelling the contract from April next year. The chief executive of Ten Alps, Alex Connock, said the news was unexpected and that the company was hoping to develop Teachers TV as a subscription-based service.

FTSE 100 Risers

African Barrick Gold 570p (up 6p, 1.1 per cent)

Rebounds as bargain-hunters move in to capitalise on recent weakness.

Resolution 253.8p (up 2.3p, 0.9 per cent)

Gains ground after announcing the acquisition of Bupa Health Assurance for £102m.

Whitbread 1,687p (up 10p, 0.6 per cent)

Target price raised to 2,075p at Nomura, 1,950p at HSBC and 1,850p at Bank of America-Merrill Lynch.

FTSE 100 Fallers

Xstrata 1,311.5p (down 30.5p, 2.3 per cent)

Sector weakens and Xstrata says its chief legal counsel, Benny Levene, has sold 102,097 shares.

Antofagasta 1,307p (down 6p, 0.5 per cent)

Retreats with the wider mining sector as investors bank profits from recent gains.

Randgold Resources 6,565p (down 30p, 0.5 per cent)

Hit by a round of profit-taking as the US dollar firms up and gold prices fall back.

FTSE 250 Risers

Hansen Transmissions 49.5p (up 3.7p, 8.1 per cent)

Japan's Sumitomo Heavy Industries bids for Hansen's industrial gearbox unit.

Computacenter 346.3p (up 8.7p, 2.6 per cent)

Trading update pleases; Credit Suisse revises its target price from 330p to 380p.

Stagecoach 185p (up 2p, 1.1 per cent)

Re-enters the London bus market with £52.8m acquisition; shares upped to "buy" at Panmure Gordon.

FTSE 250 Fallers

Cable & Wireless Worldwide 71p (down 2.45p, 3.3 per cent)

Citigroup revises its recommendation on the shares from "buy" to "hold".

Meggitt 305.1p (down 6.1p, 2 per cent)

Eases after analysts at Goldman Sachs revises their recommendation from "buy" to "neutral".

Centamin Egypt 179.4p (down 3.4p, 1.9 per cent)

Like Randgold Resources, Centamin is hit by profit-taking as gold prices pause for breath.

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