Market Report: New microchip fails to halt Arm's slide

Smartphone microchip maker Arm Holdings continued its slide yesterday despite launching a new processor that it hopes will lift its fortunes.The Cambridge-based company, whose processors are used in Apple's iPhone as well as Samsung and other smartphones, unveiled its Cortex A-12 Processor, hoping it will defend its over 90 per cent share of the mid-range mobile market.

But market watchers were unimpressed by the product. Liberum said it doubted that the new chip would make any "meaningful difference", maintaining its sell recommendation due to the company's high valuation and competition from rival Intel. Arm was the top flight index's biggest faller, shortcircuiting 69p to 919p.

At the other end of the index, the troubled Kazakh miner ENRC received a boost after it emerged that its billionaire founders had asked for a three-week extension to its takeover bid, hoping to iron out details. ENRC jumped 4.4p to 244.3p.

Tullow Oil also continued to make gains after the announcement last week that it had been granted approval for a large development offshore Ghana. The miner drilled up 17p to 1062p.

Glencore Xstrata made gains on the news that it was taking action over wildcat strikes at its South African mines. The commodities giant said it had sacked 1,000 workers across three of its chrome mines for illegal strikes last week that brought the operations to a standstill. Glencore Xstrata added 2.5p to 325.57p.

Polymetal also saw a jump after JP Morgan Cazenove upgraded its rating of the precious metals miner to overweight from neutral, adding 15p to 705.25p. But the platinum miner Lonmin was hit hard after revealing that a unionist was killed and another wounded during ongoing tensions at one of its South African sites. Lonmin slid 12.6p to 282.4p.

The benchmark index as a whole was flat yesterday, with low volumes and weak sentiment. After a morning decline on the back of weak Chinese manufacturing data, the FTSE 100 picked up on positive readings of the UK and European manufacturing sectors before finally closing down 57.97 points at 6,525.12.

The banking sector took a bashing after the Bank of England revealed its flagship credit scheme shrank by £300m in the first quarter. Taxpayer-backed Lloyds and Royal Bank of Scotland both contributed heavily to the shrinking lending. Lloyds lost 0.49p to 61.62p while RBS dropped 4p to 332.6p.

Vodafone announced a spending spree, pledging an extra £300m towards developing its 4G network in the UK. Vodafone tumbled 3.35p to 188.6p.

The Aim-listed African budget airline FastJet saw its market cap shrink by more than a third after a weekend of bad news. The carrier, backed by easyJet founder Sir Stelios Haji-Ioannou, announced on Friday a loss after tax of $56m (£36m) for the 18 months to December 2012. On Saturday its auditor, KPMG, said there was "significant doubt" over whether the company could continue to trade. Its shares plummeted 0.42p to 0.85p.

Investec's Dave McCarthy put the knife into Tesco yesterday ahead of tomorrow's first-quarter results. He thinks falling sales and the move towards online shopping mean Tesco's target profit margin of 5.2 per cent is increasingly unachievable. He reckons the only way the supermarket can hit it is by upping prices, a strategy likely to drive punters away and "push Tesco down the doom loop".

The outlook overseas is not much better. Mr McCarthy reckons: "Tesco has backed the wrong format, with hypermarkets having had their day." He says the retailer is left with a "big problem" in Europe, adding: "Tesco is not a growth stock, nor is it an income stock and it lacks momentum." The supermarket dropped 7p to 358.45p.

Small cap listed Phoenix IT announced a pre-tax loss of £58.8m, up from £4.9m last year. The company blamed accounting irregularities discovered last year at its Servo Limited business, which cost it £68.1m. Despite the poor performance, Julian Yates at Investec recommends piling into the company. He reckons that with the investigation into the irregularities concluded, the focus will be on profitability. Phoenix closed steady at 647p.

The property regeneration specialist St Mowden saw its shares fall after a timid trading update, saying first-half profits should be in line with last year, acknowledging the "challenging marketplace". St Mowden lost 2.9p to 285.1p.

Buy: United Utilities

United Utilities is a smart bet, according to Deutsche Bank. The broker's analysts raised their target price to 850p from 755p. The company, which closed yesterday at 755.5p, "should not trade at such a discount to [rival water firm] Pennon", Deutsche says, pointing out it "has improved its operational performance and is now the best performing company on Ofwat's customer service measure".

Hold: Fuller Smith & Turner

Keep a tight grip on Fuller Smith & Turner, says the scribblers at Panmure Gordon. Ahead of the pub group's full-year results on Friday, Panmure has reiterated its "hold" recommendation and 755p target price for shares that are currently 868p. The valuation "fully reflects the group's premium London and South-east operations", Panmure says, while repeating its preference for rival Young's.

Sell: Halfords

Now is the time to ditch Halfords, if you follow Numis. While analysts at the broker praise the bike retailer's "bold" new strategy, they think it may be too ambitious and costly given the current climate on the high street. On top of that, they reckon the like-for-like sales growth Halfords is targeting is unlikely given the business's maturity. Numis recommends reducing stock and has set a target of 270p for shares that are now 317.8p.

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