Market Report: Prudential catches a cold from its US exposure

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The Independent Online

The blue-chip index may have reached its highest point since June 2008 yesterday, but Prudential was left behind as analysts urged caution over its exposure to the US.

Downgrading its advice on the insurer to "reduce", Nomura said that although "conventional wisdom sees Prudential's main attraction as its Asian growth potential... we think the market is underestimating the recent growth in its US exposure".

That should worry investors, said the broker, which predicted Prudential will go "ex-growth" in the States this year thanks to increased competition "and the possibility that aggressive accounting has overstated profitability".

Nomura's analysts also said that its Asian unit "looks to be fully valued", and added that it preferred the insurer AIA for exposure to the region, which Prudential attempted to buy last year.

It was not all bad – the broker upped its estimates for the group's 2010 earnings – but Prudential still hit a low of 680p during trading before a slight rally meant it finished 1.5p weaker at 688.5p.

Overall the market was in a positive mood as the FTSE 100 surged up 70.73 points to 6,056.43 after three sessions of falling, with the banks helped by hopes that an agreement on a new eurozone rescue plan is getting close.

A number of blue-chip companies released figures yesterday, with Burberry the star of the show. The upmarket clothing retailer took pole position after rising 56p to 1,115p, following its third-quarter update in which it revealed forecast-beating revenue.

Investec's analysts were among the company's fans, saying that they "continue to believe the shares deserve a premium as they offer one of the few convincing global growth stories within our universe".

SABMiller jumped up 37p to 2,209p thanks to its interim management statement, as the brewer said it reported a 3 per cent increase in beer volumes in the third-quarter. There was a less positive reaction to Experian's latest figures, however, yet it was still 3.5p stronger at 779p as it announced a return to "positive growth across all regions and principal activities".

With the miners benefiting from strong metal prices, both Rio Tinto and African Barrick Gold (ABG) revealed latest production numbers. Rio climbed up 65.5p to 4,450p after its iron-ore output rose to a record level, but ABG shed 4p to 560p thanks to a failure to reach its 2010 production target.

Arm Holdings was bumped up 22p to 536.5p, meaning it has now gained more than 25 per cent already this year. Frequently the subject of takeover speculation, it announced a new deal with IBM late on Monday, while Goldman Sachs yesterday gave it a "buy" rating and a target price of 700p.

There was a modest shift up for Pearson of 5p to 1,006p following the news that it is upping its stake in the online education company TutorVista. The $127m (£80m) deal means that the publisher – which releases a trading update today – is now in control of the Indian group, increasing its exposure to the country's market.

The clear winner on the FTSE 250 was Taylor Wimpey as it leaped forwards 2.95p to 38.1p. The housebuilder said in a trading statement that its profit for 2010 would be ahead of expectations thanks to an improvement in the North American markets.

The group also confirmed it has received interest in its US unit Taylor Morrison, and although it said there was no guarantee of a sale, it reiterated its goal of refocusing "the business of the group on the UK market in the medium term".

A profit warning in IG's interim results left it with the mid-tier index's wooden spoon and a drop of 37.5p to 481p, with the spreadbetter blaming low trading activity last month for its caution over meeting expectations.

De La Rue climbed 41p to 829p as it continued to benefit from speculation this week that a new bid for the banknote printer could be just around the corner. The French group Oberthur Technologies has been given a deadline of 7 February to improve its 905p-a-share indicative offer, which was made and rejected in December.

One takeover definitely not happening is Ashtead's joint move for Lavendon, made with the Belgian group TVH Services. The small-cap company last week rejected a 115p-a-share approach from the duo, and Ashtead yesterday announced it was pulling out. As a result it gained 11.1p to 170.3p, while investors left Lavendon 12p weaker at 97.25p.

Down among the small-cap companies, there was vague speculation from market gossips that Southern Cross is about to receive an approach from a US group worth 45p-a-share, and the care home company stormed up 3.75p to 24p.

On the Alternative Investment Market, trading in Regal Petroleum's shares was suspended after it revealed it had received a new approach. The oil group's shareholders are currently considering a £77m offer from Energees Investments, but Regal announced that a joint proposal has been made by Heamoor and Geo-Alliance.