Market Report: Reed Elsevier hurt by 'free info' ruling

  • @BawdenTom

Reed Elsevier led the blue-chip decliners yesterday as investors in the publisher baulked at the European Commission's decision to give free access to all research funded by European taxpayers.

Shares in the group, led by chief executive Erik Engstrom, tumbled by 8.5p to end the day at 524.5p as investors fretted about the implications for the subscriptions Reed charges for its 2,000 journals of making such research freely available.

However, while the plans to release for free articles usually confined to expensive academic journals could have an impact on companies such as Reed in the future, they pointed out that any impact would be unlikely to have any impact on its revenues in the next ten years.

Furthermore, the EU is a small player in global research funding, accounting for an estimated 8 per cent of all public research spending in the EU27, or less than 3 per cent of global scientific literature.

The market also reacted strongly to speculation that Homeserve, the troubled British repair and insurance group, had been in takeover talks with private equity firms such as Apax, Cinven and KKR. Despite a denial from the company, Homeserve's shares jumped by 20.0p to close at 187p on hopes that, even if it hadn't happened yet, it might do.

The theory is that having slumped so much in the wake of concerns about mis-selling of its policies, shares in the fixer and insurer of boilers and burst pipes are undervalued and therefore ripe for a takeover.

Over in the security industry, shares in beleaguered Olympic security semi-provider G4S, which had tumbled 17 per cent in the past week, received a much-needed boost yesterday, climbing by 2.0 per cent as investors decided that maybe their recent dive had been slightly too deep.

Aided by suggestions that G4S could potentially become the subject of a takeover attempt following its recent slump – after the security giant revealed it would not be able to fulfil its Olympic contract – the stock jumped by 4.9p to 244.9p. G4S also benefited from the public backing yesterday of its second-largest investor, Invesco Perpetual with a 5 per cent stake.

Although speculation about a takeover was very faint, investors clearly believe G4S is now undervalued, and even ratings downgrades from UBS and Jefferies today were unable to hold the shares back. UBS cut its recommendation on the shares from "buy" to "neutral" while Jefferies lowered its view from "buy" to "hold" on concerns about the extent of the losses G4S will make on its Olympics contract.

The share price rise contributed to a broader increase in the FTSE 100 index, which turned in a respectable 56.6-point rise to end the day at 5,685.77 points. The index was bolstered as EMC, the data storage equipment maker, became the latest US corporation to release strong profits, boosting hopes the US economy may be stronger than previously thought.

In the FTSE 100, weaker financial and energy stocks offset a rebound in mining stocks. The Mexican precious metals producer Fresnillo, up 22p at 1,430p, was among the biggest climbers in the index as it announced that its gold output increased by 15.4 per cent to a record 127,003 ounces in the second quarter.

The group was also able to reassure the market is was on course to hit its silver targets for the year, despite a 12.6 per cent decline in output of the precious metal in the second quarter because of falling grades at its flagship Fresnillo mine.

Meanwhile, shares in BHP Billiton jumped 36p to 1,819p as the meaty miner posted strong growth in iron-ore production in the June quarter and said it expected to lift Australian iron-ore output by 5 per cent in the 2013 financial year, despite risks of cooling demand from its biggest customer, China.

But it was not all roses in the mining industry. Shares in Evraz dipped by 0.5p to 250.1p after Russia's largest steelmaker said it has suspended operations of its steel and vanadium assets in South Africa following a strike, and will not be able to ensure steady supplies of its main products.

Shares in Rio Tinto fell by 13p to 2929.5p despite the company announcing record production of iron ore and coking coal for the first half yesterday – as UBS cut its price target from 4800p to 4750p.

BP increased by 0.9p to 260.3p as the oil giant confirmed it had opened talks with AAR, the consortium which controls half of its TNK-BP joint venture in Russia, with a view to selling it part or all of BP's 50 per cent stake.