Market Report: Rentokil extends decline, despite break-up talk

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The Independent Online

Retokil Initial was the focus of gossip in the City, with yet more speculation that the ratcatcher is to be broken up, although this wasn't enough to arrest the stock's downward spiral.

While the talk is hardly new, breaking up will be hard to do following denials from management last week. Chief executive, Alan Brown, said: "It's not a good time to sell anything, as far as I can see, unless you're into the fine art world."

The pest control-to-packaging group was unable to benefit from the usual bounce that comes with these stories, as it was the victim of a beating from Exane BNP Paribas and Merrill Lynch following Friday's dire statement that sent the stock plunging 30 per cent. It closed yesterday a further 4.24 per cent weaker at 67.75p.

It wasn't a great start to the week for the FTSE 100, which drifted lower on the sentiment around the banks, before it was dragged 40 points lower by losses on Wall Street to close at 5,312.6.

For the UK banks, it was the turn of HBOS to take the fall, slumping 7.33 per cent to 287.5p, as last week's rumoured bidders in BBVA and National Australia Bank distanced themselves.

Added to that, the market has begun to fear Thursday's first-half results could be a shocker. The broker Citigroup didn't help, adding that HBOS's structured credit portfolio "continues to deteriorate", with estimated mark-to-market losses of £1bn in the first five months of the year. The rest of the banks followed on down.

Elsewhere in the financials, the insurance sector was put to the sword by UBS. Among the wounded was Aviva, down 3.98 per cent at 470.5p as its rating was slashed to "neutral" from "buy".

The airlines looked low on gas after stinking results from Ryanair. British Airways dived 4.96 per cent to 234.5p, as it too prepares to release results this week. An 85 per cent drop in profits in Ryanair's first quarter did not lift spirits.

Marks & Spencer was another stock to suffer at the hands of the brokers. The food and clothing retailer looked a little queasy as ING initiated coverage with a "sell" and a 200p price target, "given the risk of further earnings disappointments". With a 3.75 per cent drop to 250p, this was not just a share-price fall; this was an M&S share price fall.

Rising commodity prices and a complimentary note from Chevreux helped the miners rebound after Friday's falls, and stopped the FTSE 100's day tuning a deeper shade of bloody red.

The metal prices lifted Antofagasta to the top of the pile, up 7.14 per cent at 540p. Nine of the top 10 risers were miners , with only Tullow Oil breaking the stranglehold as the oil price strengthened, rising 2.95 per cent to 747.5p.

The household goods group Reckitt Benckiser posted a "good" second-quarter statement, according to analysts at Cazenove, with profits up 10 per cent. The blue-blooded broker said the stock was one of its top picks in the sector, helping the price up 2.6 per cent to 2,604p.

Vague takeover talk circled J Sainsbury, the supermarket chain, after the Qatar Investment Authority upped its stake further. The sovereign wealth fund, which failed to buy the group last year, raised its holding from 26 per cent to 27.3 per cent. It got a few tongues wagging and drove Sainsbury's shares up 1.97 per cent to 323.5p, but wasn't considered too exciting.

On the second tier, the data security company Detica Group stormed to the top of the table, closing 17.39 per cent up at 437p after BAE Systems approached the company with a 440p-per-share bid. Panmure Gordon lifted its rating to a "buy" as did Evolution Securities. Dresdner Kleinwort and Investec downgraded the stock to "hold" with a price target reflecting the bid.

On the downside in the FTSE 250, the pubs were drowning their sorrows yesterday, even if their punters weren't. The British Beer and Pub Association said beer sales had fallen 2.8 per cent for the year to June. The read-across from Marston's wasn't great either. The worst hit was Mitchells & Butlers, which had been on a bit of a bender in the past fortnight. The party came to a halt yesterday as it sunk to the foot of the second line, 9.54 per cent lower at 239.5p.

In the wider market, the drug company Acambis was on a high of almost 60 per cent to 185.5p after it agreed late on Friday to a takeover bid from the pharma giant Sanofi-Aventis. The bid values the company at about £276m.

Oilex was also up over 11 per cent to 51.5p as the market expects an announcement today that it has started drilling a well in India.

There were hangovers all round at Cains Beer Company, the Liverpool brewer, which more than halved in value as losses were higher than expected in the first half, it warned on full-year profits, the finance director stepped down and it remains in talks with banks over its facilities. Cains closed at 2.75p, down 3.62p. Not sure Alka Seltzers will be enough.