Market Report: Resolution's payout freeze chills shares
There is not much worse than being promised something before it is cruelly snatched away. That's the situation in which unimpressed investors in Resolution found themselves yesterday after the insurance conglomerate cancelled a £250m handout.
The buyout specialist – set up in 2008 by entrepreneur Clive Cowdery – blamed the economic climate and uncertainty around the sector for the decision, although this didn't placate the City. Instead, Resolution dropped as much as 10 per cent during trading, and while the stock managed to recover some of these losses, by the end of the day it was still one of the worst blue-chip fallers, having dived 12.4p to 215.5p.
With bosses at the company having put the payout on hold in March, Deutsche Bank's Oliver Steel said the decision to cancel it should not be a surprise. However, the analyst also pointed out Resolution's statement "suggests that there is no prospect of [a] cash return ever" while he added that "confidence in the company's strategic direction has probably ... taken another knock, coming on top of the group's apparently shifting view on M&A". Traders agreed – "I just think that people are getting very disillusioned with it," was the view of one.
The stock was not the only one being knocked by the news, however. Speculation has recently made a return suggesting Resolution could make another attempt to snap up Phoenix Group, but last night the mid-tier insurer finished 15p weaker at 490.5p amid concerns the likelihood of such a move was now even lower.
A rapid jump in Spanish bond yields put the Eurozone crisis back on the radar, with the FTSE 100 moving back from a two-and-a-half-month high by sinking 62.42 points to 5,651.77.
Barclays – which has dropped nearly 19 per cent since the Libor scandal hit its share price – was doing its best to bring Lloyds down as well. Analysts from the group's investment bank told investors to sell their shares in its rival, saying it had "the greatest amount of restructuring still to do, its capital position looks weak and its most profitable business [retail] is shrinking". However, although Lloyds did drop 0.3p to 29.94p, Barclays was worse off after falling 5p to 159.25p – elsewhere in the sector, Royal Bank of Scotland was driven back 7.6p to 204.7p.
Risers were rather hard to find, although Arm Holdings was one. The chip designer was helped by Apple's iPad 3 – which contains its technology – going on sale in China for the first time. There was also confidence over the forthcoming launch of Microsoft's Windows 8 in the wake of the computing giant's fourth-quarter results late on Thursday.
Weir Group was another moving higher. The pump maker ticked up 6p to 1,531p in the wake of results from fellow oil services companies Baker Hughes, Schlumberger and Gardner Denver across the Atlantic all beating Wall Street's forecasts.
With Dutch giant Heineken announcing a $4.1bn (£2.6bn) bid to take full control of Tiger beer maker Pacific Breweries, Liberum Capital's Pablo Zuanic suggested SABMiller "could also get involved" as the owner of Grolsch dipped 21p to 2,700p.
After speculation emerged late on Thursday claiming rumour mill favourite the London Stock Exchange could be a possible target for the Singapore Stock Exchange, the latter yesterday denied there had been talks between the two over a possible merger. Instead, the bourse said it was "open to collaborations and partnerships", as the LSE was knocked back 16p to 1,007p.
Undertaker Dignity rose 23.5p to 837p on optimism ahead of its update later in the month. While Investec's analysts admitted the period "is seasonally weaker", they added that "preliminary death rate data... suggests [the second-quarter] won't disappoint" and told investors to buy the stock as a result.
On AIM, Dawson International slumped by 0.52p to 0.62p after the cashmere maker – and former owner of the Pringle brand –admitted that its failure to strike a new pensions deal meant administration was now a possibility.
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