Market Report: Results cheer helps Centrica flare higher

Defensives were in favour as the FTSE 100 continued to slide last night, with Centrica claiming pole position amid optimism ahead of its half-yearly results next month.

The British Gas-owner rose to 307.3p, up 8.3p, after JP Morgan Cazenove, factoring in the recently rally in UK gas prices, the planned corporation tax changes and the company's May quarterly update, upped its estimates ahead of the results. The broker said the market may be overlooking both Centrica's growth potential and the promise of less volatile earnings.

"We see the key risk facing Centrica as increased government interference in the sector," Edmund Reid, an analyst at JP Morgan, said. "We believe this risk has reduced following Tuesday's emergency Budget, where the Government stressed the requirement to attract private sector investment into energy infrastructure. We think the main government policy – the introduction of a minimum carbon price – will be positive for Centrica." Turning to next month's update, he added: "We expect the results to be strong due to the cold winter in the UK, boosting residential gas demand at the same time as wholesale gas prices remain subdued."

Elsewhere, United Utilities (UU) was supported by Credit Suisse, which reiterated its "outperform" view. "Our analysis shows that a premium RAB [regulated asset base] trading range of 0-10 per cent looks reasonable for the UK water stocks in the coming year. UU is currently at the bottom of the range," the broker said, aiding United's rise to 525p, up 3.5p.

Overall, stocks remained under pressure, with the FTSE 100 shedding 78.29 points to 5,100.23, and the mid-cap FTSE 250 index closing at 9,.698.3, down 134.86 points. The demand outlook continued to dominate, with traders selling mining and oil & gas issues on the back of what was seen as a downbeat assessment of the American economy from the US Federal Reserve. The news from Europe only hastened the slide, with the euro falling and sovereign debt fears resurfacing on the back of rising spreads on Greek credit default swaps.

The caution sparked worry about the world's appetite for commodities, which would be pressured by any slackening in demand. The fears weighed on the likes of Kazakhmys, which was 59p behind at 1,110p, and Lonmin, which fell by 56p to 1,581p.

In other news, the departure of Australian prime minister Kevin Rudd temporarily triggered hopes of change in the country's plans to slap a tax on mining profits. The optimism was short-lived, however, with the Anglo-Australian miner Rio Tinto losing 108p to 3,282p as analysts said that though the proposals may well be watered down, a levy remained on the cards, with the new Prime Minister, Julia Gillard, opening the door to discussion, but showing no signs of abandoning the plans. "Given proposed new negotiation[s], the resolution of details may now be further in the future, opening up a longer period of uncertainty for the miners," UBS analyst Olivia Ker said.

Banks, too, were under pressure amid renewed concern about Europe's debt woes. Barclays was down 13.8p at 287p as some focused on the expected finalisation of the text of the US financial reform bill. There were worries that the proposed changes could lead to some banks having to move large amounts of over-the-counter derivatives to exchanges, and potentially taking a hit in the process. In the wider sector, the Royal Bank of Scotland was 1.53p lower at 45.19p despite Goldman Sachs revising its target for the stock to 42p from 38p. Lloyds eased by 2.39p to 56.31p. Goldman also moved its targets for Lloyds and Barclays, moving them to 84p from 83p, and to 367p from 348p respectively.

Further afield, the transport group Go-Ahead was under pressure, slumping by 9 per cent, or 119p, to 1,200p after its trading statement prompted some in the City to scale back their earnings forecasts. Panmure Gordon and KBC Peel Hunt trimmed their numbers, though both stuck to their respective "buy" views on the stock. Investec, while maintaining its "hold" stance, also lowered its numbers, but said that, given Go-Ahead's "strong UK bus franchise", profits are likely to rebound as broader economic conditions normalise.

On the upside, Grainger gained 5.7p to 119p after Collins Stewart initiated coverage on the residential landlord, advising investors to "buy". "The outlook is uncertain. Liquidity is a concern and house prices cannot be expected to advance in an age of austerity," the broker said, setting a 180p target on the stock. ""However, the company has proved its ability to survive in very difficult markets and we do not believe that it deserves to trade at a 30 per cent discount to [triple net asset values]."

Imagination technologies continued to lose ground, losing 3.7 per cent or 10.9p to 284.1p, with brokers aiding the profit-taking trend by revising their recommendations on the back of the recent full-year results. Seymour Pierce, which only recently lowered the stock to "hold" from "buy", moved Imagination to "sell", while Jefferies and Panmure Gordon downgraded the stock to "hold".

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935
The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory