Market Report: Rival's profit warning increases Misys bid fears

A profit warning from its closest peer meant Misys continued its recent slump yesterday, raising fears once again over the status of the recent bid approach for the software company.

The mid-tier index group was knocked by an overnight update from Temenos, with the Swiss company blaming uncertainty in the banking sector – which both provide software to – for its decision to reduce its license revenue expectations for the year. As a result, Misys slumped to a session low of 353p during early trading, before a rally meant it closed 3.7p weaker at 383.7p.

The update also prompted further questions over Misys' takeover talks with Fidelity National Information Services (FIS), which made an approach last month. With no recent news, vague speculation spread earlier in the week that the payment services provider could throw in the towel, and traders yesterday suggested Temenos' update was unlikely to make the US group any keener.

Panmure Gordon's George O'Connor dismissed the talk as panic, however, saying "the lack of news simply means no news". He went on to add that the recent fall in Misys' share price – it has slumped more than 7 per cent over the last four days – was likely to be welcomed by FIS, if not by investors.

"Expect FIS to be whooping it up," said the analyst, who added that the group sees "Misys as a strategic asset and now has the opportunity to pick it up for less." Meanwhile, some market voices were suggesting that its lower level means Misys could now be more likely to receive a rival approach.

Overall, the FTSE 100 slipped 3.29 points to 5,843.66, bringing to an end a week in which sovereign debt fears has seen it shed more than 145 points. Standard & Poor's joined Moody's in warning the US it could downgrade the country's AAA credit rating, while the miners were moving south with BHP Billiton 46p lower at 2,340p after agreeing to buy the US gas company Petrohawk Energy for $12.1bn.

The banks were weak ahead of the results of the European stress tests, released after the bell, with Lloyds Banking Group and Barclays – who both passed, along with their UK-listed peers – sinking 1.14p to 44.69p and 2.55p to 223.3p respectively.

Pole position on the top-tier index was occupied by Burberry, with the luxury retailer driven up 63p to 1,577p as German clothing group Hugo Boss upgraded its forecasts for the year, citing better than expected trading in the US and China.

In the wake of the news that News International's Rebekah Brooks had resigned, BSkyB advanced 13.5p to 709.5p after Deutsche Bank restarted its coverage on the broadcaster with a "buy" rating, saying the fact it is currently over 16 per cent weaker than at the start of the month "provides an opportunity to buy exposure to one of the highest quality media franchises".

Meanwhile, on the mid-tier index, DMGT edged down 2.3p to 419p despite reports claiming the owner of the Daily Mail is considering launching a Sunday tabloid newspaper to capitalise on the recent closure of the News of the World.

Arm Holdings closed in the red for the fourth consecutive session, sliding 10.5p to 564p after one of the chip designer's major customers, Sony Ericsson, posted a quarterly pretax loss for the first time in 18 months.

On the FTSE 250, Kesa Electricals declined 2.2p to 138.5p as UBS mulled over the potential next step for the group, which last month said it was considering selling its loss-making Comet chain. With the broker saying there were "several obstacles" to a demerger, its analysts did note that the group as a whole could be attractive to a private equity takeout.

The analysts also said there was "a relatively strong rationale" for a merger with Dixons Retail, up 0.05p to 15.29p, adding that "the geographical overlap [is] reasonably complementary".

Thomas Cook's week of woe continued, with the tour operator moving back 0.85p to 70.45p, meaning its share price has dropped by more than 40 per cent since its profits warning on Tuesday. Saying "the complete demise of the UK division" is now priced in, analysts at Charles Stanley added that this still seemed "like a worst-case scenario" and gave the group a target price of 110p.

The two top risers were prompted by encouraging updates coming in the wake of sharp sell-offs. Euromoney shot up 60p to 655p – a move of more than 10 per cent – as the financial publisher revealed a 3 per cent rise in its revenues for the third quarter, while FirstGroup was pushed forwards 20.8p to 350.6p by encouraging comments from the transport group on the state of its US school bus unit.

Down on the Alternative Investment Market, Halo Source was in need of some divine intervention as the water purification company shed over 40 per cent. The group slipped back by 61.5p to 87.5p after cutting its full-year expectations following a drop in its first-half revenue of 9 per cent.

FTSE 100 Risers

Tullow Oil 1,294p (up 25p, 1.97 per cent)

Explorer has its target price raised by Canaccord Genuity to 1,350p from 1,280p.

Petrofac 1,473p (up 28p, 1.94 per cent)

Oil services group manages strong bounce back after dropping sharply on Thursday.

Fresnillo 1,625p (up 30p, 1.88 per cent)

Precious metals miner advances as JP Morgan Cazenove upgrades its advice to "overweight".

FTSE 100 Fallers

Rolls-Royce 642.5p (down 16.5p, 2.5 per cent)

Engineering giant knocked back amid profit-taking after strong rises over past two sessions.

Experian 803.5p (down 7.5p, 0.92 per cent)

Credit information group falls as it reveals first-quarter organic revenue growth of 6 per cent.

Shire 2,064p (down 9p, 0.43 per cent)

Drugs company eases back after advancing by more than 5 per cent in last five days.

FTSE 250 Risers

Enterprise Inns 60.1p (up 1.85p, 3.18 per cent)

Pubs group pushed forwards by Panmure Gordon's decision to reiterate its "buy" rating.

Mothercare 407.9p (up 2.9p, 0.72 per cent)

Retailer on the rise in the wake of six consecutive sessions closing in the red.

Halfords 361.4p (up 1.7p, 0.47 per cent)

Finishes the week on a high ahead of the release of its first-quarter update next Thursday.

FTSE 250 Fallers

Home Retail 142.2p (down 9.5p, 6.26 per cent)

HSBC downgrades Argos owner's rating to "underweight" from "neutral".

Premier Foods 20.91p (down 0.75p, 3.46 per cent)

Hovis owner knocked by profit taking after enjoying sharp rise on Thursday.

Electrocomponents 238.7p (down 5.7p, 2.33 per cent)

Electronic parts supplier drops despite its first-quarter revenue rising 14 per cent.

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