Market Report: RSA Insurance shines on bid speculation

  • @MrNickClark

Traders were bemoaning the lack of action in the market, with only RSA Insurance diverting attention away from the badminton in Beijing. The speculation of a bid for RSA Insurance Group at about the 190p-per-share mark, which had many in the City reaching for the salt, sent the shares up 4.12 per cent to 146.7p.

The FTSE 100 was in fine fettle in the morning as it clawed back some of the previous day's losses. The blue-chip index was muted slightly by US inflation numbers dragging on Wall Street, ending 48.8 points up at 5,497.4.

The switch in sentiment was driven by rising commodity prices as miners and oil kept the market in positive territory.

Top of the pile was Antofagasta which leapt 4.74 per cent to 563.5p. By the close, the leader board's top five came from the metals and mining sector.

Elsewhere in the sector, Evolution Securities backed Lonmin's defence against the £5bn bid from the rival Xstrata on Wednesday. Evos said the deal "offers no premium to the company's estimated 2009 earnings or its greenfield development projects". Lonmin's protests saw it fall 5p to 3,405p.

The oil price bounced back to round off a good day for the commodity companies. Slickest performer was Petrofac, an oil equipment and services company, which rose 4.51 per cent to 544p. The exploration and production group Cairn Energy rose 2.58 per cent to 2,705p, while the big two producers also rose.

When commodities go up, banks tend to go down and so it proved yesterday. Barclays was the worst, after a downgrade from Goldman Sachs and house broker Cazenove. The latter cut Barclays from "outperform" to "in line" after last week's results. Goldman was harsher with its "sell" recommendation and forecast of further writedowns to the tune of £1.5bn over the next 18 months. The shares closed 1.42 per cent lower at 346..5p.

Rolls-Royce hurtled downward for the second day in a row. This came after it was downgraded on Wednesday by Dresdner Kleinwort who said the prospect of global recession, as well as rebounding commodity prices, would bring pain to the business. It was bottom of the pile, falling 3.85 per cent to 387.5p, despite announcing a joint venture with Goodrich to develop engine controls.

The travel companies, which have previously boasted that they were "recession-proof", were in need of a holiday yesterday. TUI Travel should have been dancing on the sand as it posted a 39 per cent bump in profits. Yet its shares were more a wet weekend in Skegness after admitting it was to cut capacity next year. There are also fears the falling pound could have Britons giving their foreign holidays the heave-ho. The pound hit a near two-year low yesterday, touching $1.86 before rising. TUI gave up 2.19 per cent to 223p.

On the mid-tier, the builders were sitting ugly once again, after Bellway announced the not-too-surprising news that the housing market remains weak. Numis slashed its target price almost in half to 740p as a result, and Bellway fell 2.86 per cent to 560p. Its peers came tumbling down alongside, with Taylor Wimpey the worst, down just over 10 per cent at 54p.

Wimpey was surpassed by the nosediving Johnston Press, which sank 14.29 per cent to 54p. Investors had stopped the presses after a report filed by Landsbanki slashed its recommendation to "reduce" from "hold" and maintained its 50p target in preparation for its results later this month. It expects lower advertising revenue, causing lower estimates for next year.

On the upside, Logica put out some surprisingly strong interims, a triumph for new boss Andy Green. The group beat consensus with a 16 per cent rise in first-half sales, leading Deutsche Bank to reiterate its "buy" recommendation. The share price was up 13.56 per cent to 127.75p.

In the wider market, the biopharmaceutical group Protherics was on a high, lifting 43.79 per cent following its announcement, after the market closed on Wednesday, that it had been subject to "a number" of takeover approaches. The group, which focuses on critical care and cancer, closed at 55p.

Phoenix IT's shares were sitting in the ashes yesterday after the group admitted its business had suffered in the softening market. Even a Landsbanki "buy" failed to get it rising from the flames, as the shares ended the day 8.52 per cent lower at 265.75p.

On the AIM market, the learning software group Netdimensions was looking clever as it reported a rise in sales in the first half of the year. The group expects sales to grow further during the year, sending the shares up 23.8 per cent to 9.75p.

At the other end, tiddling semiconductor Cyan Holdings shed 21.43 per cent to 1.3p after announcing it was to raise £3m from a share placement.