Market Report: Sales drop sparks an XP Power cut

  • @LauraHChesters

Has the power been turned down for US and European industrial and engineering stocks? A battery maker for the industrial and healthcare sector got the City talking yesterday. XP Power revealed an 11 per cent drop in sales for the nine months to October and its share price slumped 64p to 946p.

City scribes reckon the small-cap player is a gauge on how the world is faring.

Katherine Thompson, an analyst at Edison Investment Research, said: "XP Power's trading update acts as a barometer on global economic activity, which remains subdued. Second-half revenues are now likely to show slower … growth than we had expected"

The bad news from US and European- focused XP followed industrial engineer Cookson's profit warning yesterday.

Three analysts – Peel Hunt, Numis Securities and RBC Capital Markets – downgraded the group and reduced their target prices to between 600p and 635p. Its shares responded with a 0.5p fall to 539.5p.

The benchmark index reacted to the International Monetary Fund's move to reduce its growth forecasts for the UK economy and revise down its global growth forecasts for 2013. The index lost 31.49 points and ended at 5,810.25, helped down by more gloomy news from the Office for National Statistics that revealed our industrial production fell in August for the 17th month in a row.

The City is waiting for the "real" numbers that will emerge from company results in the next month, but the US was a step ahead and kicked off its reporting season last night with Alcoa, the aluminium producer that makes metals for beer cans and airplanes. It was expected to report a drop in profits for the first time since 2009, reinforcing the weak economic outlook.

Back on the blue-chip index many of the mining stocks were up, regaining some of Monday's falls with Vedanta Resources leading the way up 22p to 1,090p.

But retailers were in vogue and Marks & Spencer topped the leader board as analyst Gillian Hilditch at JP Morgan Cazenove came out positive on UK retail. She gave the retailer a buy recommendation and it ticked up 11.8p to 381.3p

It seems there is never a dull day for oil giant BP, particularly when it comes to its troublesome Russian joint venture.

Its protracted plan to exit TNK-BP looked a little more complicated as its oligarch partners at Alfa Access-Renova (AAR) have now signalled they could flog their stake.

AAR said it would rather sell out than be left in a "devalued" joint venture with state-backed rival Rosneft.

BP wants to sell its 50 per cent holding in TNK-BP and has been negotiating to sell it to AAR as well as Rosneft. A deal with Rosneft could see BP achieve its dream of exploring for oil in the Russian Arctic. Yet with AAR now giving notice it could sell its stake, either to a third party or through a flotation, it looks like a race between BP and AAR to exit.

BP has first refusal on AAR's holding and has 45 days to respond to the oligarchs but it said the move has "no impact whatsoever on its current plans to sell its stake in TNK-BP". BP managed to hold on to a 0.6p gain to 437.6p.

The deadline for defence group BAE Systems' proposed merger with EADS is today and the group's shares lost 0.9p to 325.4p as an extension looked likely.

Traders still had the energy to gossip despite a subdued day on the markets. Some thought buying shares of hedge fund Man Group could be attributed to hope of takeover activity. But an upgrade from Morgan Stanley analysts was the likely cause of the shares lifting 1.8p to 89.95p. They raised their target price to 84p.

On Aim, retail investors' favourite Gulf Ke ystone Petroleum, will mount a defence in the High Court today against claims from former business partner Excalibur Ventures for a 30 per cent share of its oil and gas assets in Kurdistan. Gulf edged up 5.75p to 205.75p. Punters also speculated about an update for Lansdowne Oil & Gas and Providence Resources' Barryroe oilfield in the Irish Sea. Providence rose 3.5p to 695p and Lansdowne 4.88p to 63.5p.