Market Report: Spirent slumps after US rivals' profit warnings

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The Independent Online

Overnight profit warnings from two of its rivals across the Atlantic meant that investors in Spirent awoke to a flood of bad news yesterday, prompting the telecommunications group to plummet towards the foot of the mid-tier index.

The testing equipment developer slipped back 7.5p to 143.3p after Ixia reduced its profit forecast, with the California-based company blaming a drop in spending by a number of large network equipment manufactuers as well as weak sales in the Asia-Pacific region. Meanwhile, Aeroflex – which provides testing products for a wide range of sectors – cut its revenue targets, citing delayed shipments.

However, City scribblers remained positive on Spirient, even as the Crawley-based company's stock was forced down to its lowest price in nearly two months. Saying it was "better positioned than Ixia and a better-managed company", Numis Securities' Nick James added that his "checks indicate orders from handset testing and wireless infrastructure remain strong for Spirent, which are markets for which Ixia has low exposure to".

Royal Bank of Scotland – Spirent's house broker – was a touch more cautious, although it still kept its "buy" rating. Its analysts said the news "starkly underlines some of the short-term challenges and patchy end-market demand" facing the telecoms testing sector, but claimed that "Spirent has a better-balanced business so should still report resilient trends".

Traders had warned of a major sell-off if yesterday's non-farm payroll data from the US disappointed, and they were proved correct. With some predicting the release would show as many as 175,000 jobs had been created, the revelation halfway through trading that the actual number was just 18,000 meant the FTSE 100 dropped sharply, and it finished 63.97 points lower at 5,990.58.

The banks were led down by Lloyds Banking Group and Barclays, which retreated 1.71p to 46.56p and 8p to 243.25p respectively, despite Shore Capital saying it expected those in the UK sector to pass the European Banking Association's stress tests, with the results expected next week.

Arm Holdings was knocked back 26p to 611p by news from South Korea where LG Electronics reduced its sales expectations for smartphones. Also weighing on the Cambridge-based chip designer was talk of higher semiconductor inventories, with JP Morgan Cazenove warning that though inventories were "not in the danger zone, if end-market demand slows further, then we could see a much more dangerous... spike".

A number of retailers were among the risers, including Primark owner Associated British Foods, up 18p to 1,092p, and Marks & Spencer, up 2.3p to 378.9p, both of which update the market next week. The latter was helped by the return of vague rumours that the Qatar Investment Authority (QIA) was considering making an approach for the high street institution. There was some even wilder speculation that suggested a merger between M&S and J Sainsbury – of which QIA is the largest shareholder – could be on the cards, although traders dismissed the mutterings as "utter rubbish".

The blue-chip index's worst performer was BSkyB, which fell 62p to 750p as investors switched off thanks to fears over its proposed takeover by News Corp. Analysts were split over whether the phone-hacking scandal will stop the deal gaining approval; Charles Stanley's Richard Nunn predicted it would not, but warned "the decision could now take months, and potentially it could cost [News Corp] more", while Panmure Gordon's Alex DeGroote said the probability was "no higher than 50 per cent".

Premier Farnell bounced up 6.8p to 201.8p after losing over a fifth of its share price on Thursday following a profit warning. Its shift down this week has sparked bid speculation, with RBC Capital Markets saying there was a "likelihood that the company may now be viewed as a target, in a market where there are very few significant players".

At the other end, TalkTalk increased 2.4p to 145.9p after Evolution Securities reiterated its "buy" rating. Saying it believes that the "threat from Sky is overstated", the broker talked up the internet provider's bid potential, calling it "the most affordable and credible way to break into the consumer broadband market."

Down on the small-cap index, bid chatter was doing the rounds regarding Cove Energy, with vague talk it could receive a 150p a share approach. Royal Dutch Shell was mentioned as a possible aggressor, although the tale failed to gain traction and the explorer edged up just 1p to 99p.

On the Alternative Investment Market, Sportingbet jumped up 1.75p to 58.75p as speculation emerged, not for the first time, suggesting the gaming group and Ladbrokes – down 0.9p to 152.6p – were close to a deal, after takeover talks between the two were revealed last month.

FTSE 100 Risers

Man Group 259.6p (up 3.9p, 1.53 per cent)

Hedge fund manager continues to rise after Thursday's interim management statement.

British American Tobacco 2,847p (up 22.5p, 0.8 per cent)

Cigarette manufacturer benefits as investors search for defensive stocks.

Capital Shopping Centres 386p (up 0.4p, 0.1 per cent)

UK's largest mall owner advances for first time in four sessions.

FTSE 100 Fallers

Antofagasta 1,424p (down 67p, 4.49 per cent)

Miner closes as one of blue-chip index's weakest stocks in tough day for the sector.

Cairn Energy 404.4p (down 9.5p, 2.3 per cent)

Explorer drops despite Collins Stewart reiterating its "buy" recommendation.

Legal & General 123.2p (down 0.5p, 0.4 per cent)

Insurer hit by profit taking after enjoying a strong rise on Thursday.

FTSE 250 Risers

Sports Direct 261.2p (up 11.2p, 4.48 per cent)

Retailer takes the top spot on the mid-tier index ahead of next week's preliminary results.

Dunelm 464p (up 13.5p, 3 per cent)

Latest rise means homewares group has jumped forwards nearly 18 per cent in last three days.

CSR 321.3p (up 3.9p, 1.23 per cent)

Chip designer advances after Jefferies upgrades its recommendation to "buy" from "hold".

FTSE 250 Fallers

SuperGroup 887p (down 82.5p, 8.51 per cent)

Fashion retailer pulls back after recent rises ahead of its full-year results next week.

Betfair 682p (down 39.5p, 5.47 per cent)

Gambling group knocked by Espirito Santo reducing its fair value to 630p from 710p.

Electrocomponents 249.2p (down 5.4p, 2.12 per cent)

Parts supplier continues to fall as HSBC cuts its target price to 290p from 325p.