Market Report: Stalled car production in Japan hits UK suppliers

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The Independent Online

Blue chip groups involved in the car industry were left in reverse last night after both Toyota and Honda announced they were delaying the restart of production in Japan.

The car giants' plants have been out of operation ever since the earthquake and tsunami hit the country, and yesterday – citing a shortage of parts – they said they would not begin assembling cars again until the weekend.

With Michael Robinet, an analyst at IHS Global Insight, estimating that by Friday the country's light vehicle output will have lost around 335,000 units, Johnson Matthey was one of those falling as a result. The world's largest supplier of catalytic converters, which are used to reduce emissions, dipped 49p to 1,835p, although Atif Latif, the director of trading at Guardian Stockbrokers, said the sell-off was "overdone".

Also knocked back by investors was the car parts manufacturer GKN, and it was left with the blue-chip index's wooden spoon despite Société Générale reiterating its "buy" recommendation.

The broker said the group's recent weakness has provided a "good entry point", pointing to recent strong car sales data in Germany, China and North America as one factor behind its positive rating. GKN was also named in reports emerging from France as one of three bidders vying for the aerospace company Latecoere.

Another group that was weakened was car retailer Inchcape, which gets around half of its volumes from Toyota, and it slipped 16.4p to 349.9p on the mid-tier index.

A retreat of 23.38 points to 5,762.71 saw the FTSE 100's recent rally come to an end after three consecutive sessions climbing. Inflation in the UK reaching its highest for more than two years did not help sentiment, but an increase in oil prices in the afternoon appeared to do greater damage.

Tui Travel dropped 4.5p to 228.2p as the chances of its parent company buying the part of the group it does not already own seemed to take a knock. There has been speculation that Tui AG could fund such a move through a float of Hapag-Lloyd, which it owns nearly 50 per cent of, but yesterday the shipping company said it was delaying its decision on a potential flotation.

Faring rather better was Prudential after analysts from UBS said a close examination of its final results – released earlier in the month – "suggested they were every bit as good as they looked at first sight", lifting the insurer 10.5p to 733.5p.

Even higher was Cairn India, which advanced 8.3p to 428p in the wake of its preliminary results. As well as revealing a return to profit last year, the oil-and-gas explorer said it was still confident the sale of its controlling stake in its Cairn India unit to Vedanta Resources – 28p behind at 2,159p – will receive government approval.

There was not much of a move for BP, which crept back 1p to 463.6p, despite Royal Bank of Scotland recommending investors take advantage of its relative underperformance this year. The energy giant is involved in an arbitration process with its partners in the TNK-BP venture, AAR, over the deal with Rosneft announced earlier in the year.

RBS's analyst David Cline noted a conclusion is expected by the end of the month, and said BP could get a boost if the Rosneft deal is allowed to go ahead. Even in the worse case scenario of the current injunction being made permanent, he said, "most of the potential disappointment is priced in... and at least the uncertainty would be over."

Down on the FTSE 250, the announcement by Exillon Energy of a new find prompted the oil explorer to gain 9.8p to 394.2p. Petropavlovsk was also among the winners, driven up 31p to 1,046p after the miner increased its gold reserve estimates.

The re-emergence of vague bid speculation, played down by traders, failed to shift Soco, and the miner instead edged down 2.9p to 361p. However one recent takeover rumour was confirmed, as Forth Ports announced it had agreed to an improved 1,630p-a-share offer from Arcus, and the ports group put on 20p to 1,634p.

The most dramatic move of the day on the index came from Rank, the owner of Mecca Bingo. More used to giving out prizes itself, yesterday it received a handsome £74.8m from Her Majesty's Revenue and Customs after overpaying VAT on its bingo revenue. The group said it is set to get an additional £79.5m in interest, leading it to finish 17.5p higher at 147p, a surge of over 13 per cent.

On the Alternative Investment Market, penny stock Coolabi – which owns the intellectual property rights to Purple Ronnie as well as Bagpuss – stayed at 7.75p after its final results and its announcement that it has signed a US broadcast deal for its new children's TV series Poppy Cat.

Elsewhere, JJB Sports was bumped up 3p to 29p on the fledgling index after the retailer's rescue plan received the backing from the majority of its shareholders and landlords.