Market Report: Support from Putin fuels a gain for BP

 

Russia's president Vladimir Putin took time out from giving his soldiers a pep talk for a tête-à-tête with BP's Bob Dudley this week. The meeting, at which Mr Putin is said to have pledged his support, indicates that BP could eventually be given access to Russia's Arctic fields as part of a deal that will see it sell its 50 per cent stake in TNK-BP to the state-controlled energy giant Rosneft.

The long-expected deal is unlikey before Christmas but traders were noting yesterday that Rosneft, headed by Igor Sechin, a former deputy prime minister, is believed to have started talks with banks in London to secure up to $15bn finance to buy BP's stake. The talks show BP and Rosneft are coming closer to agreeing a deal that would allow BP to exit from its sometimes stormy TNK-BP joint venture with a quartet of oligarchs, and BP flowed up 4.8p to 443.75p.

Traders are also pinning their hopes on Qatar's sovereign wealth fund ploughing even more cash into London listed stocks. Yesterday, a spate of reworked rumours was doing the rounds about Qatar's riches, focusing on British utility groups.

Some dealers speculated that British Gas owner Centrica could be in the Gulf oil state's sights. The business is no stranger to takeover chat. For the past six years, rumours have come and gone that Russia's state-owned Gazprom has been circling. Centrica hissed up 1.8p to 335.5p.

Takeover talk refused to die for water group United Utilities and shares were up 19.5p to 727p. But some of the wiser City scribblers argued the move in utility company share prices could be impacted by government plans to change how the retail price index is measured. The Office for National Statistics is proposing changes to the way it calculates RPI — and utility charges are linked to RPI.

Last week's rumour that the Qataris were looking again at supermarkets chain Sainsbury's has disappeared for now, and the shares were stable at 0.1p to 341.3p. Brokers also had time to natter about software group Sage again. Bid talk has done the rounds for months, and yesterday whispers of a sale or restructuring of its US arm caused the shares to edge up 2.1p to 318.3p.

Banker-bashing has become obligatory, but could HSBC be a bank investors are allowed to love? Some City scribblers think as much. Analysts earlier this week lost patience with Royal Bank of Scotland and issued a sell rating, but today scribes at Barclays Capital have come out in favour of HSBC. They claim the "market currently underestimates HSBC's earnings and dividend trajectory".

Barclays' Rohith Chandra-Rajan retains his overweight – or buy – recommendation with a share price target of 700p and said HSBC's disposals and restructuring were "well on the way" to completion. He expects underlying earnings growth to accelerate from 4 per cent this year to 26 per cent next year.

Banks are under the cosh with new capital requirements coming in from Europe, but Mr Chandra-Rajan thinks HSBC, as a result of its strong capital position and its relatively limited European exposure, will "both be ahead of other UK banks and above the level proposed by the ICB." HSBC banked gains of 9.9p to 587.8p.

Bank of America Merrill Lynch analysts were also keen on banks yesterday, upgrading their share-price targets for a number of lenders. Barclays moved down 0.25p to 225.15p while RBS edged up 1.3p to 268.4p and Lloyds Banking Group rose 0.65p to 39.5p.

The FTSE 100 was up on news that Japan's central bank will make another round of monetary easing, but punters were lackadaisical and the index closed up only 20.32 points at 5888.48. After a strong run over the past month, shares in spread-betting company IG Group lost favour yesterday, falling 19.7p to 449.5p.

On the small-caps, persistent talk that bidders were eyeing Sportingbet was proved right when bookie William Hill said it is considering a joint offer for the Australian business with Sportingbet rival GVC Holdings. Sportingbet booked gains of 7.25p to 51p.

Octogenarian tycoon Jack Petchey's Trefick Limited has sold its entire 17.3 per cent stake in used car dealership Lookers. The shares were sold at 66p a share and small cap Lookers drove down 3p to 68.75p on the news.

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