Market Report: Trio of newcomers steal the limelight
Tuesday 07 May 2013
The market's newest arrivals continued to impress, with Crest Nicholson, esure and Countrywide all making gains.
Housebuilder Crest reported that completions rose by 9 per cent in the six months to April, and chief executive Stephen Stone said the outlook in southern England, its main market, is "increasingly favourable". The shares built up 5.5p to 324p - much higher than the 220p it floated at in February.
City scribblers were also giving their verdicts on fellow newcomer esure. In a note titled 'In the fast lane', Deutsche Bank rated the insurer a buy. The bank's Oliver Steel praised esure's focus on "low-risk customers" and said it can deliver "better-than-market growth". Esure, which was priced at 290p for its March IPO, added 6p to 306p.
Countrywide, the UK's biggest estate agency group, is another that has made a great impression since its float in March. It closed up 6p at 475p, having been floated at 350p.
The top-flight FTSE 100 continued its surge upward, closing at its highest since December 2007. The top-flight index added 35.84 points to close at 6557.3 as Asian and European markets also hit record highs.
But Meziane Lasfer, professor of finance at Cass Business School, sounded a note of caution, saying: "My overall impression is that the market is too overvalued and there is no fundamental reason for the recent increase in share prices given the gloomy economic conditions. Investors need to be very careful in coming to the market."
The biggest loser on the benchmark index was G4S, which plummeted after the outsourcer issued a warning over profit margins. Scribblers at Cantor Research were still optimistic, with Caroline de La Soujeole saying: "Despite this short-term disappointment, we remain positive on the long-term growth prospects of the group." The markets weren't as confident and G4S lost 45.5p to 260p.
The announcement of the departure of long-serving Diageo chief executive Paul Walsh made surprisingly little impact on the drinks giant's share price, which added 3p to 1977p.
Gains in Asia boosted Prudential in the first quarter but a worse-than-expected fall in the insurer's US business sent shares sliding. Andy Hughes at Exane BNP Paribas does not think Pru's plan to double Asian business every 3-5 years is on track, and predicted the insurer will underperform. The shares lost 10p to 1145p.
The mining sector saw an early rally following the surprise news that Australia's central bank is cutting interest rates to a record low of 2.75 per cent. Australia-focused Rio Tinto announced it will press on with its $5bn (£3.2bn) plan to increase production at its mines by a quarter in 2015, with the shares climbing 50p to 3072.5p as a result.
Newly merged Glencore Xstrata continued to perform well after its Friday debut. Eugene King at Goldman Sachs said the miner "has the most potential to increase returns [compared to peers] on our estimates, but debt will likely need to be managed first". Glencore Xstrata added 3p to 346.95p.
Kazakh miner ENRC was one of the sector's biggest risers after reports that the firm's oligarch founders have hired a bank to help with a bid to take full control of the firm. ENRC climbed 17.7p to 310.4p.
Despite optimistic comments last week from chief executive Stephen Hester about the prospect of a sell-off of taxpayer-owned shares in the bank, Raul Sinha at JP Morgan downgraded Royal Bank of Scotland to neutral in the wake "weaker-than-expected" results. RBS dropped 0.2p to 289.6p.
Despite the news that Citigroup is suing Barclays for $141m over losses tied to the collapse of Lehman Brothers, the bank was among the day's biggest risers, putting on 11.3p to 307.4p. HSBC was also on the up after unveiling forecast-beating first-quarter results. Its shares closed 21.2p up at 735p.
Elsewhere, Sainsbury's looked to move further into banking, confirming it is in "advanced negotiations" with Lloyds Banking Group to acquire the remaining 50 per cent of the banking joint venture it established 16 years ago. The supermarket group, which reports full-year results today, added 5.6p to 396.5p.
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