Market Report: Upbeat City traders anticipate US deal
Thursday 17 October 2013
City traders can be an optimistic bunch when they need to be, and hope that the US would come to its senses and end the stalemate over its budget buoyed markets yesterday. The deal on the debt ceiling and re-opening of government actually came along after London had closed, but traders were already factoring in the good news during the afternoon. The FTSE 100 benchmark index reached its highest level this month. London followed Wall Street's afternoon rally and completed its fifth day of gains up 22.48 points to 6571.59.
Brenda Kelly, a senior market strategist, at spreadbetter IG, said: "The weak and cautious sentiment seen yesterday morning was short-lived, and the apparent end to the US political stand-off has seen the UK benchmark index push to a three-week high."
One of the top gainers on the blue-chip table was Bristol-based stockbroker Hargreaves Lansdown. The group, which has been vocal on the "undervaluing" of Royal Mail shares, reached an all-time high as investors cottoned on to the fact it has achieved a record level of assets under management, reported at its first-quarter update on Tuesday. The group is now up more than 57 per cent since the start of the year. Jefferies scribblers helped punters' interest in the stock yesterday by raising its price target to 1,150p from 1,050p and rated Hargreaves a buy. It jumped 50p to 1,090p.
Engineer IMI was top of the table after selling its drinks-dispenser business to Berkshire Hathaway-owned Marmon Group for £690m. It flew up 29p to 1,528p as a result.
The City's fashionistas couldn't decide whether luxury brand Burberry was in or out of fashion. Weak sales growth at rival Louis Vuitton – released after the markets closed on Tuesday – weighed on luxury brands across Europe, but some analysts thought Burberry's share-price stumble could be a time to buy.
Burberry lost more than 7 per cent on Tuesday after news that its chief executive, Angela Ahrendts, would be leaving next year for Apple and will be replaced by designer Christopher Bailey.
The City is worried Mr Bailey's lack of executive experience could be an issue.
But HSBC's experts said Ms Ahrendts's "departure provides a new entry point" for investors to buy the stock and its "operations continue to impress with the brand seeing the highest same-store sales growth of the industry". They rated Burberry overweight with a 1,900p price target. Berenberg's John Guy also rated it a buy and said: "We believe Christopher Bailey has demonstrated exceptional creative talent and commercial acumen".
However, investors were concerned about the update from Vuitton's owner LVMH. The French luxury giant reported sales growth of leather and fashion goods had slowed and it missed forecasts. Burberry was unmoved at 1,464p.
On the mid-cap index, Liberum Capital's analysts said power group Drax has been hit by the planned departure of Invesco Perpetual's investment star Neil Woodford. Mr Woodford is a "supporter" of Drax and Liberum said there is a concern that once he leaves next year, Invesco will review its 29 per cent ownership. Drax edged back 2p to 641p.
Profit and sales are up at Aim-listed car dealership Vertu Motors and it was driven up 5.625p to 60p.
A power struggle at Scottish football club Rangers led to chief executive Craig Mather resigning after six months and the club 0.25p better at 49.75p.
City entrepreneur Edi Truell floated one of the largest companies on Aim for several years. Tungsten Corporation, which runs electronic invoice discounting for companies, raised £160m through a placing at 225p a share. The shares began trading yesterday at 233p valuing the business at £233m and closed slightly down at 232.75p. Tungsten processes more than £100bn worth of invoices a year.
On its 20th anniversary, car oil producer China Rerun Chemical jumped 6p to 16p on its first day of trading on Aim.
Equatorial Palm Oil said it is in funding talks with Kuala Lumpur Kepong Berhad for its Liberian Palm Developments and was 1p better at 5.88p.
Builders merchant and DIY group Grafton switched its main listing to London from Ireland and added 24.21p to 611p.
Mobile software business Globo plans to raise £25m to roll out its GO!Enterprise software product in the US and Europe but was unmoved at 74.5p.
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