Market Report: US defence cuts shoot down BAE Systems

The markets were making amends yesterday after a poor recent run, but it was not enough to prevent defence stocks struggling thanks to fears over US government spending.

BAE Systems was just one of 11 fallers on the blue-chip index, as Goldman Sachs warned that the defence market in the States "is deteriorating faster than we expected". The broker's analysts pointed to the proposal from the White House deficit commission calling for defence cuts of $100bn (£64bn) over the next five years.

They also said there was further bad news to come from the withdrawal of troops from Afghanistan, scheduled to begin next July, because it "will put more downward pressure on the US defence budget and, in particular, the US Army investment budget".

Goldman Sachs accordingly repeated its "conviction sell" advice on BAE, which shed 3.2p to 327.1p. However, it did keep Cobham on a "buy" recommendation, and the aerospace electronics company just avoided a fall in its share price, edging 0.1p up to 192.4p.

Overall the FTSE 100 rose 114.23 points to 5,642.5, preventing a fourth day of falls in a row. Although worries over the economic state of the eurozone have not disappeared, manufacturing figures from the UK, US, Europe and China brought some much-needed cheer.

With metal prices rising, one of those to benefit was Xstrata – which made 75p to 1,367p – although it could also thank Barclays Capital for choosing it as one of its top picks. The broker was positive on the miners as a whole, saying that it believed "tighter commodity markets should lead to higher-than-expected commodity prices and better-than-expected earnings growth for the sector". Rio Tinto was another picked out for special praise, and it gained 127.5p to 4,207p.

The banks did their bit, as Royal Bank of Scotland took pole position by closing 2.29p stronger on 39.88p. Lloyds Banking Group, which added 3.64p to 64.05p, was just behind after being talked up by Evolution Securities' head of banks research, Arturo de Frias.

Mr de Frias said he was bullish on the banks because of "fundamentals, not the euro", which he believes are improving, although he added that "being positive on the sector does not mean buying every bank". Luckily for Lloyds it was his "top conviction buy"; his other favourites included HSBC, which advanced 7.9p to 656.2p.

Prudential was also making big gains, after the insurance company said it was aiming for a large increase in its new business profits from Asia by 2013. Panmure Gordon's analyst Barrie Cornes said the new targets were "stretching but achievable and we feel confident that they would not have been released unless management were fairly confident that they are achievable." Investors seemed to agree, as Prudential was lifted 31p to 599p.

On the mid-tier index, De La Rue saw a rise of over 10 per cent as it was boosted up 59p to 637p. The banknote producer has now regained the large losses it suffered last week after it revealed first-half results that showed its pre-tax profits had more than halved.

One of the reasons behind its strong performance was vague reports that the manufacturing buy-out group Melrose – which slumped 3.1p to 290.2p – may be preparing a bid, although traders were sceptical. Also making a contribution was Collins Stewart, which upgraded De La Rue to "buy".

ITE Group topped the FTSE 250's leaderboard, soaring 20.9p to 208p, its highest ever share price. The exhibitions company reaped the benefits of a positive broker response to its full-year results, which were released on Tuesday, in which it said it was seeing a recovery in the Russian market.

Investec, Collins Stewart and Numis Securities all reiterated their "buy" advice on ITE, which increased its dividend to 5.7p, with the latter saying that "it ticks all the right boxes in terms of its geographical exposure, structural security, seasoned management and strong balance sheet."

Not too far behind was Micro Focus, which put on 28p to 359.4p after Jefferies International upgraded it to "hold" as the result of "a period of sustained under-performance". The broker's analysts said that its advice on the company, which releases first-half results next week, "now captures much of the negative news and potential further reduction in guidance".

It was not a happy session for Thomas Cook, with investors running scared after it revealed that its revenue for the year had dropped by 4 per cent, resulting in a drop in profits. The second-biggest tour operator in Europe ended by falling 8.3p to 178p as analysts at Numis predicted a tough year ahead.

Amid the stocks on the Alternative Investment Market, a takeover deal became apparent with the announcement that Clyde Process Solutions is set to be bought by Schenck Process.

An offer of 82.5p a share from the German private equity firm has been recommended by Clyde's board, and the news propelled the Doncaster-based engineering company forward 9p to 81.5p.

News
people
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film Ridley Scott reveals truth behind casting decisions of Exodus
News
people
Sport
footballArsenal 2 Borussia Dortmund 0: And they can still top the group
PROMOTED VIDEO
Arts and Entertainment
An unseen image of Kurt Cobain at home featured in the film 'Kurt Cobain: Montage of Heck'
filmThe singers widow and former bandmates have approved project
News
Andy Murray with his girlfriend of nine years, Kim Sears who he has got engaged to
peopleWimbledon champion announces engagement to girlfriend Kim Sears
Arts and Entertainment
Jake Quickenden and Edwina Currie are joining the I'm A Celebrity...Get Me Out Of Here! camp
tv
Arts and Entertainment
George Mpanga has been shortlisted for the Critics’ Choice prize
music
News
Albert Camus (left) and Jean-Paul Sartre fell out in 1952 and did not speak again before Camus’s death
people
Arts and Entertainment
Roisin, James and Sanjay in the boardroom
tvReview: This week's failing project manager had to go
News
ebooksNow available in paperback
News
Ed Miliband visiting the Holocaust museum in Jerusalem. The Labour leader has spoken more openly of his heritage recently
newsAttacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But are the barbs more sinister?
Arts and Entertainment
'Felfie' (2014) by Alison Jackson
photographyNew exhibition shows how female creatives are changing the way women are portrayed in advertising
News
i100
Life and Style
Fright night: the board game dates back to at least 1890
life
Environment
The vaquita is being killed by fishermen trying to catch the totoaba fish, which is prized in China
environmentJust 97 of the 'world's cutest' sea mammals remain
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Langley James : IT Support; Helpdesk, VMware; Manchester, £18k

£16000 - £18000 per annum: Langley James : IT Support; Helpdesk, VMware; Manch...

h2 Recruit Ltd: Business Development Manager - HRO - £70k+ ote

£35000 - £450000 per annum + £3k car, £70k ote: h2 Recruit Ltd: Do you want to...

Citifocus Ltd: Newly Qualified Accountants - Risk Mgmt

£Attractive Package: Citifocus Ltd: Prestigious financial institution seeks to...

Citifocus Ltd: Operational Risk Analyst

£Negotiable: Citifocus Ltd: Experienced operational risk professional with ban...

Day In a Page

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game
There's a Good Girl exhibition: How female creatives are changing the way women are portrayed in advertising

In pictures: There's a Good Girl exhibition

The new exhibition reveals how female creatives are changing the way women are portrayed in advertising
UK firm Biscuiteers is giving cookies a makeover - from advent calendars to doll's houses

UK firm Biscuiteers is giving cookies a makeover

It worked with cupcakes, doughnuts and macarons so no wonder someone decided to revamp the humble biscuit
Can SkySaga capture the Minecraft magic?

Can SkySaga capture the Minecraft magic?

It's no surprise that the building game born in Sweden in 2009 and now played by millions, has imitators keen to construct their own mega money-spinner
The King's School is way ahead of the pack when it comes to using the latest classroom technology

Staying connected: The King's School

The school in Cambridgeshire is ahead of the pack when it comes to using the latest classroom technology. Richard Garner discovers how teachers and pupils stay connected
Christmas 2014: 23 best women's perfumes

Festively fragrant: the best women's perfumes

Give a loved one a luxe fragrance this year or treat yourself to a sensual pick-me-up
Arsenal vs Borussia Dortmund: Alex Oxlade-Chamberlain celebrates century with trademark display of speed and intuition

Arsenal vs Borussia Dortmund

The Ox celebrates century with trademark display of speed and intuition
Billy Joe Saunders vs Chris Eubank Jnr: When two worlds collide

When two worlds collide

Traveller Billy Joe Saunders did not have a pampered public-school upbringing - unlike Saturday’s opponent Chris Eubank Jnr
Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

Our partner charities help veterans on the brink – and get them back on their feet
Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

Putin’s far-right ambition

Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

Escape to Moominland

What was the inspiration for Finland's most famous family?