Market Report: WPP gets a boost from US – and the City is lovin' it
News from across the Atlantic will have put a smile on Sir Martin Sorrell's face last night. As his WPP empire closed at its highest since last March, one of its major rivals posted forecast-beating figures on Wall Street while predicting a jump in advertising spending over 2012.
An impressive set of results from New York-based Omnicom – which was behind the "I'm Lovin' It" campaign for McDonalds – prompted scribblers in the Square Mile yesterday to claim expectations for the London-listed agencies were too cautious.
Noting that the company not only said advertising spending outside of Western Europe stayed strong but that it also believed clients would up their spending over the year ahead, Liberum Capital's Ian Whittaker argued the results supported his belief the sector would see organic revenue growth of as much as 6 per cent – much higher than consensus.
As a result, Mr Whittaker kept WPP's "buy" rating and its position as his favourite of the agencies. The company's response may have been fairly modest, with it ticking up 5.5p to 799p, but it meant it continued a great run in which its share price has added nearly 40 per cent since October, leaving WPP at its strongest for more than 11 months.
The analyst also reiterated Aegis' "buy" advice, although this did not stop it creeping back 0.5p to 164p. However, the group has also enjoyed a fantastic year, helped in no small part by its Carat business winning a major contract worth around £2bn with car giant General Motors last month.
It was a choppy session for the FTSE 100, which at one point looked as if it was going to shrug off Moody's decision to place the UK's credit rating on "negative watch" and set a fresh six-and-a-half-month high. Yet once again the attempt to move significantly higher ended in failure, and with retail sales figures from the US disappointing, the benchmark index closed 5.83 points worse off at 5,899.87.
The banks took a much bigger hit, and Royal Bank of Scotland was left with the wooden spoon after dipping 1.45p to 26.65p. At the other end, Bunzl jumped 32.5p to 910.5p ahead of the distribution firm's full-year figures later in the month as JPMorgan Cazenove's analysts – who upgraded their rating to "outperform" – pointed out the group's share price tends to rally after releasing results.
The broker was also helping BAE Systems, which tomorrow announces its preliminary results. The arms dealer was fired 9.4p higher to 329.4p following the publication late on Monday of President Obama's budget request, with JPMorgan saying his comments on defence spending were better than feared for BAE.
There was relief for Capita as the outsourcer was picked by the Army as the preferred supplier for a major recruitment and IT contract. Earlier in the month, it was knocked back by claims confidence in the City was too high over its chances of winning the deal – expected to be worth roughly £500m – but the news it had prevailed saw it rise 13.5p to 648p.
Logica – whose joint bid with Serco (up 3p to 534.5p) had lost out to Capita – slumped 3.5p to 80.3p on the FTSE 250. The IT giant was not helped by rising fears ahead of its next results in a week's time as vague speculation did the rounds that the group, which released three profit warnings last year, could be about to disappoint investors once again.
Misys powered up 18.1p to 308.4p on renewed hopes it may still be saved from its planned all-share merger with Swiss rival Temenos. Reports claiming unnamed buyout firms were interested in a possible move prompted the revival of vague rumours that a new approach worth 375p a share might be on the cards.
Elsewhere, Carpetright was 26p better off at 604p as it continued to be boosted by speculation earlier in the week that – following a string of profit warnings – the retailer's founder Lord Harris may have had enough and could take it private.
Market gossips were still getting excited over Cove Energy, the East Africa-focused explorer that put itself up for sale last month. As well as vague chatter suggesting approaches as high as 200p a pop had already been rebuffed, the latest speculation also claimed US giant Anadarko could be considering entering the fray.
Traders were not convinced by the tale, although another rumour suggested BP - which slipped 1.2p to 494.8p – may be interested in the gas assets of the AIM-listed group, which advanced 1.75p to 147.75p.
Despite announcing it was open to bidders, engineer Hampson Industries plummeted a huge48 per cent to 4.03p on the fledgling index. The Boeing supplier also warned issues with a large order meant a number of deliveries were being delayed until next year, although it would not say how much damage to revenues or profits this would cause.
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