Market update - 11 August

The FTSE 100 was up 35.8 points at 5,525 and the FTSE 250 was up 50.3 points at 9,253 at 11.41am today. Wolseley led the London benchmark, up 7.4 per cent or 31.25p at 452p, amid market rumours of a major US disposal. Recent speculation has suggested that the construction materials group may offload Stock Building Supply, its North Carolina-based subsidiary.

ITV was second placed on the FTSE 100. The broadcast group was up 5.4 per cent or 2.4p at 47.2p after reports in the European press suggesting a bid from Endemol may be in the offing.

Moving up

A positive day of trading on Wall Street on Friday cheered London financials this morning and Old Mutual, at third place on the FTSE 100, was up 3.8p at 99.7p. Friends Provident was up 2.2p at 94.7p.

Sector consolidation hopes gave strength to the miners after Kazakhmys, up 18p at 1,266p, increased its stake in the Eurasian Natural Resources Corporation, down 77p at 1,047p, to more than 25 per cent.

On the FTSE 250, Barratt Developments was the strongest, up 15.2 per cent or 19.5p at 147.5p after Goldman Sachs weighed in on the house building sector.

“One risk is that share prices fall back towards trough price/tangible book values owing to the current weakening conditions in the UK housing market and negative news flow. The second risk is financing risk, and the possibility of a rights issue by certain companies. The potential reward for owning these stocks is a possible re-rating to a price/tangible book ratio of 1, after taking into account possible write downs,” the broker said, sparking a sector-wide rally.

Barratt was also helped by the news that Polaris Capital Management had taken its stake in the company to above 6 per cent.

In the wider sector, Taylor Wimpey, at second place on the FTSE 250, was up 10.7 per cent or 5.5p at 56.75p and Persimmon advanced 25.75p to 395.5p.

Positive broker sentiment also helped Aquarius Platinum, the mid cap platinum producer, which gained 19.5p to 444.5p.

“Aquarius Platinum’s share price has fallen by over 50 per cent since its peak in mid May, while PGM [platinum group metals] prices have fallen by ‘only’ 25 per cent. In addition, Xstrata has announced a proposed offer in cash for Lonmin, at a 42 per cent premium to the pre-bid share price. Xstrata (and indeed Anglo American through purchases of Angloplats stock) are suggesting their confidence in sustained high PGM prices, while the equity market continues to focus on the shorter-term demand negatives,” said UBS, upgrading the stock to “buy” from “neutral”.

Moving down

Experian was down 10.5p at 403.75p after Goldman Sachs moved the stock to “sell” from “neutral”.

“Over the next year we expect Experian’s credit related operations to remain under pressure and that this will spread further across the business as clients become increasingly cautious and price sensitive. In the longer term we expect demand for credit data and scoring products to return to the growth rates seen over the past decade. This suggests to us that Experian is facing both structural and cyclical headwinds,” the broker said.

Among the mid-caps, Hikma Pharmaceuticals was down 9.5p at 390.5p after Credit Suisse reduced its target price for the stock to 405p from 500, while maintaining a “neutral” rating.

“We still like the overall fundamentals of the company. We highlight that, in our view, the vast majority of Hikma's revenues offer higher quality, and superior growth prospects relative to the 'average' EMEA [Europe, Middle East and Africa] Generics company. The MENA [Middle East and North Africa] region, in particular, offers the best long-term pricing environment for generics drugs as well as the most potential for increased utilisation rates/market growth, in our view. However, the opacity on the US business and valuation underlie our Neutral recommendation,” the broker said.