Market update - 28 July

It was a slow start to the week with the FTSE 100 falling 21 points to 5331. The lowest by lunchtime was HBOS as the whole bank sector continues to suffer.

The UK bank is preparing to release its first half earnings on Thursday, and the City is clearly getting nervous. Citigroup didn’t help as it released a report which added: “HBOS structured credit portfolio continues to deteriorate with £1bn mark-to-market losses estimated in the five months to May.” The stock was down 6.53 per cent at 290p

Moving up

The miners dominated the FTSE 100 in the morning as commodity prices were up. Best performer was Antofagasta, which rose 5.06 per cent at 529.5p. Others including Anglo American were helped by a note from Chevreux, which raised the stock’s rating to “outperform”. It also announced it would report underlying earnings of $850m from its Anglo Platinum business and more movement in its potential takeover of IronX. It was up 3.89 per cent at 2777p at lunchtime.

Reckitt Benckiser put out strong second quarter results driving the stock up 2.01 per cent to 2587p. The group said net profit was up 10 per cent and reiterated full year targets. Cazenove said the results were “good” and has an “outperform” rating on the stock. It said:

“Reckitt is one of our top-picks in pan-European food and HPC. Since its merger in 1999, Reckitt Benckiser has delivered an outstanding performance. In the period 1999-2007, FCF is up fivefold, EPS increased fourfold and DPS doubled.”

Detica Group rose 17 per cent to 439.5p in the morning after BAE Systems approached the company about a potential takeover. Panmure Gordon lifted its rating to a “buy” with a target price of 440p.

Moving down

Aviva, the insurance company, was 3.42 per cent lower in midmorning at 473.25p after UBS cut the stock to “neutral” from “buy”. The Swiss broker said it had made the move “to reflect the challenges it faces in a number of markets.” It added: “We expect most UK life companies to report H1 losses as a result of weak asset markets.”

Sage Group fell 3.38 per cent to 194.2p after its rating was cut by JP Morgan from “neutral” to “outperform”. The broker said:

“While the stock is down 20% from its LTM peak, we believe PE multiples will continue to de-rate as organic growth decelerates in a difficult macr oenvironment and competition remains high in the SME sector.”

On the second tier Rentokil Initial fell 8.48 per cent to 64.75p. The ratcatcher slipped after Merrill Lynch cut it from its Europe 1 list in the wake of the profit warning last week.

Merrills said: “Rentokil’s returns are significantly below peers and that management’s operational initiatives should drive a significant improvement over their 2010-12 incentive period.”