Markets update

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The FTSE 100 was up 12.7 points at 6317.2 at noon with miners and oil companies leading the market yet again. Kazakhmys, up 96p at 1928, is right at the top of the leader board, thanks to firmer metals prices and a new note from Credit Suisse, whose analysts have raised their price target for the stock to 2700p.

"We believe that Kazakhmys is the cheapest company in our mining universe, producing copper which has arguably one of the best demand and supply dynamics of all our commodities. The market took time to appreciate their 14.6 per cent holding in ENRC [currently up 30p at 1474], the broker said, adding: "Now it seems the market is also underestimating the recent acquisition of 2,200 megawatts of power that has the potential to increase to 4,000 megawatts with an investment of only $650 million. We think this power asset is worth £2.20 per share"



The rest of the sector is also doing well, helped by a new note from Citigroup:



"Our in-depth look at costs and incentive prices suggest we will see higher long-term margins than the industry has experienced over the past 20 years, but at lower levels than the companies are enjoying. On the back of this work we have upgraded Anglo American [currently up 100p at 3640p] and Vedanta [currently up 119p at 2680p] to Buys, raising our price targets to £40 and £30.61, respectively. Our top picks are Anglo American, First Quantum [currently up 20p at 4479p]...Peter Hambro Mining [currently up 50p at 1398] Vedanta, Ferrexpo [currently up 2.5p at 413p] and Xstrata [currently up 62p at 4375p]. In terms of trading the sector, after a strong run, we have hit levels, in price terms, which have historically suggested a good time to take some profits. There are four occasions since 2003 when the sector has jumped at least 20 per cent in two months, on average giving back 6 per cent in the ensuing month. Three months subsequent, the sector has still tended to be in negative territory. But, as we said, we remain structural bulls and believe investors should either trade the dips or just stay on for the ride."



Moving up...



BSkyB, up 12p at 536p, is among the few non-mining stocks on the FTSE 100 leaderboard – Deutsche Bank has issued a ‘buy’ note on the company.



"Sky is trading at its lowest multiple ever, ahead of a period when EPS and cashflow growth should be strong after a 3-year investment phase. Consensus estimates have moderated and we see upside flexibility to Sky forecasts from an inevitable Virgin renegotiation and move to full unbundling in FY09. Further, a successful Tiscali deal could add 30p/share. We see 20 per cent EPS growth over the next 8-qtrs as impressive, in both a market and a sector c context," the broker said.



Further down the leader board, Tate & Lyle is strong, up 11p at 510p. Panmure Gordon is helping drive investors into the stock.



"Tate has underperformed the FTSE100 by 20 per cent since we turned Sellers on 27 March, principally on valuation grounds. With the shares back below 500p, we think they are looking more reasonably priced on 12.6x P/E and 7.6x EV/EBITDA for March 2009E. We move from Sell to Hold, maintaining our 480p price target," the broker said in a new note published this morning,



Moving Down...



Last week’s rights issue is weighing on Bradford & Bingley, which s down 10.53 per cent or 14p at 119p, at first place on the FTSE 250 loser board.



Most of the wider sector is also depressed. On the FTSE 100, the Royal Bank of Scotland is down 6.38 per cent or 17p at 249.5p – Goldman Sachs has reduced its target price for the stock. "We are reducing our 12-month price target from 350p to 290p to reflect RBS trading ex-rights on May 15. We had previously included 60p in our price target for the value of the rights issue," the broker said.



Alliance & Leicester is down 12.25p at 428.75p, Lloyds TSB is down 9.5p at 401.5p, and HBOS is down 15.25p at 452p.





British Airways is down 5.15 per cent or 12p at 221p, thanks to Deutsche Bank and ABN Amro, both of whom revised their rating on the stock to ‘Sell’.



"A 10 per cent EBIT margin puts BA's profitability ahead of peers, but looking forward it remains in the eye of stagflationary trends. We believe BA is losing its ability to price up while maintaining volumes and while a strong management team is taking measures to reduce capex and cut capacity the EPS impact is significant: we cut 3/08E EPS to 10p and 16p, plus our TP falls to 200p," said Deutsche, adding: "BA must resize its business or hope competitors resize theirs, until either scenario occurs we see only downside risks and so reduce our rating to Sell"



Elsewhere, ABN Amro analyst Andrew Lobbenberg warned against "excessive exuberance": "We see BA’s recent rally in the face of rising oil prices as unjustified and downgrade to Sell, target unchanged at £2. BA is making sensible moves in this tough environment, but we see downside risks to revenue and challenges in lowering non-fuel costs."

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