Market Report: Pace switched on by good news from US supplier

Toby Green@greentoby
Saturday 03 December 2011 01:00

Punters were plugging back into Pace yesterday as the beleaguered set-top box maker – which has issued three profit warnings in a year – was finally on the receiving end of some good news.

The Yorkshire-based group shot up more than 11 per cent after its major supplier Western Digital restarted production in Thailand earlier than expected in the wake of the country's devastating floods.

The temporary closure of the US hard drive supplier's facilities following the tragic floods forced Pace to admit in November that its profits could be hit by as much as $50m (£32m) as a result. Yet Western Digital's announcement that it had partially lifted its suspension on production prompted the company to close last night 5.7p ahead at 57.25p.

Analysts said it was an early Christmas present for Pace, with many assuming that operations would not restart this early. It persuaded Collins Stewart's Jonathan Imlah to upgrade the company's rating to "buy", although he cautioned that "the ongoing pressure on the supply of hard drives and other components" meant it was too early to change his forecasts.

Pace's recovery still has a way to go before it can return to the levels it was trading at close to the beginning of the year. Yesterday's rise may mean it has added more than 25 per cent in a mere three sessions, but its share price is still three-quarters lower than in February, a slide that has recently helped to revive speculation that it could become a takeover target.

The main event of the day for traders was taking place across the Atlantic, where the closely-watched non-farm payroll figures revealed a surprise drop in the numbers of Americans out of work. As a result, despite a bit of profit taking ahead of the weekend, the FTSE 100 still finished the day 62.95 points better off at 5,552.29.

The benchmark index's rise over the past five days of more than 7.5 per cent is its best weekly performance since January 2009, while the losses suffered during the recent nine-day losing streak have now been more than wiped out.

It was a strong day for the commodity stocks, including the heavyweight miners. Kazakhmys and BHP Billiton advanced 38p to 956p and 77.5p to 2,000.5p respectively and Eurasian Natural Resources – yet again the subject of vague takeover chatter – was lifted 12.5p to 674.5p.

The banking sector was also continuing to rally following central banks' decision earlier in the week to boost liquidity, with Barclays shifting up 13.5p to 190.65p to take the blue chip index's gold medal.

There were some ill winds blowing for Admiral after Investec's Kevin Ryan warned the "shocks" in its update last month – when the insurer issued a profits warning because of an increase in personal injury claims – may not be a one-off. However, although the analyst kept his "sell" advice and said it was heading downhill "like a freight train", the group only ended up creeping back 0.5p to 911.5p.

Even though it announced that its full-year profits would meet expectations, SThree still ended up with the wooden spoon on the FTSE 250 after falling 9.1 per cent to 221.8p. The recruiter admitted growth had dropped sharply over the past three months, which prompted Panmure Gordon to slash its forecasts and downgrade the group's rating to "sell".

However, with the broker adding that the problems were "not an SThree issue, and suggests bad news across the board", it also changed its advice for rival Michael Page to "sell" as it slipped 22.2p to 221.8p.

After the return of vague bid rumours around Home Retail on Thursday, claiming the former Marks & Spencer boss Sir Stuart Rose may be involved in a possible approach from a private equity consortium, the Argos-owner shot up a further 8.85 per cent to 98.4p.

It means its share price has put on more than a third in just seven sessions, although Singer Capital Markets was doing its best to play down the whispers, saying that with Christmas just around the corner "any immediate action appears unlikely".

Tiddler Ceres Media, which special- ises in environmentally friendly forms of advertising, slumped 44.48 per cent after announcing that its sales were still underperforming expectations and that it had started a strategy review as a result. The Alternative Investment Market-listed group fell 2.5p to 3.12p as it also revealed health issues had forced the resignation of its finance director Matthew Howes.

Petra Diamonds was driven up 12.5p to 126p after the precious metals producer said it could leave AIM and enter the main market as early as next week.

After warning as much on Thursday, Haverford confirmed yesterday that it was not extending its partial offer for its rival Omega. With the reinsurer instead saying it wanted to buy a 25 per cent stake at 74p a stake, 9p lower than its previous bid, Omega dipped 2.5p to 62p.

FTSE 100 Risers

Icap 369p (up 24.7p, 7.17 per cent)

Interdealer broker manages a strong rise after Bank of America Merrill Lynch decides to include it on the broker's "Europe 1" focus list of stocks.

Essar Energy 245.4p (up 16.4p, 7.16 per cent)

Energy company moves ahead in the wake of its announcement that Lalit Kumar Gupta will become the chief executive of its Essar Oil division.

FTSE 100 Fallers

Severn Trent 1,498p (down 55p, 3.54 per cent)

With defensive stocks suffering a tough session as punters continue to rediscover their appetite for risk, water group closes as the top-tier index's worst performer.

SSE 1,274p (down 44p, 3.34 per cent)

Energy supplier dips in the wake of JP Morgan Cazenove's analysts keeping their "underweight" recommendation, citing its recent advance.

FTSE 250 Risers

SDL 630.5p (up 44.5p, 7.59 per cent)

Investors cheer the news that small-cap marketing company Alterian has agreed to the translation software group's £68.4m – or 110p a pop – approach.

Berkeley 1,360p (up 93p, 7.34 per cent)

Housebuilder rises after impressive interim results reveal a 30 per cent jump in underlying profit and a 15.2 per cent growth in its pipeline of forward sales.

FTSE 250 Fallers

Domino's 440.4p (down 10.7p, 2.37 per cent)

Investors finally lose their appetite for the pizza delivery company, meaning it finishes behind for the first time in six trading sessions.

Ashtead 184.6p (down 3.6p, 1.61 per cent)

Rental group ends up closing in the red despite getting a vote of support from Barclays as the broker initiates coverage with an "overweight" rating.

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