Market Report: Serco provides lesson in stockbroking pecking order

Those unfamiliar with the stockbroking pecking order just needed to take a look at Serco. Two brokers released notes on the outsourcing group, which is two years into its turnaround. Peel Hunt upgraded the shares from “sell” to “hold” after Serco sold its troubled business processing unit for £250m last month to focus on government contracts. Despite trimming its target price to 108p and warning of a lengthy recovery, Peel Hunt was reassured by more manageable debt levels.

But investors listened instead to larger broking rival HSBC, which cut Serco’s rating to “reduce” and its target price from 140p to 77p, causing the shares to slide 3.3p to 101.6p. Arguing that the introduction of the Chancellor’s national living wage (NLW) would hit margins, it slashed its profit forecast for this year by 20 per cent and for next year by 35 per cent.

It was back to winning ways for the FTSE 100, which climbed 69.06 points to 6,338.67, ending three straight days of losses.

Brokers heaped praise on the funds supermarket Hargreaves Lansdown, which topped the blue-chip leaderboard for a second day, rising 70p to 1,400p a day after it revealed record numbers of customers.

Chip maker Arm Holdings’ shares rose 46.5p to 979.5p after encouraging results from its overseas rival Taiwan Semiconductor Manufacturing. Shares in Imagination Technologies also rose by 9.5p to 223.5p.

Booker’s shares are running out of puff as more smokers quit. The FTSE 250 wholesaler, which completed a takeover of the Budgens and Londis grocery chains last month, said tobacco takings fell by 3.7 per cent in the 24 weeks to 11 September, contributing to a 1 per cent decline in sales, to £2.2bn. It fell 4.1p to 175.9p.

On the FTSE 250, shares in Restaurant Group edged 14p higher to 709p after Jefferies upgraded the owner of the Frankie & Benny’s brand to a “buy”, saying that it preferred restaurants to pub stocks.

Brokers at Barclays are predicting a return to form for Asos. They say shares in the online fashion retailer – a former AIM darling – could hit 4,500p. On Thursday, they rose by 67p to 2,997p – still a way off last year’s all-time high of 7,195p.