Morning:
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Tuesday October 28 - afternoon update
Shares of Marks & Spencer were edging precariously closer to their lowest for eights years today after broker Pali International chose to dump the retailer just days before it unveils first-half results.
The price retreated 5¾p to 218½p with more than 10 million shares changing hands after the broker cut its rating from neutral to sell. The price is now way below the 653p at which it started the year.
Top retail analyst Nick Bubb at Pali slashed his pre-tax profit forecast for the full year from £550 million to £300 million. He is braced for a drop in like-for-like sales of between 3% and 4%, but warns they could drop by as much as 6%. “With more downgrades and a dividend cut now on the horizon, we think M&S's rating can crack further,” says Bubb.
Meanwhile, stock-market investors tried to make hay while the sun shone by taking advantage of share-price rallies in the Far East. The appearance of a few bargain-hunters briefly carried the FTSE 100 index back above the 4000 level, before another nervous start to trading on Wall Street this afternoon saw it pare back its lead to just 41.3 at 3893.9. The Dow rallied 95.4 to 8271.1.
Conditions remain fragile in the face of further possible write-offs by the banks. Dealers warn hedge funds could see the rally as an excuse to dump more stock to meet new margin calls.
BP provided some of the early impetus to the London market with a big surge in profits during the third quarter on the back of a strong oil price. The shares rose 20p to 458p.
Third-quarter profit numbers from Aviva, up 17¾p at 263p, were warmly received, and went some way to alleviating concerns over the life assurers in general. Aviva said it is well-capitalised, dispelling rumours of a dividend cut to conserve cash. It was also reassuring about the need for further asset sales. It pointed out that it sold more than £3 billion of equities in September when the Footsie 100 was above 6000.
Admiral was up 92p to 885p after Morgan Stanley began coverage with an overweight rating and 1269p target, in light of above-average growth for the group and a significantly better risk profile than that of its rivals.
Morgan started RSA Insurance at equalweight with a 171p target, while Credit Suisse has raised its rating from underperform to outperform and tweaked its target from 146p to 164p. The shares rose 5p to 128.5p.
One of the biggest blue-chip casualty was shares in the London Stock Exchange itself, down 16p, at a new four-year low of 471p. The search is on for a new chief executive to replace Clara Furse, but of more immediate concern is the dramatic drop-off in share trading of late.
There is no telling what damage may be caused to the LSE's revenues by a long-drawn-out bear market. Standard Chartered put on 71p at 751p following third-quarter numbers. The international banking outfit also gave reassurances that further funding by shareholders would not be required.
Citigroup has repeated its hold rating and slashed its target for bookie William Hill, up 8½p at 182¾p, from 245p to 175p. It says the fixed-odds betting terminals are under scrutiny because of a possible link to problem gambling, and a Gambling Commission report is due next year. Citi adds there is a distinct possibility of an increase in machine-gaming duty.
GKN continued to hit new lows with a loss of 6¾p at 99¼p after yesterday's profits warning. Merrill Lynch has cut its target for the aerospace and automotive parts supplier from 170p to 90p, and repeated its underperform rating.
Citigroup prefers easyJet, 9p lower at 257¼p, to British Airways, 5.9p cheaper 118.6p, in the battle for control of the skies. It reckons profits for the sector during the traditionally busy third quarter will be down about 50% as fuel costs take a toll, but expects easyJet to suffer a smaller decline.
