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Market report - afternoon update
The three High Street banks taking refuge in the Government's lifeboat were the biggest fallers among blue-chip stocks today as City investors became increasingly disillusioned with the terms of their proposed fund-raisers.
Lloyds TSB's Government-sponsored right issue continued to slide deeper under water today with the shares dropping 16.7p to 149.3p, against the rights-issue price of 173.3p. HBOS slumped 11.2p to 75.3p, compared with its rights price of 113.6p. Growing disenchantment over the terms of their proposed funding and rescue is prompting shareholders to cold-shoulder them. Royal Bank of Scotland's proposed £20 billion issue has been priced at 65.5p. The shares today fell a further 4.2p to 46.8p.
The big income funds had to sell their stock after dividend payments were stopped on the Government's orders. Quipped one dealer: "What's the point in owning the shares?"
Standard Chartered lost 24½p at 752p after Dresdner Kleinwort slashed its target from 2100p to 1300p, warning the global recession will lead to increased impairment charges.
Shares generally suffered further losses, partly reflecting Friday's turmoil in New York, where shares suffered a late sell-off. The FTSE 100 index fell 69.33 to 4163.64 in another day of pitifully thin trading. Goldman Sachs is unperturbed by the dramatic drop in the oil price in recent weeks as the global economy slides towards recession.
The broker says it has been encouraged by third-quarter profits from the big European producers. The figures are also being flattered by the resurgent dollar. Goldman raised its target for BG Group, down 10p at 835½p, with potentially huge reserves in Brazil, from 1140p to 1230p. It has upped BP, ½p firmer at 488½p, from 600p to 650p and Royal Dutch Shell, 18p lower at 1637p, from 2180p to 2500p.
Morgan Stanley has begun coverage of Associated British Foods, off 11½p at 656½p, with an underweight rating and 730p target. It sees little scope for re-rating next year, with earnings remaining under pressure from its substantial investment plans and expected margin erosion at discount clothing arm Primark.
International Power fell 5½p to 257¼p after JPMorgan cut its target from 520p to 400p. It continues to rate the shares overweight.
Carphone Warehouse fell 9½p to 135½p ahead of tomorrow's half-year results. Dealers fear a profit warning, reflecting a similar move by joint-venture partner Best Buy in the US last week. A wholesale restructuring of the business is also on the cards.
An 18% jump in pre-tax profits to £27.5 million at Diploma was accompanied by a near-40% leap in the dividend to 7.5p. Shares in the group, which supplies parts for the European Airbus and Formula 1 teams, rose 13¾p to 127¾p. The price had more than halved since the start of the year.
Safestore, the UK's largest self-storage retailer, rallied 6¼p to 64p after no less than nine directors took advantage of recent weakness in the shares to top up their holdings. Between them, they have bought a total of 325,386 shares at 58p each. The shares continues to trade way down on the 270p at which they were floated in March last year.
