Tonight:
4°c
Legal & General was the biggest blue-chip casualty today, losing 3.5p to 41.4p ahead of results tomorrow that are expected to produce a cut in the payout to shareholders.
But as traders point out, the price has almost doubled since hitting a low of 23p earlier this month, with the shorts feeling the squeeze. Today it emerged that hedge fund Millennium Partners had an outstanding short position of 0.21% of the total shares in issue. It co-incided with ING slashing its target from 77p to 34p to reflect the deteriorating outlook for the life assurer in the UK.
ING says the results will be dominated by credit, and believes L&G's decision to top up reserves by £650 million for credit defaults will deflate profits. This also begs the question of whether total reserves of £1.2 billion are adequate.
Rival Blue Index says any sign of the shares breaking above the 50-day moving average of 47p in the run-up to the next trading statement will be a bridge too far. It warns: "Any disappointments or unpleasant surprises in the statement will most likely result in severe punishment for the shares, along with other contentious issues such as dividend and cash reserves."
Financial stocks generally slammed into reverse after posting early gains. The exceptions were Royal Bank of Scotland, adding 0.7p at 25.7p, and Friends Provident, up 2p at 63.4p. But Barclays lost 4.1p at 117.4p and Lloyds Banking Group fell 2.4p at 59.1p. HSBC retreated 25¾p at 392p having gone ex the banking giant's £12.5 billion rights issue in London.
Elsewhere, the bears were taking a breather after rushing to cover most of their outstanding short positions following yesterday's announcement of a $1 trillion rescue package for America's banks. Leading shares in London gave back some of yesterday's gains, leaving the FTSE 100 index nursing a loss of 51.44 points at 3901.37. New York also ran into profit-taking when trading resumed this afternoon, and the Dow was down 100.68 at 7675.18.
Mining shares came off the boil in the wake of yesterday's gains inspired by evidence of an increase in demand for imports by China. Anglo American fell 106p to 1260p, Rio Tinto dropped 135p to 2157p and Antofagasta was down 43½p to 517½p.
Centrica, which is offering 725p a share for Venture Production in which it owns a 22% stake, dipped 1¼p to 241¾p after Citigroup trimmed its target from 285p to 265p to reflect a weaker short-term profit outlook as underlined by full-year results for 2008. It has also cut its earnings per share forecast for the current year from 22.1p to 20.8p.
UBS has raised Northern Foods from neutral to buy with a target of 61p ahead of Thursday's fourth-quarter trading update. The broker complains that the environment remains challenging, but management was confident about the outcome for the full year when it last gave an update in January. The shares responded with a rise of 4½p at 44p, making them one of the best performers among second-liners.
Bank of America Merrill Lynch and UBS have joined the SIG fan club in the wake of the group's rights issue to raise £341 million. UBS has raised the shares, down ¼p to 110½p, from sell to neutral, and says the risk to a breach of covenants has now been removed. It has a price target of 107p.
Merrill Lynch has raised its rating on SIG from neutral to buy. It says the rights issue has diluted shareholders, but was a "necessary step", and adds that the group has repaired the balance sheet and is now sufficiently capitalised to see out an extended downturn.
Inchcape shaded 1p to 66½p despite Citigroup moving from hold to buy. But shareholders who have been asked to cough up for the motor trader's heavily discounted right issue at 6p a share remain in the money. Citigroup has also upped its target from 40p to 88p. But Panmure Gordon has cut Inchcape from buy to hold and cannot see a recovery in earnings until 2011 at the earliest. It is sticking with its 70p target.
