Morning:
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A flurry of late-afternoon rumours stoked up by Barclays' mouthwatering deal with BlackRock propelled interest sky high in other fund managers.
Man Group's popularity rose throughout the day until it emerged, 17¼p higher at 283p, at the top of the FTSE leader board. As soon as one unfounded rumour was quashed — those in the know say Man has now denied rumours of an approach by Goldman Sachs — another popped up. Traders are now claiming Man is looking to sell its stake in MF Global.
With trading volumes noticeably thin, the recent rally ran out of steam despite a flurry of optimistic economic statistics from the US and Asia. Sustained selling of mining and oil stocks wiped out strong performances elsewhere and the FTSE 100 was down 18.33 points to 4443.54. In the US the Dow J ones opened down 28.95 points at 8741.97.
Punters willing to believe the worst of the recession is over might cast a glance at advertising giant WPP.
Goldman Sachs has added it to its conviction buy list on the grounds that sales have fallen as low as they are going to get. In terms of new business WPP, up 11p at 436½p, has not been as successful as rival Publicis in recent weeks, but Jones calls WPP's performance in May “solid”.
From an investment point of view, WPP has lagged the market by 20% during the recent rally and on a price/earnings ratio is 20% cheaper than Publicis and 30% better value than Omnicom.
Mining group Vedanta was the Footsie's main casualty today as the prospect of a major share dilution loomed into view via a $1 billion (£606.2 million) convertible bond, launched today.
Vedanta, down 118p at 1629p, needs the money to clean up its substantial collection of minority holdings in subsidiaries. Shareholders say the messy web of assets is responsible for a good deal of the 75% fall in attributable profits last year.
JPMorgan is sole bookrunner on the offering which could be increased by a further $250 million. The convertible bonds are expected to have a coupon of 4.5%-5% and the conversion price is estimated to be at a premium of 35%-45%. Other miners took a pounding as investors fretted they will be tempted to follow suit. Antofagasta was 32p down at 671½p and Fresnillo was off 30p at 6555p.
GlaxoSmithKline rose 54½p to 113½p as the drugmaker indicated it will slash the price of leading drugs in developing countries after trials in the Philippines showed an eightfold increase in Cervarix, following a 60% price reduction.
BT headed back towards 100p powered by a glowing note from Bank of America Merrill Lynch, which upgraded the telecoms group to buy from neutral. It says 30,000 job cuts translate into £900 million in savings and reckons earnings should grow 2% to £5.6 billion this year. BT, up 4p today at 97p, hasn't been this high since early February.
Chaucer Insurance rose 3p to 43p as it emerged Brit Insurance has mooted an all-share offer for its smaller rival. Brit Insurance, with a market cap of £19, million — more than twice that of Chaucer, slid 1p to 193p.
Private-equity group 3i jumped 6¾p to 279½p as it revealed an impressive response to its £732 million rights issue. Some 96.5% of existing shareholders took up the offer and around 523 million new shares in 3i start trading today.
Regal Petroleum may not be so lucky. It dipped 12½p to 62p as it launched a $100 million rights issue having failed to borrow the money elsewhere. Well-placed sources said that Regal's on-off suitor TNK-BP, may be pressured into making an offer for the group before the EGM to approve the rights issue on 30 June. However, the share price reaction suggests few believe TNK-BP, or any other buyer, will come up with the goods.
Aim-listed cafés group Coffeeheaven jumped 2½p to 21¾p after it said it was in takeover talks with an unnamed bidder. Chairman Richard Worthington said Coffeeheaven did not need any more money to fund its opening plan and fresh investment would speed up expansion.
