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Ironic isn't it? One of the hottest days of the year and the water companies have suddenly found themselves out of favour among investors.
They are often seen as a defensive play in times of trouble, but JPMorgan thinks the water companies may have had their day, partly because of an easing of inflationary pressures. So it is urging clients to start switching into the power generators.
The water regulator Ofwat is due to make known its views on the next round of pricing within a few weeks, and JPM sees scope for only a small increase. Returns could be set at a level allowing companies to make only small returns.
It has raised Pennon, 1¼p firmer at 486¼p, from underweight to neutral, reflecting mainly its fast-growing Viridor waste disposal business. But United Utilities is cut from overweight to neutral. The shares responded with a dive of 9¼p at 499¾p, making them the biggest blue-chip fallers on the day. Severn Trent was another casualty, dropping 17p to 1101p after JPM slashed its target on the shares from 1490p to 1040p.
Shares generally nursed late falls after window-dressing by institutions dried up as the second quarter drew to a close. The market has rallied from its low point in March but has been unable to claw back the big losses suffered by investors last year as the full impact of the banking crisis and recession started to be felt. The FTSE 100 index fell 37.29 to 4256.74. Wall Street lost an early lead in subdued trading this afternoon, with the Dow Jones losing 28.1 at 8501.1.
Over on the currency market, sterling hit an eight-month high against a weakened dollar before seeing its lead pared back by a sharper than expected decline in GDP. The UK economy contracted at its fastest rate for more than than 50 years during the first quarter. It fell a revised 2.4% compared with initial estimates for a decline of 1.9%.
Integrated oil companies such as BP, 1.55p softer at 481.2p, BG Group, 11p off at 1026p, and Royal Dutch Shell, down 3p at 1543p, have been a weak market of late after falling victim to institutional investors selling their shares in order to take-up their rights issue entitlement in mining giant Rio Tinto, 20p softer at 2133p.
But Morgan Stanley says the selling in BG and BP has been overdone, and insists investors should now rebuild their positions in both stocks, which it continues to rate overweight.
The focus on BG Group should now be on the Corcovado-2 and Abarre West wells - the two largest wells drilled by BG and worth up to 150p a share.
At BP, there should be continued evidence of the restructuring, while limited downstream exposure relative to Shell leaves the company better positioned to endure a tricky quarter for the group.
Dana Petroleum spiked up 40p to 1410p in a notoriously thin market. City speculators have revived talk claiming that Germany's biggest power generator RWE may be looking to bid 1800p a share which would value Dana, with big interests in the North Sea, at £1.4 billion.
Oil and gas explorer Aminex slipped 1.12p to 6.8p after announcing its intention to raise almost £7 million by way of a placing of 116.3 million new shares at 6p.
It also plans a non-underwritten open offer of up to 30.2 million shares on the basis of one-for-eight at 6p to raise a further £1.82 million. The money will be used to fund the company's exploration and development programme in Tanzania where it is partnered by Tullow Oil - up 2½ at 934½ - which has already struck it rich in neighbouring Uganda.
