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Could car dealers be on the road to recovery?
Shares in the sector have taken a battering in the past two years as the recession sent sales of vehicles plunging. But Pendragon, which trades as Stratstone and Evans Halshaw, motored ahead today after Citigroup advised snapping up the shares.
The heavyweight broker reckons that Pendragon should get a triple boost in the coming months: from government plans this week to extend the car scrappage scheme to another 100,000 vehicles — which should add up to 5% to the volume of car sales — the VAT cut bringing demand forward and from tight cost controls.
Citi believes that September's industry car figures — due on October 6 — will show demand recovering, with further growth in premium new car registrations. It rates Pendragon a high-risk buy, with a 50p price target for the shares, which today gained 3¼p to 4012p.
Shares in London were just in positive territory thanks to a strong showing from financial stocks.
The FTSE 100 rose 3.7 points to 5163.42, with Man Group leading the benchmark higher after reporting a slight rise in assets under its management as redemptions slowed. The world's biggest listed hedge fund soared 20½p to 328p. Insurers were boosted by a positive note from Deutsche Bank, with Legal & General adding 4¼p to 87p and Aviva 16p stronger at 447p.
The index shrugged off a host of top stocks going ex-dividend — including International Power, Inmarsat, Wm Morrison and Tullow Oil — which gave the FTSE a small knock.
All eyes were on Marks & Spencer, which posted its eighth consecutive quarterly drop in like-for-likes sales but still its best sales performance in two years. A warning that next year will be tough for the High Street sent its shares down 4¾p to 370p. This pushed the rest of the retail sector down, with Next sinking 11p to 1839p and Argos and Homebase owner Home Retail Group 3p cheaper at 277p.
Reed Elsevier, the publishing and media group, dropped 6p to 468p after Goldman Sachs placed 22.4 million shares for an institutional investor at between £4.65 and £4.70 a pop. Sage Group has found a fan in Morgan Stanley, which reckons the software group has the firepower to go on an buying spree. The heavyweight bank has upgraded the software maker to overweight and set a 270p price target for the shares, which today rose 6½p to 235p. Analysts reckon cost-cutting has been swift, that it is getting a boost from the weakness of the pound and that it remains popular with its customers for its business support service.
Troubled broadcaster ITV shrugged off news that the internet has overtaken TV for advertising spend in the UK, after Morgan Stanley reiterated its bull case for the stock. They still recommend the shares, despite the leadership crisis engulfing the company, on hopes that it will gain concessions from the Competition Commission over product placement. Morgan Stanley's analysts set a 55p target for the shares, which added 1¼p to 46¼p.
Shares on Wall Street slipped after mixed economic data, with a surprise decline in consumer confidence overshadowing a better-than-anticipated housing report.
The S&P/Case-Shiller house price index for July rose 1.6%, the third consecutive month of gains, against analysts' predictions of a 0.5% increase. But investors in New York were unnerved by the Conference Board's figures which showed Americans' mood deteriorating, sparking fears that consumers will keep their spending in check during the coming months.
The Dow ended down 47.16 points to 9742.20. Energy stocks were the biggest drag on the index as the price of crude declined. Titan of oil ExxonMobil shed 0.8% to $69.07 and rival Chevron gave up 1.1% to $70.91.
Goldman Sachs reckons Polo Ralph Lauren is looking rather dapper. The big-hitting bank has upgraded the preppy clothing label to buy, predicting strong sales in South-east Asia. Polo said at the end of August that it plans to open up to 15 stores in Hong Kong and China. Shares in the group rose of 4.5% to $77.59.
Asian stocks were a mixed bag. Trading in Tokyo was choppy, but the Nikkei 225 ended up 33.03 points to 10,133.23.
Toyota Motor dropped 0.8% after the car giant said it was recalling 3.8 million vehicles in the US amid fears that the floor mat on some of its Lexus and Camry models could jam the accelerator down. This is Toyota's biggest ever recall.
In Hong Kong, the Hang Seng index dropped 161.55 points to 20,851.62.
