Morning:
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British Gas operator Centrica lit up on the leaderboard today with a rise of 6p at 258¼p as that old story about a bid from Russia's Gazprom began doing the rounds again.
City gossip claims the cash-rich Russian bear is ready to squeeze out a bid worth 400p a share, which would value Centrica at £20 billion. Some in the Square Mile were quick to dismiss the story as so much speculation, but the Russians are already on record as saying they want to expand hugely in the UK.
Three years ago they said they wanted to grow their operations over here tenfold. The British Government, which is always on the lookout for cheap and reliable sources of gas, indicated at the time that it would be prepared to let a bid go ahead.
Shares generally ticked better with the FTSE 100 index posting a rise of 19.28 points at 5365.21. The best gains were helped back by half-a-dozen blue-chips going ex-dividend, including Vodafone, off 2½p at 136½p, Barclays, 5½p better at 320½p, HSBC, ½p cheaper at 744½p, J Sainsbury, down 4½p at 340½p, and Unilever, 23p off at 1817p.
For a few minutes they were trading shares of Marks & Spencer blind. The price managed to touch 379p before it was finally announced through the official channels that Dutchman Marc Bolland, the man who turned William Morrison Supermarkets around, had landed the job of chief executive.
Once the news was out the M&S share price extended its lead to 20p at 388p.
ITV also stood out with a 3.1p rise to 54.9p after appointing former Asda supermarkets boss and MP Archie Norman as chairman after an exhaustive search. Again the price of metals and other commodities is back in fashion, with prices being driven higher. Among the miners, platinum producer Lonmin was carried 66p higher to 1749p, while Fresnillo added 54p at 931p and Vedanta put on 71p at 2461p.
Morgan Stanley reckons shareholders of the water companies may have to face up to dwindling profits growth and even dividend cuts as the utilities get to grips with the industry regulator's tough new pricing formulas, which will dictate what they can charge consumers.
Ofwat is due to unveil its proposals next week and has already indicated they will fall way short of the various operators' demands.
The broker has cut its price targets for their shares, having removed any premium it had factored in for regulatory outperformance. It sees United Utilities, ¾p cheaper at 474½p, and Severn Trent, up 7p at 1012p, at greatest risk.
UU has been slashed from 565p to 420p with an underweight rating, while Severn Trent drops from 1230p to 945p, also rated at underweight.
Morgan Stanley's top pick remains Pennon, 2¾p dearer at 476¾p, but it says it would rather own National Grid, 1p firmer at 638½p, which it rates overweight, as a UK-regulated name. “We do not think enough downside has been priced into the water companies to reflect potential equity issuance and dividend cuts,” it said.
