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FTSE 100 falls despite mining shares recovery, with Arm down on sell note

Category : Business

Commodity companies lead risers but chip designer hit by downbeat comments ahead of quarterly results

Despite a recovery in the mining sector, leading shares are heading lower again.

With gold stablising after its recent declines – which were based on worries about countries such as Cyprus selling some of their reserves along with signs of slowdown in China – and base metals such as copper recovering, mining shares regained some lost ground.

Fresnillo is up 45p at £11.25, Eurasian Natural Resources Corporation has climbed 9.1p to 247.2p and Xstrata has added 37.2p to 1003.5p.

All ten of the top ten risers in the leading index are commodity companies, as are the top ten in the FTSE 250.

But investors are still cautious, not least following Wall Street’s fall overnight in the wake of the Boston marathon explosions. So the FTSE 100 is down 41.20 points at 6302.40, with little impact from UK inflation figures in line with forecasts.

Ahead of results next week, Arm is among the biggest fallers in the leading index. The chip designer is down 27p at 869.5p as Liberum Capital issued a sell note. Analyst Janardan Menon said:

We expect Arm’s US dollar revenues to be broadly in line with guidance ($250m) and consensus estimates, while sterling revenues are expected to benefit from weakness in the currency. Arm had sequentially guided down its first quarter 2013 revenues, following strength in the fourth quarter of 2012. Going forward we expect year on year revenue growth rates to gradually decelerate as smartphone growth moderates. We also remain concerned about potential gains in smartphone and tablet share by Intel and maintain our sell recommendation on the stock.

In more detail, Menon added:

Our sell recommendation on Arm is based on three factors. 1) an expectation of Intel gaining share in Arm’s key royalty markets – smartphones and tablets. 2) slowing growth rates in the smartphone and tablet markets which are expected to depress Arm’s royalty growth 3) The high multiples the stock is trading at relative to its longer term growth outlook. While we do not expect these concerns to be specifically flagged in the first quarter results, we do expect newsflow in coming quarters to do so.

Elsewhere Associated British Foods has fallen 40p to £18.24 after Credit Suisse cut its recommendation from outperform to neutral.

Burberry is down 33p at £12.51 following disappointing results from luxury goods giant LVMH.

FTSE falls as China slowdown hits mining shares, but United Utilities lifted by bid talk

Category : Business

Leading shares undermining by disappointing Chinese GDP, with metal prices and mining groups under pressure

A smattering of bid talk was not enough to prevent markets moving lower, with mining shares leading the way down.

Disappointing economic data from China – a key market for commodities – hit metal prices, with gold falling to a two year low. China reported a 7.7% rise in first quarter GDP but this was lower than the 7.9% growth achieved in the fourth quarter of 2012 and below forecasts of 8%.

So Randgold Resources is down 366p to £45.92, not helped by Citigroup cutting its price target from £55.40 to £43 and issuing a sell recommendation. Polymetal International is down 57p to 802p while Fresnillo has fallen 79p to £11.94.

Eurasian Natural Resources Corporation has dropped 13.3p to 236.1p, with JP Morgan Cazenove edging down its price target to 295p from 300p.

Overall the FTSE 100 has fallen 68.22 points to 6316.17, despite takeover speculation lifting water shares. United Utilities has jumped 19.5p to 740.5p, a 2.7% rise following weekend reports the company was beefing up its defences against a bid. Infrastructure funds are said to be keen on UK utilities, which has also helped lift Severn Trent 19p to £17.25. But Peter Atherton at Liberum Capital was cautious:

United Utilities has (according to a Sunday Times article) appointed Goldman as an advisor. The Sunday Times says that this is to beef up its defence team against a possible bid, although the company is quoted as saying that the appointment was part of a normal review of advisors. Last week it was Pennon, this week United Utilities.

These rumours do the rounds every few months. The reason they keep re-appearing is that there is some logic. We know that infra funds like UK network assets and especially their inflation protection. But there are several things against a bid. First, we are already into year 3 of this 5 year regulatory cycle. So a bidder would only have 1.5 years left where they know the regulatory settlement. Ofwat are changing a lot in 2015 so a bidder would face considerable uncertainty over the post 2015 cash flow. Second is size, United Utilities has a market cap of £4.7bn so a bidder would need to pay somewhere north of £5.5bn which is probably too big for any infra fund (this is not 2006). So the chance of a bid – 20%.

Still with utilities, Centrica has climbed 1.3p to 380.7p after the British Gas owner linked up with Qatar Petroleum to pay $987m for oil and gas assets in Canada.

FTSE down 1% but banks remain unmoved by Moody’s downgrade

Category : Business

Markets fail to register any of the major announcements from the EU as apathy and an eye to the weekend set in

The UK markets stuck up the proverbial two fingers to Moody’s today as the banks which were downgraded by the ratings agency hardly moved and some even closed up on the day.

HSBC – downgraded for the first time in five years – closed up 0.6p at 560.8p, Lloyds Banking Group, up 0.2p, 0.6%, at 31.6p, Royal Bank of Scotland, unchanged at 241p, and Barclays down 1.6p, 0.8%, at 202.6p.

The biggest sufferers in a day of, well, not very much really, were the resource companies as the global economy continues its grinding slowdown.

Fresnillo, down 74p, 5%, at £14.39; Petrofac, down 67p, 4.7%, at £13.63; Tullow Oil, down 50p, 3.4%, at £14.44 and ENRC, down 14.3p, 3.3%, at 416.3p, were all among the biggest FTSE 100 fallers.

They were joined by Carnival, the world’s largest cruise operator and owner of the doomed Costa Concordia, who posted a 93% drop in profits, due to rising fuel costs.

To the end of May the company made just $14m, compared with $206m a year earlier.

Shares were down 92p, 4%, at £22.40.

Elsewhere, some positive news for phara giant Shire, closing up 22p, 1.1%, at £19.70, but this was on the back of rival Pfizer failing to get a license for its latest drug.

The FTSE 100 closed down 53 points, 1%, at 5514, trading around the same place throughout the whole day.

Next week all eyes will turn to the latest European summit, but by the way the markets are barely registering to any announcements – whether from Moody’s downgrading 16 banks worldwide, or the leaders of Germany, France, Italy and Spain holding a lacklustre press conference – don’t expect much of a reaction.

FTSE slumps below 5400 on Greek fears but Barclays bucks the trend

Category : Business

Bank lifted by recommendation by UBS, but investors still fearful of eurozone crisis

As leading shares slumped again on the growing prospect of Greece leaving the eurozone, the FTSE 100 fell below the 5400 level for the first time since mid-December.

But with investors shying away from risk, one surprise was the emergence of Barclays as one of the biggest risers so far. The bank is up 2.55p at 188.65p after UBS raised its recommendation from neutral to buy, although it cut its price target from 272p to 215p. UBS analyst John-Paul Crutchley said:

Barclays shares have fallen by around 20% since a good set of first quarter figures drove a stock price rally and a 6% upgrade to our 2012 earnings per share forecasts. Deutsche Bank which reported on the same day as Barclays saw an earnings cut of 6% and has only fallen by 12%. This has brought Barclays shares back to a point where the risk/reward looks attractive. Although we are cutting our price target to 215p, we are upgrading the shares to buy.

Recent share price retrenchment has largely been driven by concerns over Barclays exposure to Spain where we think a more realistic approach to impairment over the last few years should limit the impact of higher provisioning from the proposed Royal Decree to between £50m-£70m. Moreover, we do not see a read through from the JP Morgan hedging loss debacle or additional Barclays specific regulatory risk.

Overall the FTSE 100 has fallen 50.02 points to 5387.6, on course for its lowest close since 19 December. Markus Huber at ETX Capital said:

Stock markets are expected to remain under pressure as uncertainty about Greece and the effects a potential exit out of the euro would have on Europe, global economies and the financial system in general is driving investors out of stocks into safe havens like the German Bunds. However some temporary relief might come from Greek parties agreeing on a new election date today. Once the date is set it will be up to the individual pro-bailout parties to convince the electorate that the election is more or less about Greece remaining in the Euro, and that rejecting austerity measures will make this an almost impossible task to fulfil.

Mining companies are among the losers, on worries about future economic growth given the never-ending crisis in the eurozone.

Specialists in base and precious metals are being hit. Eurasian Natural Resources Corporation is down 13.8p to 467.5p, while Fresnillo has fallen 39p to £13.41. Xstrata has lost 34.6p to 964.4p as UBS – again – moved from buy to neutral.

Polymetal is leading the way down, falling 56p to 752.5p as its shares went ex-dividend. A similar reason was behind the fall in Glencore, 17p lower at 353.15p.

A fall in J Sainsbury by 13.9p to 297.5p was also attributable to an ex-dividend move.

But SSE has added 3p to £13.28 after a 2% rise in full year profits. In a hold note, Angelos Anastasiou at Investec said:

The 2% increase in pretax profit is exactly in line with expectations, but the profit growth record of the past four years (around 2% per annum) is disappointing. The statement points to mitigating factors (upheaval in global energy markets; widespread economic uncertainty; and the weather), but these are not great figures, even if they are much as expected. We reiterate that SSE needs to show concrete signs of improvement from its extensive investment programme this year, otherwise the market may well lose patience. We remain slightly wary.

Cable & Wireless Worldwide climbs ahead of bid deadline but FTSE dips again on eurozone worries

Category : Business

Telecoms group awaits news of any offer from Tata or Vodafone, as Spain and Italy unsettle investors

Cable & Wireless Worldwide jumped more than 2.5% ahead of Thursday’s deadline for prospective bidders Tata Communications and Vodafone to decide whether to make an offer or not.

India’s Tata has reportedly changed the size of its $2bn loan to help fund the deal, while critics have suggested Vodafone could struggle to explain its position if it used CWW’s tax losses to reduce its own bill. Analysts at Espirito Santo said:

A bidding war may emerge but we still believe Vodafone could justify a higher premium than Tata because of the combination of the available tax assets and synergies with its existing UK operation. We note reports that if Vodafone enters a bidding war “the price could be pushed up to 50p, which could eliminate Tata”, but if Tata has secured more financing than previously expected bids may actually go higher than this level.

CWW closed 0.92p higher at 37.05p while Vodafone has dipped 2.6p to 169.9p.

A number of companies in the leading index went ex-dividend including insurers Resolution, down 14p at 225p, and Legal and General, 6p lower at 118.2p, Old Mutual, off 5.3p at 150.1p, and BAE Systems, down 14.6p at 289.2p.

Engineering group GKN fell 2.3p to 209.2p on profit taking following a 19% rise in first quarter profits.

Overall, leading shares fell back after Tuesday’s surge, as worries about Spain and Italy unsettled investors once more. UK unemployment fell back while the latest Bank of England minutes suggested that further quantitative easing could be off the agenda. Disappointing updates from Intel and IBM did not help sentiment. So with Wall Street and European markets also slipping back, the FTSE 100 finished 21.66 points lower at 5745.29.

Fresnillo flew to the top of the tree, up 51p at £16.24. The Mexican miner said silver production fell 2.9% in the first quarter but was in line with expectations, while gold output was ahead of target, thanks to the opening of a new mine, Noche Buena. Numis said:

The company appears to remain on track for its full year guidance of 41m ounces of silver and 460,000 ounces of gold. No mention of [joint venture] Juanicipio and San Julian pre-feasibily study results so looks to be disappointingly pushed back to later this year, as we feared.

Other miners were also in demand, as copper and other base metals moved sharply higher in tandem with the Shanghai stock market. The catalyst was news that South Korea’s central bank planned to buy $300m in Chinese stocks over the next three months, as well as renewed hopes the Chinese government would ease monetary policy after weak housing figures.

All that helped push Antofagasta 2p higher to £11.78, while Rio Tinto rose 22.5p to £35.40.

Defensive stocks were again in favour. Imperial Tobacco climbed 56p to £25.03 ahead of its first half figures in early May. Nomura raised its price target from £21.84 to £21.97 but remained neutral on the shares.

One of the day’s biggest risers was equipment hire group Ashtead. Its shares climbed 10.2p to 252.4p on positive news from US peers United Rentals and RSC, as well as an upbeat Architects Billing Index. Seymour Pierce said:

[Tuesday's] results from peers United Rentals and RSC show that the secular shift away from ownership of equipment towards renting remains strong. We stick with our buy recommendation on Ashtead as we believe it is well placed to benefit from this.

Shares in the London Stock Exchange added 25p to £10.93, a 2 year high after a number of positive broker notes suggested the City was starting to see the benefits of its offer for LCH.Clearnet, which is expected to complete by the fourth quarter of the year.

Lower down the market Borders & Southern, one of the companies drilling in the Falkland Islands (to the chagrin of Argentina), jumped 38.5p to 108p as traders speculated on a positive result from its Darwin well. Peer Falkland Oil & Gas rose 24.25p to 93p.

Elsewhere whiteboard maker Promethean World slumped 15.75p to 57.5p after it said US school budget cuts had hit its revenues by more than expected, while Zenergy Power dropped 26% to 5.3p The technology company told shareholders there were no firm orders in place which would secure the future of the trading business. It had two short term prospects with utility companies in the US and Russia, but has also decided to consider other strategic options.

Number of male-only boards falling

Category : Business

A year ago, 21 FTSE 100 firms did not have any women directors. By October last year it had fallen to 14. Last month it was 11

Slowly but surely, the list of FTSE 100 companies with no female boardroom directors is shrinking. A year ago, 21 of them did not have any women directors. By October last year that had fallen to 14. Last month it was 11, when there was a formal review of progress after Lord Davies recommended that the biggest 100 companies should have 25% female board representation by 2015.

Late last month one of the 11 recalcitrants – Aggreko – named the banker Diana Layfield as a non-executive and on Tuesday silver miner Fresnillo appointed María Asunción Aramburuzabala as a non-executive.

Aramburuzabala is the first woman on the board of the company, which was created in 2008 when it was listed on the London stock exchange after being spun out of a Mexican holding company. She is a member of many boards in Mexico, including Grupo Modelo – the Corona brewer founded by her grandfather.

Fresnillo was at pains to point out that she was chosen on merit and not to meet the Davies quotas.

The remaining male-only boards are largely mining companies based outside the UK. One of them, Glencore, is chaired by Simon Murray, who a year ago declared that women were a risk to hire because they get married and become pregnant. Another is Xstrata, which Glencore is attempting to take over in a friendly tie-up. Prime examples of what Davies, the former Standard Chartered bank boss, is up against.