UK MARKET TALK ROUNDUP: SHARES LOSING

28th Jul 2010 12:50

Stocks on the fall in the UK today. Compiled by Dow Jones Newswires Markets Desk, [email protected] Contact us in London. +44-20-7842-9464 [email protected] 1150 GMT [Dow Jones] Execution Noble upgrades BAE Systems (BA.LN) to hold from sell as the stock nears the bottom of its 10-year P/E valuation range, reflecting market anxiety about defence budgets, particularly in the UK. Says there is a limit to the downside potential from UK budget cuts. In addition to this, expects BAE to generate 20% of its '10-'12 revenues from outside the EU and U.S., largely in the Middle East and Australia. Adds that a potential Republican takeover of the Lower House in November could help stabilize the U.S. business. Shares -0.5% at 317p. ([email protected]) 1130 GMT [Dow Jones] Credit Suisse raises Bodycote (BOY.LN) price target to 280p from 240p following the company's 1H results. Says market share and margin gains are reassuring and the brokerage is increasingly confident Bodycote can capitalize on the recovery through top-line growth and margin improvement. Says: "The company's focus on improving the business mix and avoidance of filling capacity with commodity or subcontracted work allowed for a strong operational gearing and hence margin improvement." Keeps the stock at outperform. Shares -7.6% at 231p. ([email protected]) 1120 GMT [Dow Jones] Investec Securities upgrades Morgan Crucible (MGCR.LN) to buy from hold following the company's strong 1H results. Says the update shows improving end markets and the impact of management actions taken during the downturn. Says forecast risk is now weighted to the upside given the more positive outlook for 2H. "We believe there is potential upside to both revenue and margins as end markets continue to recover." Puts 205p price target under review. Shares -0.2% at 219p. ([email protected]) 0926 GMT [Dow Jones] ING raises Pearson (PSON.LN) target price to 1075p from 1000p following consensus-beating interim results. ING also raises 2010 EPS forecast to 72.4p from 68p, due to slightly higher revenue expectations in all business units, and corresponding benefits to operating margins, it says. "Although this bodes well for the full year, the second half is unlikely to be as strong and comparatives will be tough for 2011," adds ING. Retains a hold rating on the stock. Shares -1.2% at 1010p. ([email protected]) 0920 GMT [Dow Jones] BP (BP) may have to pay higher prices to secure growth assets in the future following the damage to its reputation from the Gulf of Mexico oil spill, says Barclays Capital. "We remain concerned that longer term BP will be paying premium prices to secure new growth hubs if it is no longer partner of choice in the Gulf of Mexico," it says. "We continue to see BP as a company with a disadvantaged business model," it adds. Gives underweight rating, 430p target. Shares -0.9% at 402p. ([email protected]) 0834 GMT [Dow Jones] Evolution Securities cuts Vodafone Group (VOD.LN) to neutral from buy, but raises target to 156p from 153p. Says Vodafone's 1.1% service revenue growth in 1Q '10 was encouraging, as is the growing willingness to sell non-core assets and the probable resurrection of the Verizon Wireless dividend. "However, we think these positives are offset by underwhelming operational performance relative to peers," says brokerage. Adds that selling non-core assets is a positive step, but without widespread disposals, the financial impact will likely be limited. Reckons selling China Mobile, Bharti, Softbank assets and Telecom Egypt would be 3-4% accretive for Vodafone on the brokerage's calculations. Shares -0.9% at 149p. ([email protected]) 0729 GMT [Dow Jones]--Centrica's (CNA.LN) 1H 2010 earnings seen neutral for shares, says Citi analyst Peter Atherton. "The market expected good results and they delivered them," he says. Citi has a buy on the stock and a target of 310p. Centrica posted a 65% rise in adjusted operating profit for the half-year reflecting first-time contributions from Venture and British Energy acquisitions, the newly commissioned Langage gas power station and one of the coldest winters on record. Shares -2.2% at 301p. ([email protected]) Contact us in London. +44-20-7842-9464 [email protected] 0614 GMT [Dow Jones] September bunds are down 0.09 at 127.60 and Richard Adcock at UBS says that as long as the contract trades below the 128.27, the bias would be for limited bounces and further price weakness. "A break below yesterday's 127.37 low will be the next bearish trigger exposing the market to first the June 21 session low at 127.12 and on breaks of this the 38% retracement point at 126.45," he says. ([email protected]) Contact us in London. +44-20-7842-9464 [email protected] 0707 GMT [Dow Jones] Morgan Stanley cuts its African Barrick Gold (ABG.LN) price target to 668p from 733p to reflect lower production guidance and higher cash cost guidance for '10 in the company's 1H numbers. Still, African Barrick has a balanced portfolio of assets, with the largest planned volume growth among London-listed gold miners, says the bank. Its strong liquidity position will not only help the company finance its organic growth, but should also provide deal-making flexibility, says the bank. Overweight. Shares -0.5% at 545p. ([email protected]) 0657 GMT [Dow Jones] Peripheral spreads have enjoyed a strong outperformance vs Germany in recent weeks and although fundamentals indicate spreads should be wider in the medium term, tightening is likely to continue in the short term, says Robert Crossley, Citigroup Global Markets strategist. Demand for European government bonds has been strong over the last four weeks despite no rise in yields, however, "Demand is currently not reflecting fundamentals but we expect this to continue in the near term." The 10-year Spanish/German yield spread is unchanged Wednesday at +128.5 bps, Italian/German is unchanged at +120 bps, Portuguese/German is 2 bps tighter ahead of the 5- and 15-year Portuguese auctions at +242 bps, Irish/German is 1 bp tighter at +236.5 bps and Greek/German is unchanged at +750.5 bps. ([email protected]) 0657 GMT [Dow Jones] HSI +0.9% at 21,164.31, led by gains in heavyweight HSBC (0005.HK), last +2.0% at HK$80.45 due to news Basel 3 proposals watered down. Prudential's associate director Alvin Cheung expects HSI may test 21,400-21,600 ahead if it manages to stay above 21,000. "Buying interest in HSBC ahead of its interim results (due Monday after market close) is expected to support the Hang Seng Index in the near-term." HK developers higher with government land auction expected to start soon (at 0700 GMT), with Cheung Kong (0001.HK) +0.8% at HK$94.45, Sino Land (0083.HK) +1.4% at HK$14.98. Elsewhere, Hang Lung Properties (0101.HK) down 1.2% at HK$33.25, HK Electric (0006.HK) +0.7% at HK$46.60, both released results during lunch break, kicking off HK earnings season. Volume modest at HK$41.69 billion. ([email protected]) 0656 GMT [Dow Jones] Rally in China bourses rubbing off on Singapore shares, with STI +0.4% at 2991.64 vs +0.1% at 2981.41 midday. If benchmark manages to clear 3000, next resistance at year-to-date high of 3037 set in April. Market breadth positive vs flat at midday, with almost 2 gainers for every decliner. "We're starting to get some momentum thanks to China. It's definitely a break from the dull session we had this morning," says local house dealer. Notable gainers among STI components include Singapore Airlines (C6L.SG), +2.8% at S$15.44, DBS (D05.SG), +1.3% at S$14.62, SembMarine (S51.SG), +1.3% at S$4.00, ComfortDelgro (C52.SG), +2.6% at S$1.59. Small caps meanwhile, remain most actively traded in market, led by Healthway Medical (5NG.SG), +2.7% at S$0.19, Informatics (I03.SG), +4.2% at S$0.125. ([email protected]) 0652 GMT [Dow Jones] EUR/JPY hits 114.74, highest since May 18, as non-Japanese hedge funds buy on cheap, with knock-on effect for USD/JPY, says senior trader at major Tokyo bank. "While Japan exporters' selling remained small (on expectations for the euro's further gains), dip-buying by non-Japanese players pushed up JPY-crosses broadly." Says BOJ board member Kamezaki's comments about FX have negligible impact on currency market as "such remarks are not particularly new." GBP/JPY hits 137.57, highest since May 13, GBP/USD reaches 1.5628, highest since Feb. 18. U.K.-based Tomkins PLC, global engineering and manufacturing group, agrees to be acquired by group of Canadian investors for about GBP2.89 billion, or nearly $4.5 billion, raising demand for GBP. Tips USD/JPY may rise to 88.40 vs last 88.05, EUR/JPY may gain to 115.00. ([email protected]) 0643 GMT [Dow Jones] India central bank's monetary policy statement appears hawkish, focused on taming double-digit inflation, which may lead to 100 basis point hike in key lending rate by March 2011, Morgan Stanley says in note. "We now expect the RBI to lift repo rate to 6.75% by March 2011 versus our earlier expectation of 6.25% (from 5.75% at present)," note says. House remains concerned over macro-economic stability risks such as building up of generalized inflation pressures. "In addition, a widening current account deficit has meant increasing risk of currency depreciation and rising cost of capital in the event of a sudden stop in capital inflows," note says. ([email protected]) (MORE TO FOLLOW) Dow Jones Newswires July 28, 2010 07:50 ET (11:50 GMT)