Forum Archive Index - December 1999

["David Reid" <aspex@ix.net.nz>]

For what it is worth, a commentary on London Monday 13 December.

 

Leading shares closed a see-saw session in negative territory pressured by the weak performance of the DJIA ahead of tomorrow's key consumer price data and a 7-1/2 pence fall in Vodafone AirTouch, which wiped 11.2 points from the blue chip index, dealers said, The FTSE 100 index ended 28.8 points weaker at 6,710.7, off a high of 6769.7. The DJIA was down around 20 points at London's close. The FTSE Mid 250 index stayed in the red, ending 16.0 points easier at 6,267.4, but the FTSE Small Cap, up 2.2 at 3009.2, index managed to cling on to a modest advance all day. Volume was buoyant again in London, despite the fast-approaching Christmas shut-down, with over 1,334 mln shares changing hands, helped by hefty trading in Marks & Spencer - over 52 mln shares - and in Vodafone Airtouch - over 72 mln shares. Leading shares opened higher fired by a strong pre-weekend performance from the DJIA and hopes of further corporate activity. Early gains in Marks & Spencer - on hopes of an offer from Tesco - in Sainsbury - on speculation that the 30 pct stake owned by the Sainsbury family is up for sale - and in Abbey National - on talk of a strategic link-up with Dutch group Fortis - propelled the FTSE 100 to within 5 points of its intraday record high. And the blue chip index managed to hold on to the majority of those gains even in the wake of worrying producer price data for November. Input prices for November were up a seasonally adjusted 1.7 pct on the month and rose 9.1 pct year-on-year, against expectations for a 0.7 pct month-on-month gain and 7.4 pct year-on-year rise. Dealers said the figures reflected rising oil prices and the upward pressure they were placing on manufacturers' raw material costs. With a raft of UK data to come later in the week, including the critical retail price data tomorrow and average earnings and employment figures on Wednesday, the response surprised many. In the end it took the prospect of key U.S. inflation data tomorrow to knock the FTSE 100 off its perch. With the S&P Globex Future indicating a weak start to trading in the U.S. ahead of tomorrow's vital consumer price data the FTSE fell back into negative territory early in the afternoon session. This fall was compounded as DJIA did exactly what it was supposed to and opened lower, with investors taking the view that the CPI data could upset the apple-cart. And with Marks & Spencer reversing its earlier gains to finish 8 pct lower the FTSE ended the session on a drab, if not unsurprising, note. After its strong performance on Friday and in early trade today, Marks & Spencer came down to earth, shedding 27 to 273-3/4 as investors registered their disappointment that it is retail entrepreneur Philip Green rather than industry giant Tesco who is reviewing investment opportunities in the UK retail sector, including a possible takeover offer for M&S. Salomon Smith Barney added to M&S' woes when it played down the prospect of any bid before the end of the Christmas trading period and advised clients to lock-in profits at the higher levels. Sainsbury headed the list of bluechip risers, gaining after weekend press reports that Judith Portrait, the Sainsbury family lawyer, has appointed advisers to consider options for the blind trust that holds the family's shares in the group. With the likes of Dutch food retailer Ahold thought to be waiting in the wings to pounce, Sainsbury's shares rose 21-3/4 pence to 322. Bass rose 34 to 719-1/2 on speculation that family-owned Belgium brewer Interbrew, which is reportedly considering a stock market flotation, could possibly launch a bid for the UK group soon after. Hilton Group continued its recent good run, ahead 12-1/4 at 194-3/4 on speculation that US stakeholder Hilton Corp. will launch a bid in the near future. Pearson came off highs in the afternoon but was in demand, up 57 at 1,848, ahead of tomorrow's trading update which analysts said could include news on its much-touted internet tracker. Goldman Sachs resumed coverage on Pearson with a 'market outperform' recommendation. Rumours also circulated that Pearson was close to a deal with AOL. New format BG Group remained in demand, up 16-1/2 at 357-3/4, as it completed its corporate restructuring and refinancing, with ABN Amro pushing the stock aggressively. United Utilities, after last week's volatile sector performance, rose 37 to 587-1/2, after naming a new finance director, and as Deutsche Bank said it believes the stock is over 50 pct undervalued. Financials also performed strongly. Fortis bid speculation in the weekend press pushed Abbey National 27 higher to 976, while Amvescap, up 46 at 718, benefitted as CSFB's quantitative analysis team made positive comments. The CSFB quantitative team was also bullish on WPP Group - up 11-1/2 at 918. But telecom issues remained a drag despite a raft of individual stock recommendations and ongoing consolidation talk, with some commentators suggesting that the market's enthusiasm for the sector is, for now, beginning to wane. News that both Goldman Sachs and Morgan Stanley have hiked their price targets for BT in the wake of Friday's Cellnet presentation provided only temporary support. Goldman upped its target for BT to 1,550 from 1,350, and Morgan Stanley to 1,515 from 1,400, but the stock lost 5-1/2 at 1,427. It was a similar story at Cable & Wireless, down 66-1/2 at 1,014-1/2, though Goldman Sachs has aggressively hiked its 12-month target price to 1,150 pence from the previous 850 pence. Vodafone Airtouch was off 7-1.4 at 304-3/4 in hefty volume, reflecting profit-taking and Mannesmann bid situation uncertainties. Telewest fell 16 to 332-1/2, after the weekend press suggested that an offer for Flextech, first mooted last week, would be put on the table by the end of this week. Telewest gained no benefit from news it is to launch an unlimited access residential internet service from Feb 2000. HSBC lost 10-1/2 to 847, while Standard Chartered lost 61-1/2 to 953 - as Warburg Dillon Read indicated that its 'buy' recommendations on the two Far Eastern banks are under review. For now, the broker is rating both as an outright 'buy'. Logica was also on offer, down 63-1/2 at 1,633-1/2, amid talk of comment from Deutsche Bank. Outside the bluechips, Philip Green's statement of interest in UK retail sector opportunities also excited Arcadia Group, up 3-3/4 at 70, Matalan, ahead 82-1/2 at 1,520, amongst FTSE 250 stocks. United Biscuits saw renewed interest, up 8 at 235, after a Wall Street Journal report that Nabisco and buy-out firms Hicks, Muse, Tate & Furst are considering a last-minute 2 bln usd bid for the UK group. Eidos leapt in the afternoon, ahead 316 at 6,366, on news of a three product licensing deal with Disney Interactive News of its 70 mln stg, seven-year contract win supported WS Atkins, 32-1/2 higher at 747-1/2, with Albert E Sharp rating the stock as a 'buy' up to 800 pence. Powderject surged 30 to 832-1/2 as rumours continued that news on a licensing deal with U.S. healthcare giant Johnson & Johnson was imminent. Williams rebounded from earlier weakness to gain 12-1/4 at 311-1/2 as news of the planned sale of its paint business - which together with its other major disposals will bring in proceeds of some 1 bln stg - offset a warning that full year profits will be similar to those achieved last year Nycomed Amersham were a feature in the afternoon, ahead 12-1/2 at 390, as the group's chief executive Bill Castell told a seminar in London that its second half has been broadly in line with the group's expectations, and it sees 1999 earnings falling within the range of estimates. Arjo Wiggins was off 27-3/4 at 174 on stock overhang worries after some big trades this morning at below 200 pence. Johnson Matthey dropped 81 at 655 as Deutsche Bank downgraded to 'market perform' from 'buy' on valuation factors. Meanwhile, Cookson failed to be inspired by news of a 503 mln usd acquisition, 16 lower at 219, with some brokers feeling the group may have overpaid for the asset. Wolverhampton & Dudley shed 19 to 547-1/2 after extending the acceptance period for its Mansfield Brewery bid, while Hyder lost a further 13-1/2 to 292-1/2 as cash call concerns continued.
Smaller company shares, as in recent days, managed to significantly outperform their blue chip counterparts -- supported by continued enthusiasm for internet stocks and "plays", and a raft of bid speculation and activity, dealers said. The FTSE Smaller Cap index closed the session 2.2 points higher at 3,009.2, well shy of its 3,013.4 high but off an earlier low of 3,008.4. Thunderbirds were go at AIM-listed SCI Entertainment as the company's share price soared 59 pence to 476-1/2 after it revealed its acquisition of the worldwide computer and video games rights to the cult 1960s/70s sci-fi series Thunderbirds. The games launch would follow the worldwide digitally-restored release of the 32-part series, which was devised by Gerry and Sylvia Anderson. Alongside the purchase, which is sure to excite all those Thunderbirds fans in the City, the company revealed that it will be seeking a move to a full listing next year. London Securities surged 123-1/3 pence, or 134.97 pct, to 215, on news of a reverse takeover. After a recent poor performance, bid speculation drove Ross Group 1-1/4 higher at 5-1/4, with the weekend press suggesting that a deal with a Hong Kong-based group could be on the cards. Grande Holdings, owned by Chinese tycoon Christopher Ho, is said to have made the approach to Ross shareholders -- which would eventually lead to Ross becoming the Europpean quoted vehicle for Ho's interests. Grande is a major manufacturer of computer monitors and also owns the Akai and Nakamichi hi-fi brands. The appetite for internet "plays" and stocks continued unabated. Digital Animations became the latest play, up 51 at 106-1/2, after it confirmed that it is working closely with PA New Media, the interactive division of the Press Association, to develop a new internet link. SportsInternet Group, the Aim-listed online betting and sports website operator, was also well-supported, up 42-1/2 at 767-1/2, on confirmation of talks with U.S. internet giant Yahoo, which could lead to a commercial arrangement regarding the distribution of content. Sector followers said the deal would provide SportsInternet with a huge boost in its ambitions to become the leading provider of official information on football. The group currently operates websites on behalf of 20 English clubs through its planetfotball.com products, and aims to provide a similar service on football news and statistics. Meanwhile, PrimeEnt ended the session 2 higher at 4-1/2 after revealing that demand for its 2.45 mln stg rights issue had exceeded demand. Biotech babe Oxford Molecular sparkled with gains of 6-1/2 to close at 32 after its Cambridge Discovery Chemistry unit announced a major chemistry R&D collaboration deal with Zeneca Agrochemicals, part of pharmaceutical giant AstraZeneca. Boxmore International ended days of speculation when it finally confirmed that it had received a bid approach, which in stock exchange parlance "may or may not lead to an offer." Tyco, despite its widely-publicised U.S. problems, is still being widely touted as a potential predator -- though the pundits reckon any play would be met with short shrift from shareholders without wide-ranging assurances. Boxmore shares closed 55-1/2 higher at 210-1/2. After hefty rises in recent sessions as demand from private clients investors went off the chart, AIM-listed independent broker Teather & Greenwood finally succumbed to some profit-taking -- down 85 at 877-1/2 -- despite forecast-busting interim results, which saw profits quadruple to 2.02 mln stg. The broker also laid out its strategic plans for the next millennium, which will focus on a switch into more broadly-based financial services group -- including a move into fund management and venture capital -- as well as doubling its current research capacity. Murray Financial returned from suspension following the failure of its proposals to take over mutually-owned building society Leek United, whose members last week overwhelmingly rejected its overtures. Murray shares dropped 5-1/2 pence to close at 7-1/2, though it pledged that it will continue to seek acquisitions. Lionheart shed 3 to 22 as the market digested news of its 5.2 mln stg placing and open offer, which will be used to finance acquisitions. Nottingham-based IT and manufactured designer Jasmin was also on offer, down 20 to 100, after it reported a swing into interim loss, which it blamed on on increasing investment in product development in IT and systems integration. Jasmin reported a pretax loss for the six months to Sept 30 of 94,000 stg, compared to a profit in the prior year of 269,000 stg. Elbief crashed 3 to 17 after it delivered a double whammy to the market - the lack of any offer and a warning that current trading has been slower than anticipated, though it is still on an uptrend.