MARKET REPORT: FTSE shrugs off recession woes
21:40 GMT, 27 April 2012
It doesn’t want to go down. The London stock market has this week shrugged off depressing news that the UK economy has officially dropped back into recession and a worrying downgrade by troublesome credit rating agency Standard & Poor’s of Spain’s long term debt.
Any sign of share price weakness has seen cash-rich fund managers hungrily mop up loose stock. Yesterday was a prime example.
The Footsie dropped 40 points on the Spanish news before recovering to close 28.39 points higher at 5,777.11 and 5 points up on the week. The FTSE 250 closed 118.36 points up at 11,479 and 35 better over the five day period.
Yesterday the Footsie dropped 40 points but closed 28.39 points higher
Wall Street opened nearly 30 points
to the good despite dealers in New York hearing that economic growth in
the US slowed in the first quarter as GDP expanded at a 2.2 per cent
annual rate from the fourth quarter’s 3 per cent.
Online retailing giant Amazon
rocketed after blowing analysts’ quarterly earnings forecasts out of the
So those investors thinking of adhering to the ancient stockmarket adage
of ‘sell in May, and come back on St Leger day in September’ should
possibly think again. It may have worked last year when the Footsie
actually fell more than 14 per cent between May and September, but this
year could hopefully be different.
The underlying strength of the equity
market has been well illustrated this week by a flurry of successful
share placings and 2.3billion worth of takeover bids.
Even against the depressing backdrop
of recessionary fears, rising unemployment, the eurozone crisis and
Middle East tensions, dealers have kept their nerve.
Wall Street behaving itself and
responding to much better-than-expected quarterly earnings figures from
the likes of Apple has been a big plus too.
There is even a bullish train of
thought that the Footsie will want to fly the British flag and show some
old bulldog spirit over the coming months as we celebrate the Queen’s
Diamond Jubilee in June and the London 2012 Olympics.
Let’s face it, fund managers and
investors have nowhere else to put their money as investment returns on
the High Street remain pitiful. UK plc is also sitting on a mountain of
cash and shareholders can mostly look forward to healthy dividend
income. So why duck out now
Leading the Footsie’s gains yesterday
was hedge fund giant Man Group. It rallied 13.25p further to 107p after
broker SocGen upgraded to buy from hold but shaved its target price to
115p from 155p.
On Tuesday, rival broker UBS tipped
Man as a possible takeover target and said a 50 per cent bid premium to
the current share price would suffice to gain shareholder approval.
Computer services group Invensys, a
perennial bid favourite, climbed 10.6p to 211.5p.
Selling on whispers of a pending cautious circular ahead of the
fourth-quarter results on May 10 dragged BT 3.2p lower to 212.9p.
Buying ahead of Thursday’s Capital
Markets Day helped animal genetics group Genus soar 94p to a 52-week
peak of 1439p. Liberum Capital is a fan and says new chief executive
Karem Bitar, who took over in September 2011, and his management team
will present its update strategy to investors and prove the group has
vast growth potential as global leader in cattle and swine genetics.
Perhaps drawing some inspiration from Amazon’s impressive trading
performance, online grocer Ocado climbed 8.2p to 130p. Another boost to
sentiment was UBS appearing on the share register with a 3.2 per cent
Following plans to sub-divide its
shares into three ordinary shares for every existing share to enhance
the stock’s marketability, Irn-Bru drinks group AG Barr fell 7p to
Bus and train group National Express accelerated 8.1p to 216.9p in anticipation of Tuesday’s first-quarter trading update.
Sold down to 247.25p in early
response to the heavily discounted 124million rights issue, Salamander
Energy rallied to close only 0.05p cheaper at 256.15p. The company said
the fully underwritten 13-for-20 rights issue at a 37 per cent
discounted price of 130p will help finance various projects in its
portfolio, particularly extending the life of the Bualuang field and
exploration drilling in Thailand and, in the North Kutei basin,
Irish building materials group CRH rose 48p to 1268p on a JP Morgan Cazenove upgrade.
Stockbroker Arden Partners nosedived
6.5p to 33.5p after terminating bid talks with former director Grahame
Whateley. Panmure Gordon, which earlier this week reported a loss of
31.47million, eased a penny more to 11.75p.
Speculative Beacon Hill edged up
0.16p to 8.14p after the Mozambique-based coal producer wheeled out a
confident trading update. Merchant Securities says Beacon is expected to
be cash flow positive within 12 months and then have the ability to
ramp up to a potential 150million of revenues.