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Sellers again dominant on more concerns over the financial sector
There was some hope yesterday that the bid for Alliance & Leicester together with the funding packages in the US for the two GSEs might change sentiment towards financials. In the event, the sector rose then fell and many shares are down again so far today as investors focus on the overall health of the US mortgage market. Footsie is down over 70 points mid-morning with Royal Bank of Scotland down 5% and Barclays not far behind.
Alliance & Leicester is also down 4% after several potential bidders ruled themselves out. Press reports suggested that Clive Cowdery and JC Flowers had made it clear neither was likely to enter the fray. Lloyds TSB was expected to review its options but an approach here would almost certainly be precluded on competition grounds. It may not be the end of the story, but we would want to see more downside before the risk/reward made it attractive to buy A&L.Elsewhere, the main statement today came from Cable and Wireless, which left its underlying earnings guidance for the year to March 2009 unchanged at between £702m and £725m, an increase of between 16% and 20% on the previous year. The overall statement was reasonably solid and the shares have edged up, but the sector still has a dull feel to it, so we would stand back here for now.
In the miners, Kazakhmys has played down talk it is to merge through a reverse takeover with Metalloinvest, which is run by Alisher Usmanov, who owns a stake in Arsenal Football Club. The shares spiked up yesterday, and technically it looked like some mischievous rumour making, so until the trend and buying volume get back to bullish, the shares look likely to drift down.
Head of Research at Blue Index, specialists in trading Contracts For Difference
15/07/2008
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