Market report: Thursday close

By MICKEY CLARK FOR MAILONLINE
Updated:

 

CITY speculators were caught out today after a leading broker downgraded shares of one of their favourite takeover targets.

Credit Suisse First Boston has decided to cut its 12-month target price for mortgage lender Abbey National to 440p from 480p while repeating its underperform rating. Abbey responded with a fall of 5 1/4p to 484 1/2p. The shares were riding high at the start of the year, touching 590p on news of an unofficial bid approach from Spain's Banco Santander Central Hispano, but the talks had already broken down by then.

That did not deter the speculators, who remembered Abbey had successfully defended itself from an unwanted takeover move by Lloyds TSB just a few years previously.

Abbey was later rocked by huge losses and a series of profit warnings after taking a hit in the junk bond market. Just a few weeks ago those same speculators were at it again, suggesting that RBS had given Abbey the once-over.

This, it was thought, might be enough to rekindle Santander's interest. CSFB seems to think otherwise.

Share prices generally were on the slide undermined by a profits warning from mobile phones giant Nokia. An opening rise in New York this afternoon was not enough to pull the FTSE 100 out of the red. In the first hour of trading, the Dow Jones industrial average rose 7.74 to 10,216.54 and the Nasdaq composite index climbed 3.80 to 1,918.68. The FTSE 100 index fell 31.90 points to 4340.7.

Marks & Spencer tumbled 19p to 345p with more than 220m shares changing hands. Dealers said the share price fall might have been bigger following Philip Green's decision to withdraw his proposed offer of 400p a share but was being propped up by bears closing their short positions.

Drugs giant AstraZeneca lost 44p to 2329p. Indian cut-price drugs company Dr Reddy's is bidding to launch its own cheap generic version of ulcer treatment Nexium, which last year accounted for 19% of AstraZeneca's sales. Brokers say such a move would be a body blow to the Anglo-Swedish giant, which is expected to generate $3.8bn (£2bn) of Nexium sales worldwide this year.

Reuters fell 14p to 323p after Deutsche Bank removed the shares from its European Focus List. It warns tough trading conditions will take a toll in the second half of the year.

Premier Oil fell 14p to 534 1/2p after plugging and abandoning the Chung-1 well in south-west Pakistan - the fourth and last commitment well on the Dunbar licences.

US securities house Morgan Stanley has raised its target price on Xstrata, up 12 1/2p at 777p, from 700p to 800p but has cut Anglo American, 8p dearer at 1138p, from 1300p to 1200p. Its top picks in the sector are Rio Tinto, 17p better at 1392p, and BHP Billiton, 2 1/2p firmer at 500 1/2p.

Building supplies group Wolseley, 4p better at 874p, has been downgraded from neutral to sell by Merrill Lynch despite this week's upbeat trading statement. Merrill reckons the shares are fully valued.

Shares in Vernalis more than doubled, leaping 49 1/2p to 97p after the biotech group signed a licensing deal for its Frova migraine drug with America's Endo. The deal is worth up to $400m. Vernalis receives $110m over two years, including a $50m loan to pay off Elan, which Vernalis ditched. Endo is also funding a Vernalis US sales force.

Aim-listed Merchant House had its shares suspended at 14 1/4p ahead of an announcement. Also on Aim, Fundamental-E Investments was suspended after losing 3 3/4p to 8p, pending an announcement.


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