Market report: Wednesday close

By MICKEY CLARK FOR MAILONLINE
Updated:

 

FIRST signs that City firms are starting to suffer from the dramatic downturn in business in recent weeks have begun to filter through.

High Street bank Barclays retreated 2 1/2p to 496p today after US investment bank JP Morgan downgraded the shares from overweight to neutral and slashed their fair value from 575p to 500p.

Morgan has also reduced earnings per share estimates by 4% for 2004 and 5% for next year. It blames the move on a possible slowdown at Barclays' capital markets side, which includes trading in fixed-interest stocks, Government bonds and currencies.

It says trading volumes and information on new issues during the second quarter indicate that the capital markets environment is beginning to weaken. The second half of the year is also likely to be affected by seasonal inactivity.

One fund manager said: 'The fixed-interest bubble has burst and bonds have weakened as interest rates start to rise.'

Barclays has no exposure to equities, having sold its market-making arm to Credit Suisse First Boston a few years ago. Morgan has also noticed Barclays' shares have performed poorly in response to first-quarter earnings, suggesting a peak in the cycle.

Elsewhere in the sector, Standard Chartered rose 5p to 895p. Director Bryan Sanderson has bought a further 20,000 shares at 889p (£177,800), making his holding 74,421, or less than 1%.

Share prices generally failed to hold their best levels despite a strong showing by the Dow overnight. This afternoon, as Wall Street opened lower, the FTSE 100 was 20.3 points ahead at 4438.3. In the first two hours of trading, the Dow Jones industrial average slipped 15 points to 10,102.86 and the Nasdaq composite index was all but unchanged.

Vodafone, 1/2p cheaper at 128 1/4p, accounted for 25% of total market turnover with more than 250m shares changing hands after Tuesday's profits numbers.

ICI led blue-chips higher with a rise of 14p to 214p following the annual general meeting. Chief executive John McAdam said he was cautiously optimistic about prospects but warned that the soaring oil price was likely to drive up the cost of raw materials.

Publisher Emap rallied 19p to 775p after yesterday's sell-off on disappointing profits news. Broker UBS has downgraded its buy recommendation on the shares and cut its 12-month target price from 1025p to 900p. Credit Suisse First Boston has repeated its neutral rating.

GUS, which yesterday delivered bumper profits news, added a further 12 1/2p to 808 1/2p. UBS has repeated its buy recommendation and raised its price target from 900p to 925p.

Marks & Spencer added 10 1/4p to 290 1/2p despite broker Dresdner Kleinwort Wasserstein lowering its rating on the shares from buy to add with a 310p price target. DKW insists they are good value but warns patience is needed.

DKW says the problems at M&S are fixable but it expects no tangible improvement until the third quarter.

Alternative Investment Market-listed Vislink fell 2 1/4p to 27 1/4p after warning that first-half profits would fail to match last year's. The maker of TV broadcast vans blamed the slow recovery in the UK.

Plumber Homeserve soared 33 1/2p to 661p after pushing up pre-tax profits last year from £27.1m to £36.8m. The group wants to expand in the United States.

Little engineer Corac stood out with a rise of 3p to 24p after linking up with Shell, ConocoPhillips, ENI, Husky Energy and Repsol-YPF to develop a compressor that works down holes.

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