Market report: Wednesday close

By MICKEY CLARK FOR MAILONLINE
Updated:

 

THE sellers came in for mortgage lender HBOS today after a leading broker said its rating had started to look expensive. Shares in the group created from the merger between Halifax and Bank of Scotland fell 22p to 810p. US broker Merrill Lynch has cut its recommendation from buy to neutral but raised its target price from 835p to 880p, having seen them rise 13% during the past month.

Based on its new target price, the group is now producing a return on investment of less than 10%. The rating for the shares remains a touch higher than the sector average of 12.3 times earnings. The broker emphasised that it remains bullish of the bank's overall business.

Elsewhere in the sector, falls were seen in Lloyds TSB, down 8p to 781p, Royal Bank of Scotland, 15p off at 1953p, and Standard Chartered, 20p adrift at 825p following strong gains throughout April. For many City punters, it appeared to be a case of 'sell in May and go away'. The FTSE 100 index fell 30.3 to 5135.3 as the Dow started giving back some of yesterday's gains in early trading this afternoon.

There seems to be no stopping supermarkets chain Safeway now investors have woken up to how cheap the shares look. They climbed another 11 1/2p to 315 1/2p, stretching their two-day lead to 22 3/4p. Punters were also piling in to food giant Unilever, up 4 1/2p at 632 1/2p. Last week the shares stood at 580p.

Mobile phones operator mmO2 bounced off the bottom with a rise of 1p to 45 1/2p. The group last night launched its new corporate identity O2, which includes its sponsorship of Arsenal Football Club. Every man and his dog appear to hold a short position in the shares, having seen them drop from 68p in the past month. US securities house Salomon Schroder Smith Barney now rates them a speculative buy and the institutions seem quite happy to store them away at these levels. Watch out for the inevitable bear squeeze.

Shire Pharmaceuticals celebrated betterthan-expected first-quarter results showing a 40% rise in pre-tax profits to £53.4m with a rise of 71p to 558p. Retail specialist Julian Richer, one of the original Knutsford Four, has been adding to his holding in Coffee Republic, up 1/2p at 6p. He has bought 7.8m shares, or 3.5%, stretching his total holding to 4.45%.

Shares in the ITV Digital twins came under pressure with Granada, down 2 1/2p at 126 1/4p, and Carlton Communications, 1 1/2p cheaper at 246p after the plug was pulled on the service. A merger between the two is looking less likely.

City punters say there is a question mark over the business judgment of both groups following their decision to plough almost £1bn into the failed venture. Rupert Murdoch's satellite broadcaster BSkyB hardened 6p to 774p. It says ITV Digital collapsed owing it £22m.

Model maker Hornby was building up a full head of steam with a rise of 13 1/2p to 370 1/2p. It has appointed broker Robert Baird as financial adviser with the aim of building up its institutional shareholder base.

Former farmer Willisham Group jumped 3p to 24 1/2p as software retailer Dream Direct Group's offer went unconditional. DDG, backed by former Merrill Lynch boss Carol Galley, is reversing into Willisham and the shares begin trading on AIM tomorrow.

• Prices and indices in this section are supplied from various sources and calculated at different times and may not always match those listed on the site.

The Daily Mail's Geoff Foster on yesterday's trade
World markets, updated every 2 minutes
Every share, updated every 2 minutes
AIM, updated every 2 minutes
techMARK, updated every 2 minutes
Today's gainers and fallers

Most watched Money videos