Market report: Tuesday close

By MICKEY CLARK FOR MAILONLINE
Updated:

 

MINERS were the biggest losers among blue-chips today after broker Merrill Lynch went on the warpath and downgraded the entire sector.

Anglo American led the way down with a fall of 11p to 1205p, followed by BHP Billiton, 6½p to 584p, Rio Tinto 18p to 1474p and Xstrata 15p to 891p.

Merrill has cut the diversified mining sector from overweight to neutral, saying it has probably reached the top.

The benefits of higher oil, platinum group metal prices and an expected surge in coking coal has been outweighed by a falling dollar and rising costs in explosives, steel and labour.

Anglo American, Rio Tinto and BHP Billiton have been downgraded from buy to neutral and their earnings expectations trimmed. Lonmin, 5p off at 896p, has been cut to a sell.

Merrill has also downgraded Centrica from buy to neutral and cut its profits forecast for this year and next, just days before the gas distributor delivers its trading update.

Centrica fell 2¼p to 253¾p having seen turnover swell considerably yesterday as some hefty lines of stock went through on the ticker. Merrill has reduced its operating profit forecast by 5% for this year and 3% for next year. It blames turbulent wholesale markets and competition in supply. The broker expects supply margins to rise but warns the 8% target in 2005 could be a best-case scenario given the prospect of higher commodity prices. Centrica benefits from a falling oil price but the recent drop in wholesale energy prices may hinder the expected windfall.

Meanwhile, Friends Provident came rattling back 3¼p to 155p, almost matching a big sale of shares in the life assurer conducted by, yes, you've guessed it, Merrill Lynch.

Last night it disposed of a massive 48.5m shares on behalf of clients at 155p following an accelerated offering. The sale raised £75m.

Elsewhere, investors came out fighting, hoping to reverse recent falls. But their efforts appear to have had a minimal effect with prices trading in a narrow band in thin volume. The FTSE 100 index was up 5.9 at 4728.7.

Strange move by broker UBS in housebuilder Berkeley, 1p better at 720p - it has repeated its buy rating but slashed its 12-month target from 1465p to 965p.

Brewer SABMiller fell 10½p to 842p after UBS downgraded from buy to neutral following its strong showing of late.

UBS explained two-thirds of the stock's performance since 2003 has been driven by a re-rating of the shares, which now trade on the same 2005 price-earnings multiple as Heineken and InBev.

As such, UBS said it regards multiple expansion as less of a driver of relative performance from here. It has a 940p target on SABMiller, down from 950p.

Ireland's leading telecom group Eircom firmed 0.03 cents to €1.67. Billionaire financier George Soros is reckoned to be selling 14.6m shares through Morgan Stanley and Dublin-based Davy Stockbrokers at €1.64. The sale should raise €24m (£16.5m).

It was the first day of trading on Aim for BowLeven, the African oil and gas explorer which has raised a further £17m from the sale of shares at 363p. The price opened at 375p before settling at 385p.

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