Market report: Friday close

By HUGO DUNCAN FOR THE DAILY MAIL
Updated:

 

Investors were snapping up shares in Carphone Warehouse today after a bullish note from Morgan Stanley gave it a much-needed boost.

The shares added 8p to 257p after Morgan Stanley analyst Geoff Ruddell upgraded the mobile phone store to overweight from equalweight.

The stock has been battered in recent months as the deepening economic gloom and growing competition in the broadband market forced boss Charles Dunstone to rein in ambitious expansion plans. Dunstone this month admitted that even the fast-growing world of mobile phones will be hit by the consumer slowdown.

'The shares have fallen 30% over the last five months,' said Ruddell. 'We consider this a very attractive entry point. Much of the share price weakness appears to have been caused by concerns about Carphone Warehouse's seeming inability to turn profits into cash. We think it unreasonable to expect a company growing so fast to generate cashflow.'

The FTSE 100 index edged to 6091.40 after a rally in Asia this morning. The Dow Jones Industrial Average slipped 4.6 to 12,844.4 in New York as comments from US Treasury Secretary Hank Paulson last night were overshadowed by disappointing figures from American Express. Paulson said there were signs the financial crisis was easing but the bears reckon this is rather premature.

In London, Punch Taverns, up 6p to 545p, benefited from an upgrade by Numis Securities, having seen its share price collapse from 1400p a year ago. The firm, which like other pub landlords has been hit by the smoking ban and downturn in consumer spending, yesterday warned there was little to cheer for the industry and its shares sank.

Numis said the sell-off was overdone and advised investors to buy the stock. 'We think yesterday's share price fall for Punch Taverns has been overdone, and in our view the stock now more than discounts the uncertain near-term trading environment.'

Shares in car dealer Pendragon have crashed from 124p to as low as 28p in the past 12 months as a string of profit warnings sent investors running. So a relatively positive update was a welcome relief for the City, although the shares edged only ¼p higher to 38¼p.

Pendragon has been hit by a collapse in demand for new cars - big-money purchases are not flavour of the month during an economic crisis - but it is now tapping the second-hand car market, where buyers can still be found.

Pendragon said new car sales were down more than 4% in the first quarter and warned the market remained uncertain. But it said full-year results should be at the top end of not very optimistic expectations. Shares in packaging group DS Smith plunged 10%, or 13½p, to 128£frac12;p, after it admitted prices of cardboard have 'softened' on slowing demand. 'We are preparing for a more challenging trading environment,' it said.

ABN Amro warned that with oil close to record highs, demand for first-class travel slowing, and consumer confidence weakening, airlines face a tough year. 'We are not surprised many investors would not want to touch airlines with a bargepole,' said ABN analyst Andrew Lobbenberg.

It cut profits forecasts across the sector by between 20% and 65% and changed its mind on oil prices for next year. Instead of averaging around $90 a barrel, it now thinks crude will be $120 a barrel. Crude topped $119 this week and rose $1.73 to $117.79 today.

ABN downgraded easyJet, up 8¾p to 296¾p, and Ryanair, up 0.15 cents to €2.78, from buy to hold and cut its price target on British Airways, 7¼p higher at 220p, to 200p from 260p.

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