Market report: Wednesday close

By MICKEY CLARK FOR MAILONLINE
Updated:

 

The London Stock Exchange wants to halve the spread between bid and offer on some leading shares in its order-driven trading system. That was the story doing the rounds in the Square Mile today.

Mickey Clark

Mickey Clark, Evening Standard

The stocks chosen are expected to include supermarkets chain Tesco, up 11&frac;14p at 429p, mobile phones operator Vodafone, 1.8p dearer at 160.3p, oil giant BP, 2p down at 611p, HSBC bank, 8½p dearer at 879½p, and drugmaker GlaxoSmithKline, 1p better at 1121p.

The LSE argues that these stocks already spend 80% of their time trading within the current tick range, and that a move to reduce the tick further will increase competition among dealers and result in better prices for investors. But member firms are not so sure.

They say the gap between bid and offer is already consistently tight, with few examples of 'gapping out' during periods of market volatility. Some traders are bemused by the move, and say the only beneficiary will be the LSE, which will achieve bigger revenue flows as traders struggle to complete orders in tighter markets.

At present, the LSE receives a commission every time a parcel of shares is bought or sold. The spread on, say, Vodafone is just 0.1p at the moment. Under the LSE proposals, that will halve to 0.05p. In the case of Tesco, the tick is 0.25p, and will drop to 0.1p.

The LSE plans to discuss the move with member firms over the next few weeks. One of the most volatile stocks among the top 100 companies these days is, strangely enough - the LSE itself. Today it was up 6p at 1077p.

Trading in London was lacklustre despite impressive first-quarter profits from another oil company, BG. Even so, the shares ran into profit-taking, losing 77p at 1231p. Home Retail, the Argos and Homebase retailer, was rewarded with a rise of 21¼p to 264p on the back of strong numbers, as was satellite broadcaster BSkyB, up 4½p at 545p.

The FTSE 100 index reversed opening falls to trade up 20.2 at 6109.6 with the help of an unexpected restated rise in first-quarter US economic growth but it closed at 6,087.3, 2.06 down. But cautious investors are still waiting to see if the US Federal Reserve cuts interest rates by a further quarter-point tonight. The Dow was up 43.9 to 12,875.8

Mining shares came in for a bashing. Vedanta slumped 105p to 2245p following bearish Merrill Lynch comments while Rio Tinto fell 99p to 5911p, where it trades at a discount to the takeover terms proposed by BHP Billiton, down 18p at 1800p.

Panmure Gordon has slashed its price target for HBOS, down 16¼p at 470½p, from 450p to 350p to reflect this week's £4bn rights issue. The broker warns to expect further write-offs.

Citigroup lowered HBOS from 600p to 425p. But HSBC rose 8½p to 879½p after Goldman Sachs raised its rating from sell to buy.

There was a muted reaction by the supermarket chains to the Competition Commission's two-year inquiry into the way they operate. Some in the City take the view they have got away scot free. But the share-price response was mixed, Sainsbury's rallying 6¼p to 383½p, while Wm Morrison dipped 2½p to 286½p.

Evolution has become the third broker this week to think again about Drax, 24p lower at 602p. It downgraded the shares from add to reduce with a target of 589p after similar moves by Cazenove and Dresdner Kleinwort. Evolution says rising coal prices and cheaper oil further out are likely to erode the power generator's margins.

CML Microsystems added 1½p to 79½p after 13% of the company changed hands. Progressive Asset Management is thought to have sold its holding of a million shares at 72½p to a single buyer.

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TOMORROW'S AGENDA

• Manufacturing growth is expected to have stagnated in April as rising raw materials and the credit crunch hit the sector. Analysts forecast the headline Purchasing Managers Index figure will fall from 51.3 last month to 50.8 - a number above 50 indicates expansion. Meanwhile, the Bank of England's bi-annual financial stability report will set out the issues facing the wider economy.

• With the ink still drying on its merger deal, first-quarter numbers from Thomson Reuters are unlikely to give a clear picture of how the global news giant is faring. The City will focus instead on its outlook for the year ahead where UBS forecasts revenue growth of 5%-6%.

• Property developer Hammerson issues a trading statement. Chairman John Nelson warned in February that the City offices market has slowed dramatically. However, business across the Channel has been strong.

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