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The Guardian (UK): Dip in oil sector fails to halt FTSE 100

The Guardian (UK): Dip in oil sector fails to halt FTSE 100

“In the past month, Shell has risen 16% as index-tracking funds have positioned themselves for its merger with sister company Royal Dutch. The deal will create a company with a market value of around £130bn… The unification is due to be completed a week tomorrow…”

Tuesday July 12, 2005

Neil Hume

The FTSE 100 pushed on to a fresh three-year high yesterday despite a weak performance from the heavyweight oil sector, which was hit by a flurry of profit-taking as the crude price fell back from recent highs.

London’s strong showing was largely down to Wall Street, which rose an impressive 147 points on Friday and managed a further advance in early dealings yesterday. That said, Vodafone also made a contribution. The mobile phone group climbed 1.75p to 141p as two leading brokers advised clients to pick up stock. US bank Lehman Brothers started the ball rolling by recommending a switch out of BT Group, up 0.75p to 229.75p.

Lehman pointed out that BT has outperformed Vodafone by 18% this year and now looks expensive. A similar line was taken by German broker Dresdner Kleinwort Wasserstein. Reiterating its “buy” rating in a research note called Time for Rally, analyst RobertGrindle noted that Vodafone shares have gone nowhere this year despite the fact that firstquarter performance figures should impress.

Vodafone’s rise helped the FTSE 100 close 10.2 points higher at 5,242.4, taking its gains since last Thursday’s terrorist atrocities to 84 points. Dealers said the blue-chip index would have ended higher were it not for a poor performance from the oil sector. Shell shed 15.25p to 584.75p – the biggest fall in the FTSE 100 – as several analysts advised clients to take profits. In the past month, Shell has risen 16% as index-tracking funds have positioned themselves for its merger with sister company Royal Dutch.

The deal will create a company with a market value of around £130bn and a FTSE 100 weighting of over 9%. The unification is due to be completed a week tomorrow, although institutions will be able to trade Royal Dutch Shell ‘A’ shares on a conditional basis as of Friday. Elsewhere in the sector, BP fell 7.5p to 634p, while BG Group dropped 5.75p to 471.75p as the crude price fell more than $1.00 a barrel after Hurricane Dennis missed oil and gas production facilities in the Gulf of Mexico. Lower down the market, the FTSE 250 hit another record high of 7,567.8, up 48.7 points, while the FTSE Small Cap index added 20.1 points to close at 2,971.

Market turnover was lacklustre, with just under 2.5bn shares changing hands. Three stocks – Vodafone, Shell and BP – accounted for 20% of trading. In the bond market, the 10-year gilt closed around 103.730, yielding 4.292%. Amvescap, the Anglo-US fund management group, bagged top spot on the FTSE 100 leaderboard. Its shares gained 13.25p to 432.75p, helped by rumours that Canadian fund manager CI Financial will make another bid. In an interview on Friday with Barron’s, the US investor newspaper, CI’s chief executive, William Holland, said he was interested in Amvescap and revealed that half a dozen companies had contacted him to say they would be interested in buying any assets he wanted to sell in the event of a successful bid.

Prudential, 15p higher at 528.75p, was another strong performer, excited by weekend press reports that Citigroup is considering launching a bid for internet bank Egg, 8.5p stronger at 113.75p. Pru owns 79% of Egg. Dealers said Pru had also been supported by reheated rumours of a tie-up with rival Aviva, 9.5p better at 627.5p.

Away from the blue chips, the recent strong run of British Energy, the nuclear power company, continued. Its shares advanced a further 7p to 447p after Deutsche Bank lifted its target price to 500p. But Luminar, the UK’s biggest nightclub operator, was marked 9p lower at 555p after small-cap rival Ultimate Leisure, off 5.5p at 293.5p, warned on profits. Elsewhere in the sector, Urbium, the Tiger Tiger bar operator, jumped 56.5p to 827.5p on reports that Regent Inns, unchanged at 78.5p, is likely to return with an offer in the region of 900p- 950p a share that will contain a significant cash element.

Regent’s previous indicative offer was pitched at 820p a share, two thirds of which would have been paid with Regent stock. Among the small caps, Mice Group, the market services outfit which raised £25m at 34p a share in February, was one of the worst performers. Its shares slumped 4.5p to 24.25p after German bank Dresdner Kleinwort Wasserstein took on a block of 7m shares – around 4% of the company – and attempted to find buyers at 24p.

Parkdean Holidays, the caravan park operator, improved 5.5p to 209p after activist investor Jo Hambro, in the guise of North Atlantic Value, appeared on its share register with a 3.3% stake. Dealers believe Hambro is attracted to Parkdean because of its freehold asset base, which is worth considerably more than its market value, currently a touch above £100m.

Umbro, the sportswear manufacturer, was marked 3p higher at 130p as traders took the view that Mike Ashley, the entrepreneur who owns Slazenger and Dunlop, will increase his 4.6% holding before eventually trying to engineer reverse takeover. Tepnel Life Sciences firmed 0.12p to 6.1p after Bio-Rad Laboratories of California declared a 3.9% stake.

Jumpit, which makes batteries for iPods, mobile phones and other handheld electronic devices, made its market debut. Issued at 40p its share closed at 45p. Finally, keep an eye on Cyberscan Technology today. Following a £34m fundraising by Collins Stewart, its shares start trading at 611p this morning and dealers expect bright debut. The company supplies downloadable gaming systems for Fixed Odds Betting Terminals.

Regan rides again

Financier Andrew Regan was the talk of City again yesterday amid rumours that one of his shell companies is working on an exciting reverse takeover.

Aim-listed Commoditrade, which is majority-owned by Corvus Capital – Mr Regan’s main stock market listing – is believed to be in talks with Sucden (UK) Ltd, the futures and commodity broker.

Under consideration is a deal whereby Sucden, which has been looking for a stock market listing, is bought out of its parent company, Sucres et Denrées, and then reversed into Commoditrade. Commoditrade was brought to the market by Mr Regan in March via share placing at 5p with a view to acquiring commodity brokers.

It closed 0.5p higher at 12.25p last night, while Corvus, eased 0.25p to 11p.

http://www.guardian.co.uk/business/story/0,,1526473,00.html

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