Market report: Equities worry exposes L&G
LEGAL & GENERAL was the standout blue chip casualty yesterday as it paid the price for the recent downturn in equity prices and lingering concerns over its provisions to cover defaults on its holdings of corporate bonds.
L&G rode the rising tide of investor optimism from early March – its shares trebled in the following two months – but with equities now heading south again amid ongoing uncertainty over the economy, it is more at risk than its UK life insurance peers, according to broker SG, which told clients to sell the stock.
SG said: “L&G has the highest exposure to equities among the UK life stocks we cover. In addition, it has lower provisions against bond defaults.
These two factors support our view that L&G is the highest risk stock in the group and thus merits a discount.” L&G shares dropped 4¾p to 55¾p.
Uncertainty over the large stake held by German retailer Arcandor, which filed for insolvency earlier this month, dragged Thomas Cook 7p lower to 200p.
But rival tour operator TUI Travel set the pace, adding 8¾p to 233½p, as broker Credit Suisse said trading remained encouraging.
ESPN’s acquisition of the rights to Premier League football coverage relinquished by Irish broadcaster Setanta was shrugged off by satellite broadcaster BSkyB, 13½p brighter at 444½p.
Bullish comments from broker JPMorgan boosted drugs giant Shire Pharmaceuticals 17½p to 828½p.
But the FTSE 100 Index struggled to claw back much of Monday’s £28billion losses, closing just 4.03 points ahead at 4230.02 as leading banks fell into the red.
Lloyds Banking Group was 2¾p overdrawn at 65p, while Royal Bank of Scotland and Barclays fell ¾p to 35¼p and 5p to 259p.
Pubs group JD Wetherspoon toasted a 22p rise to 391½p as broker Morgan Stanley ordered a double upgrade from underweight to overweight, noting the company’s accelerating market share gains.
The same broker was also optimistic that luxury goods firm Burberry would take share in a fragmented market, helping it achieve a 12¾p mark-up to 382¼p.
Bid talk drew speculators to Hikma Pharmaceuticals, up 23¾p to 473¾p, while chip designer Imagination Technologies firmed 4½p to 114½p as Intel increased its holding to 16 per cent.
Property group Hansteen eased ¼p to 81¾p as it said it would raise nearly £195million for an acquisition spree on UK commercial property.
