Market Report: British Energy loses power after 'sell' note

There's no pleasing the stock market sometimes. On Wednesday, British Energy revealed a 144 per cent leap in first-half earnings only for the stock to tank. As always, the devil is in the detail and the nuclear power group also confirmed that unplanned output losses resulted in lower power generation.

Things got worse yesterday as investors continued to desert the company on the back of a reiterated "sell" note from the French broker SG Securities. SG believes the shares are worth no more than 410p each, and the broker is particularly concerned about output reductions at the group's Hunterston power station.

British Energy shares fell 31.5p to close at 685.5p, with SG's target price indicating that there could be another 40 per cent downside to come. One trader said: "The numbers were good, but that is based more on wholesale energy prices rather than anything the company itself has done. The reasons behind these shortages are chronic and it will take significant investment to put right."

An interest rate rise in China put the skids under the mining sector, heavily weighted towards demand from south-east Asia. Worst hit was Kazakhmys, the copper producer, 29p lower at 1,209p, while blue chip peers Xstrata and Rio Tinto were also deeply in the red, falling 36p to 2,230p and 60p to 2,722p respectively. However, a spike in the copper price, caused by the closure of BHP Billiton's Escondida mine in Chile, offset losses. BHP, due to report full-year numbers next week, was 7p weaker at 1,032p.

After a very quiet week, the FTSE 100 ended on a positive note, albeit only 3 better, to close at 5903.4, the third day in a row that the blue-chip index has moved fewer than 5 points either way. Weakness in mining was countered by strong demand for oil stocks as the per-barrel price ticked up again after a week of declines. The oil giants BP, 5p firmer at 614p, and Shell, 31p better at 1,948p, make up almost 25 per cent of the index on their own.

A bullish note from house broker Charles Stanley failed to tempt buyers into Interserve, the support services group that was forced to restate profits for the past five years earlier in the week following the suspension of six senior managers. Charles Stanley believes the dividend is not under threat and that the accounting scandal is unlikely to have spread to other parts of the business. Even so, sellers remained on top as the shares shed another 4.75p to close at 290p.

Private equity takeover speculation intensified at GCAP Media, the owner of Capital Radio, as the shares surged to 232.25p in early deals, a gain of 24p. However, some traders believe that the rumours were started by a hedge fund in an attempt to get out of the stock, which has also been helped by short sellers closing positions. A hefty bout of profit-taking saw the shares lose most of their early gains as it closed at 215p, up 6.75p.

Shares in 888 Holdings, the online gambling group, remained under pressure as the malaise over the gambling industry shows little sign of lifting. The company was thought to be on the radar screen for a bid from rival PartyGaming, but the blue-chip internet poker group is now thought to be looking elsewhere for acquisitions. 888 fell another 4.25p to 144.75p, edging closer to the all-time low of 134p, while PartyGaming eased 2.5p to close at 111p.

Demand for Renesola has been excellent since the company listed on AIM on 8 August at 79p. Retail investors piled into the Chinese solar panel manufacturer yesterday, after the company reported a solid set of debut numbers on Tuesday, sending the shares 14p better to 117.5p, a 48.7 per cent premium to the placing price.

Empyrean Energy, up 8p to 53.5p, began drilling at its Sugarloaf-1 prospect in Texas, three weeks after abandoning a gas project in Germany. But shareholders should brace themselves for a rocky ride from here, as traders noted that the Australian company drilling for Empyrean is obliged to update on progress every Wednesday. Investors are hoping for more positive news from the company regarding its Eagle North oil assets in California.

Rumours of a private equity bid for Alexon, the fashion brands retailer, sent the stock into orbit as word swept the market that a bid valuing the company at 150p per share is in the pipeline. According to the broker Dresdner Kleinwort, July's poor trading statement was down to "self-inflicted" problems as it cut its target price for the shares to 130p. Yesterday's bid talk sent the shares 20.5p better to 137p.