Market Report: Huge placing strikes a jarring note for HMV

HMV extended its week-long losing streak yesterday as a series of bearish factors combined to leave the music and books retailer one of the worst performers in the FTSE-250 index.

The most pressing issue that shareholders of HMV had to contend with was that Morgan Stanley was looking to find a home for a line of 17 million shares in the group. It eventually did, at a price of 150-151p, but the sale took its toll on the stock, leaving it down 5.75p at 150.5p.

HMV shares have now lost ground for every one of the past six sessions bar one. Rumours of a profit warning have been to blame for the decline, which has knocked 10 per cent off the company's market value since the start of last week. The recent profit downgrade from Woolworths highlighted the tough trading conditions facing HMV and Tuesday's profit alert from the publisher Bloomsbury showed that things are also difficult at the group's Waterstone's chain.

Amid all the gloom surrounding HMV and the wider retail sector, there was a chink of optimism from Morgan Stanley yesterday. It is just as well given the broker was busy trying to find a buyer for £25.5m worth of HMV shares. It believes that this Christmas is likely to be tough for the sector, but will not be dreadful.

The broker said: "We believe that the poor start to seasonal spending can be explained by the weather and timing issues, which will make Christmas late, but not dreadful.

"We also think that HMV might surprise positively," it added. Clearly, the investors who bought the £25m tranche of HMV stock from Morgan Stanley will be hoping the US broker turns out to be right about that.

Elsewhere in the sector, Woolworths fell 0.25p to 33.5p and Game lost 0.5p at 100.5p, while Marks & Spencer advanced 8.5p to 705.5p. Instore rose 0.5p to 18p, Alliance Boots jumped 19.5p to 839.5p and Home Retail added 0.5p to 408.5p.

The FTSE 100 index ended the session 36 points higher at 6,192 after bullish US spending figures sent both the Down Jones Industrial Average and the tech-laden Nasdaq Composite into positive territory.

Gallaher raced higher in early trading, and peaked at 1,178p, amid suggestions the tobacco sector giant Altria might be tempted to table a offer for the company to rival that from Japan Tobacco. Altria, which owns Philip Morris, certainly has the firepower to finance such a move. By acquiring Gallaher, it would strengthen its position in the UK and block Japan Tobacco's dominance in Russia. However, as the session wore on, investors lost their ardour for the story and Gallaher lost ground, finishing the day down 1.5p at 1,151p.

Rank gained 3.75p to 236.5p amid vague rumours of stake-building by the bookie William Hill. Luminar, 31.5p better at 680.5p, was boosted by an über-bullish note from Cazenove. The heavyweight broker urged investors to buy into the nightclubs operator and said the shares could be worth up to 1,100p. It believes recent reforms have transformed Luminar into a portfolio of high-quality, branded nightclubs and that its current stock-market rating does not reflect this.

Bloomsbury rose 13p to 233p after Goldman Sachs upgraded its recommendation on the publisher to "buy" from "neutral". It said that the drop in the publisher's shares following its profit warning earning this week had been overdone and argued that the factors leading to the setback were temporary rather than permanent.

Britvic gained 1.25p to 259.75p on rumours that the French private-equity group PAI Partners is mulling a 320p-a-share bid for the soft-drinks maker.

Consolidated Minerals held steady at 88p despite speculation the Australian miner is in talks to sell its manganese operations or is arranging a cash injection to help it raise nickel production from its Kambalda project in the west of the country.

Ashmore, the emerging markets fund manager, gave up 2.5p to 264.5p after UBS warned investors about the company's exposure to the falling dollar and downgraded its stance on the stock to "neutral" from "buy".

Lower down the pecking order, Cashbox gained 1.25p to 20.75p after unveiling its second contract win of the week. The cash machine operator said it had secured Booker Cash & Carry as a client. Cashbox will now survey the retailer's 4,000 stores and place its machines in those which it believes are likely to be the most profitable.