Market Report: Double Standards rock the markets

The City can be very fickle when it decides what stock is on or off the buy list, and yesterday the FTSE had particularly varying standards. Insurer Standard Life Investments was in but Standard Chartered Bank was out.

Scribblers at Morgan Stanley warned investors that in the short term the Asia- focused Standard Chartered is likely to face problems as China and India slow. The analysts warned that ahead of its third-quarter results at the end of the week, there are concerns about “softer financial markets and wealth management revenues” and emerging markets currency weakness. These “key concerns” mean they see “better value elsewhere”. The stock was also suffering after analysts at Numis downgraded the group to a hold on Thursday and gave it a 1,500p price target for shares that are down 20.5p to 1,445p, and the bank was close to the bottom of the blue-chip index.

Meanwhile Standard Life was top of the table following an upbeat note from JP Morgan Cazenove. It rated the insurer as overweight and said investors could expect a £300m dividend payout this year. It was 8.7p better at 354.1p.

The blue-chip table managed to creep up despite the US government shutdown continuing to drag on. The FTSE 100 edged up 4.84 points to 6,453.88.

Alastair McCaig, market analyst at spreadbetter IG, said: “Considering the uncertainty surrounding America, the European markets have done very well to keep their heads above water; it will be even more impressive if they can maintain that form for the start of trading next week.”

“As next week progresses, equities and currencies will begin to factor in the possibility of the US hitting their debt ceiling more heavily, as well as the chance that they might default on their debts. Due to the US government shutdown there has been an absence of the monthly non-farm payroll figures, which usually help the markets form an opinion of the economic health of the nation.”

GKN, which supplies car and plane parts around the world including to Jaguar Land Rover, drove up 8.4p to 352.9p after fresh data showed that new UK car registrations jumped 12.1 per cent last month.

The bookmaker William Hill may be suffering but Deutsche Bank think it’s a good long-term bet. Despite revealing on Thursday that third-quarter profits were £20m lower than expected, scribblers at the bank think William Hill is in a good position. In a note entitled “Near term pain, but long term gain”, Deutsche said: “New digital sign-ups were up 35 per cent and weekly active players increased 41 per cent in August and September – both harbingers of future profit growth when sports margins normalise.” The bank downgraded its forecasts for the book maker but kept a buy rating. William Hill dropped 5.2p to 407.8p.

Numis was impressed with Diageo, saying the Guinness-to-Smirnoff drinks giant is poised to benefit from the global market’s “robust growth”. The analysts rated Diageo a buy and the company glugged up 2.5p to 1,948.5p.

Analysts at Jefferies had a sweet spot for Tate & Lyle, slapping a buy rating on the sugar producer despite a rocky trading update. Tate & Lyle, the owner of the sweetener brand Splenda, added 6p to 745p as the update was no worse than expected.

On the FTSE 250, Carpetright plummeted after a profit warning and news of the surprise exit of its chief executive. The retail chain fell 57p to 616.5p.

A number of retailers received buy ratings from analysts at UBS, and in focus was the Argos owner Home Retail Group, up 3.3p to 171p. UBS believes that the group, which also owns Homebase, has the potential to gain market share. The electrical retailer Dixons Retail added 0.74p 46.39p.

The Russian gold miner Petropavlovsk said its part-owned iron ore group IRC has raised fresh capital. It is proceeding with a refinancing via an equity raising from Chinese investors, who will buy $134m of equity. It spurted 2p to 76.5p.

On AIM, Northcote Energy jetted 0.025p to 1.25p after increasing its proven oil reserves by 24 per cent to $76.7m, in comparison with its current market valuation of £12.29m.

The upmarket jeweller Theo Fennell officially left AIM yesterday. It was bought in August by a consortium including ex-Goldsmiths boss Jurek Piasecki.

Buy

Pendragon

Snap up shares in Pendragon, Jefferies insists. The broker notes the news that new UK car registrations are “still motoring” with volumes for the important September month showing continued strength, up 12 per cent. Jefferies thinks the car dealership business still has scope for expansion, and rates it a buy with a 40p target for shares that are 33.75p.

Sell

Carpetright

Flog shares in Carpetright, Cantor Fitzgerald suggests. The broker is concerned after the carpet retailer’s profit warning. It points out that profit forecasts have been downgraded, and questions the suitability of the format to a “fast-changing retail environment”. Cantor rates it a sell with a 500p target for shares that are 616.5p.

Hold

Serco

Hang on to shares in Serco, Peel Hunt advises. The broker thinks the outsourcer’s disposal of its occupational health business is in line with its strategy to “proactively manage its portfolio”. The disposal of the business, Peel says, is not material as the profits disposed of represent just 0.3 per cent of 2014’s earnings. Peel rates Serco a hold with a 590p target for shares that are 528.5p.