Last updated: July 24, 2009 7:48 pm
The FTSE 100 inched to its 10th straight gain on Friday, one day short of its best ever winning streak.
The advance came in spite of sharp losses among the water utilities. Stocks including Pennon and Severn Trent were under pressure for a second day in reaction to price controls proposed by regulator Ofwat, which challenged perceptions of the sector as safe.
“Ofwat very clearly guided the companies to make greater use of equity funding going forward,” said Cazenove.
“With the potential for dividend cuts, capital raising and negative earnings momentum, we struggle to see the sector outperforming until after the final determination in November.”
Pennon was the sharpest blue-chip faller, having largely dodged Thursday’s selling. The South West Water owner fell 4.9 per cent to 466¼p after HSBC downgraded to “neutral” on valuation grounds.
Severn Trent fell 1.7 per cent to £10.14 and United Utilities weakened 0.6 per cent to 476¼p. Merrill Lynch said both companies would have to rethink their dividend policy in response to Ofwat’s proposals.
The FTSE 100 closed 0.4 per cent higher, rising 16.81 points to 4,576.61. The index has gained 10.9 per cent over its fortnight-long rally, its best such performance this year.
Optimism about a sustained recovery fed through to those stocks most likely to benefit. London Stock Exchange led the blue-chip risers, gaining 4.3 per cent to 689½p, while 3i Group was ahead 3.4 per cent at 262¾p and Man Group rose 3 per cent to 288p.
Vodafone was in demand after in-line quarterly figures and full-year guidance. The shares climbed 2.8 per cent to 120¼p, adding 7 points to the Footsie.
BT Group, which reports first-quarter results on Thursday, gained 1.3 per cent to 115¼p after figures from sector peers KPN, TeliaSonera and KCom were all well received.
BSkyB gained 0.5 per cent to 515½p ahead of its full-year results, also due on Thursday.
Dealers noted gossip of a fundraising by a Footsie company next week. Talk that BT or BSkyB could issue bonds was being played down.
Lonmin was the best performing miner, rising 3.8 per cent to £12.43 following a production report on Thursday, which led Goldman Sachs to take the stock off its “sell” list.
Compass lost 4 per cent to 313¼p after Thursday’s trading statement saying organic growth would be stalled both this year and next.
Natexis, which downgraded Compass to “reduce”, saw the risk of further bad news given the catering group’s exposure to the UK and corporate customers. It expected the market view to shift in favour of competitor Sodexho.
Among the mid-caps, Misys retreated 2.4 per cent to 173¾p after a downgrade to “neutral” from Investec.
CSR, the bluetooth specialist, slid 4.6 per cent to 647p after results from US peer Broadcom disappointed. Fellow chipmaker Arm Holdings lost 2.3 per cent to 127p ahead of earnings on Tuesday.
Michael Page gained 6.9 per cent to 287¾p, helped by revived speculation that Adecco may be looking again at UK acquisitions. The Swiss group has also been touted recently as a potential bidder for SThree, up 0.5 per cent to 203p.
Traders also noted better than expected earnings from Manpower, the US-listed recruitment group.
A Merrill Lynch upgrade to “buy” helped lift Mondi, the Anglo-South African papermaker, by 2.9 per cent to 247p. Its argument was that Mondi has a relatively strong balance sheet and would benefit from rivals folding.
Aquarius Platinum gained 2.9 per cent to 247p after its recent acquisition of Ridge Mining led Citigroup to add the stock to its “buy” list.
SMALL CAPS Helphire runs into referrer obstacle
Helphire, the vehicle hire and accident management group, dropped 16.7 per cent to 37½p after losing one of its significant referrers.
Coming just a week after the company issued a relatively positive trading update, the news surprised investors and analysts. “With no comment on who the referring partner is, or the volumes that this relates to, it is very difficult to gauge the likely financial impact,” said RBS, which pointed out that Helphire would now to have amend its restructuring plans.
Glencar Mining jumped 94 per cent to 8½p after Gold Fields of South Africa unveiled plans to buy the Dublin-based explorer for £28m, or 9p a share.
Shares in Alizyme were suspended at 4p after the troubled biotech company called in administrators. As a result of a legal action in the US, Alizyme said it was no longer possible to raise cash for refinancing.
Findel, the home shopping group, gained 0.6 per cent to 41½p on news of plans to raise £81m through a fully underwritten placing and open offer.
Nighthawk Energy fell 1.9 per cent to 39¼p after it said it planned to raise £22.4m via a share placing at 35p a share, which has been organised by Hanson Westhouse. The cash will be used to fund a 12-month development programme.
Bid rumours helped Max Petroleum, an exploration company focused on Kazakhstan, put on 3.5 per cent to 22p.
Portrait Software, meanwhile, rose 1.9 per cent to 13¼p after two of its non-executives directors declared the purchase of a total of 890,00 shares.
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