Centrica bucks weak London market

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Centrica, the parent company of British Gas, defied the London market’s downward trend on Tuesday.

Its shares rose 2 per cent to 352¼p, extending gains since Friday’s better-than-expected trading statement.

In the wake of the update several brokers have upgraded their recommendations, arguing that Centrica had finally turned the corner.

Traders said such comments had prompted fresh speculation that Centrica could be a takeover target. Several companies have been linked with Centrica over the past year, most frequently Gazprom.

All told it was good session for defensive stocks as investors looked for safe places to park investments after Asian markets suffered a heavy sell-off overnight.

Associated British Foods firmed 1 per cent to 835p, while National Grid added 0.2 per cent to 749½p and Kelda Group inched up 0.1 per cent to 932p.

Buyers also emerged for British American Tobacco amid talk of positive year-end round-up meetings with brokers.

“We see global trading as the best for the last 10 years, particularly in emerging markets which account for over 50 per cent of group earnings, and see no new concerns arising in the fourth quarter of 2006,” JPMorgan said in a note to clients. BAT shares closed 1.2 per cent higher at £14.60.

In the wider market, the FTSE 100 closed down 43.5 points, or 0.7 per cent, to 6,203.9 as investors, unsettled by the Thai market plunging to its lowest level since 1990, took profits.

The FTSE 100 has enjoyed a strong run in the past week and on Friday closed at its highest level in almost six years.

A poor performance from AstraZeneca weighed on the blue chip index. Shares in the Anglo-Swedish drug maker dropped 4.4 per cent to £27.38 after the European Patent Office revoked a key patent on Nexium, a move that potentially paves the way for copy-cat versions of the popular ulcer treatment to hit the market in 2010.

Traders said the news had also undermined confidence in AZ’s ability to defend the US patent on Nexium, which is the world’s second-biggest selling drug.

Lower down the market, the FTSE 250 lost 32.4 points, or 0.3 per cent, to finish at 11,055.3.

Market turnover was again lacklustre, with around 2.6bn shares changing hands.

Vedanta Resources was another of the big blue chip fallers. Shares in the mining company shed 2 per cent to £11.99 after the IMF suggested the Zambian government increase taxes on copper mines. Vedanta controls Konkola, the country’s largest copper producer.

Elsewhere in the sector, lower metal prices saw Kazakhmys lose 2.6 per cent to £11.38 and Lonmin shed 1.5 per cent to £30.37.

BT Group was also under pressure, sliding 2.5 per cent to 305¼p as investors moved to bank profits. BT shares have risen 40 per cent in the past six months.

Elsewhere, J Sainsbury faded 1.3 per cent to 408¼p despite talk of strong trading. There were also rumours that property investors were running a slide-rule over the store portfolio.

Given the recovery in profits under chief executive Justin King, traders say sale and leaseback deals at Sainsbury are now a possibility.

Beazley Group, the Lloyd’s insurer, was among the best FTSE 250 performers, ending the session with a gain of 4.4 per cent to 135¾p. The advance came courtesy of a Numis Securities upgrade to “buy”.

“We expect an imminent strong pick up in earnings from recent premium growth and expect the shares to be re-rated as investor confidence improves,” the broker said as it set an increased target price of 165p.

Elsewhere, Britvic, the soft drinks company, gained 6.8 per cent to 281p. After the market closed Permira, the private equity group, declared a 14 per cent stake.

Talk of stake building by a venture capital house also supported casino and bingo club operator Rank Group, up 0.4 per cent to 232¾p.

Elsewhere, JJB Sports rose 1.9 per cent to 236¾p amid rumours of predatory interest from Apax Partners, the private equity house that has bid for several retailers including Signet, unchanged at 119p, and Woolworths, 0.7 per cent higher at 33¼p.

John Wood, the oil field services company, climbed 6 per cent to 259p on expectations that full-year earnings were likely to be ahead of expectations.

Disappointing drilling results from a prospect close to its M’Boundi field in the Congo saw Burren Energy ease 1 per cent to 902½p.

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