Royal Bank of Scotland and Lloyds among the biggest losers after downgrade from house broker
As leading shares edged lower on renewed worries about the eurozone and the effects of austerity measures on the likes of Greece and Spain, support services group Babcock International confirmed it is positively benefiting from government cost cutting drives.
The group said it was experiencing buoyant conditions, in both civil and military markets, as customers continued to seek increased efficiency:
We believe the current economic climate will continue to create significant medium and long term growth opportunities both in the UK and overseas.
John Lawson at Investec repeated his buy rating and raised his target price from 970p to £10. In the market Babcock bounced 22.5p to 945p.
Overall, investors were uncertain which tack to take, given confusion over whether - or rather when - Spain would seek a bailout. Suggestions it could come this weekend were seemingly dismissed by the country's prime minister, Mariano Rajoy, who said a bailout request was not "imminent." But the lack of clarity continued to unsettle the markets. So the FTSE 100 finished down 11 points at 5809.45, having traded within a 60 point range. Angus Campbell, head of market analysis at Capital Spreads, said:
If Spain does seek a bailout then those investors who have bought in the last couple of days will be sitting very pretty, as you can expect a risk on rally to follow as it would open the door for the European Central Bank to buy Spanish bonds and really drive their borrowing costs down.
Banks were among the main fallers, not helped by the continuing crisis in Europe. Royal Bank of Scotland fell 8.9p to 257.5p and Lloyds Banking Group lost 0.95p to 39.025p following news that analysts at the banks' broker UBS had cut their recommendation from buy to neutral, highlighting concerns about their capital requirements.
Meanwhile Bank of Georgia was the biggest faller in the mid-cap index, down 84p to £11.94 as the country's president conceded defeat in parliamentary elections. Analyst Sue Munden at Seymour Pierce said:
The impact on Georgia in the short term will be a higher degree of risk and uncertainty until the new government is formed and makes its policies clear. Moreover, the efficacy of the new government will rely on a cohesive coalition since the [outgoing] United National Movement will have a sizeable minority position.
In terms of Bank of Georgia, one would expect operations to continue with business as usual. We would, however, expect the share price to be weak until there is clarity on the new government and its intentions. We understand that investors may want further reassurance but we believe that the shares at these price levels represent a buying opportunity.
Wolseley ended 15p lower at £26.68 despite the building materials group unveiling a special dividend of £350m. Full year profits rose 10% but its European markets continued to be weak.
Back among the risers, International Airlines Group, owner of British Airways and Iberia, climbed 4.7p to 159p. The move follows reports Qatar Airways may join the oneworld alliance, which includes BA, as well as Monday's buoyant assessment of the industry outlook from the International Air Transport Association.
ITV added 0.65p to 90.6p on renewed takeover speculation, while Tesco rose 5.7p to 336.7p ahead of its first half figures on Wednesday.
Bumi, which fell sharply at the end of last month after unveiling a probe into possible irregularities at its Indonesian operations, rose 9.7p to 159.5p. The troubled 20% subsidiary said it would consider selling mines or even a rights issue to raise cash.
Bwin partydigital put on 5.9p to 110.8p on continuing bid speculation. Malaysia's Genting has been mentioned by traders as one possible bidder. Following news that Bwin would sell its Ongame poker network for up to €25m, Michael Campbell at Daniel Stewart - who has a 177p price target and hold recommendation - said:
The sale should be seen as welcome news and leaves [the company] to focus on integrating its core assets post the Bwin and Party Gaming merger which we believe is well on track. There is no impact on earnings; however the initial [payment] will boost 2012 cash reserves by €15m and in so doing further boost a balance sheet with significant firepower.
Bwin trades on an attractive multiple [but] we have the stock on hold despite our target price and this is based upon regulatory uncertainty in its single largest market, Germany. We retain this view until there is clarity on regulation out of Germany.
Satellite operator Inmarsat came down to earth ahead of an investor day next week.
Its shares have been flying high in recent times, partly on hopes for its Global Xpress super-fast broadband network which will be delivered by the (yet to be launched) Inmarsat-5 satellite. Indeed last week it was lifted by a positive note from Jefferies based on the prospects for Global Xpress.
But it lost 9p to 585p after HSBC downgraded from overweight to neutral and cut its target price from 650p to 640p ahead of the 9 October presentation by the company. The bank said it was time to be cautious:
We are sceptical regarding management's ability to offer full visibility on the Global Xpress ramp up one year ahead of first launch.
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