News

Recession fears are hitting European markets, with London no exception. A number of heavyweight stocks, such as cruise operator Carnival and telecoms giants Vodafone and Cable & Wireless, are trading in ex-dividend form today, which has acted as a further drag on Footsie's performance.

Investment analysts employed by banks are queuing up to trash the banking sector.

The European arm of US banking giant JP Morgan (JPM) said more steps to improve liquidity in the economy and remove systemic risk from the banking area are needed before it would consider adopting a more positive on UK banks. JPM remains underweight in the sector and all of the stocks in it, with the post-merger Lloyds Banking Group its least preferred stock. It has cut its pro-forma price target for Lloyds Banking from 180p to 110p.

JPM has also cut its price targets for Barclays (from 210p to 150p), Royal Bank of Scotland (from 120p to 50p) and HSBC (from 720p to 675p). JPM has cut its banking sector earnings estimates for 2009 by 31% and for 2010 by 34%.

Meanwhile Broker Panmure Gordon has also been sticking the boot into HSBC, dropping its rating from "neutral" to "sell" and scything its price target from 810p to 615p in recognition of the worsening global economic outlook. The broker observes that although it has avoided the need to ask for a government hand-out, its Tier 1 capital ratio has eased to 8.9%, which is below the 10% average for the European banking industry.

Swiss bank UBS pitches in with a statement which says the earnings prospects for European banks next year are "dreadful".

Lloyds TSB shareholders meet to vote on the proposed merger with HBOS having been warned yesterday by chancellor Alistair Darling that if does not go through, Lloyds will have to pay a lot more to borrow money from the government.

The government's statement seems to have been interpreted as making it more likely that the Lloyds/HBOS merger will go through, with the result that the HBOS share price has advanced briskly to close the arbitrage gap between its trading value and the assumed value of the Lloyds TSB offer price.

Barclays has confirmed that all of the £500m of Reserve Capital Instruments (RCIs) made available by Qatar Holdings and HH Sheikh Mansour Bin Zayed Al Nahyan were placed with institutions yesterday. The offer of the RCIs to existing investors, which pay a coupon of 14%, followed growing criticism of the deal that will see Barclays raise £7bn of additional capital.

Resource stocks get the elbow from investors as the price of oils and metals fall. Lonmin is the major faller in the sector, with Xstrata, which has a 24.9% stake in Lonmin, not far behind.

Property giant British Land upped its interim dividend by 7% despite a big write-down on its property portfolio that sent it deep into the red and reduced net assets by over 20%. Broker KBC Peel Hunt was unimpressed by the figures and changed its recommendation from "hold" to "reduce", and recommended switching in to sector peer Land Securities.

Credit checking firm Experian is the day's best performing blue-chip after it said it is adapting to market challenges, which is expects to persist into next year, as it posted a rise in half year profits. Broker Seymour Pierce has changed its stance on the stock from "sell" to "hold" after taking note of the counter-cyclical nature of parts of Experian's business, such as debt collection.

Plumbers' merchant Wolseley falls sharply on concerns that it might have to tap the market for funds next year in order to reduce its debt burden.

Pick'n'mix retailer Woolworths confirmed that it is in preliminary discussions regarding a possible offer for its retail business. This morning's statement comes after the Times reported that Woolworths is in talks to sell its entire high street business to Hilco, the specialist distressed fund, for only £1.

Pharmaceutical giant AstraZeneca is friendless after suffering a reverse in the US, where the Food and Drug Administration (FDA) has given approval for a generic version of Astra's Pulmicort Respules asthma drug.

PartyGaming reported flat quarterly revenues due to a 15% decline in poker and said the challenging economic environment and strengthening US dollar continue to affect its revenue performance.

Regus' performance in the year to date continues to be in line with expectations, but the outsourced workplaces provider said 2009 is likely to be a challenging year. Revenues rose 24.7% in the four months to 31 October to £367m, with total capacity up 2.3% to 168,908.

Engineering conglomerate Melrose said current trading remains in line with expectations and the integration of FKI is proceeding ahead of plan. The group also said current conditions in the financial markets have delayed the sale of Logistex.

Engineer IMI said it is confident of delivering on expectations for 2008 but warned that it is cautious about the outlook. IMI said it has maintained its revenue momentum of the first half through to the end of October and added that further weakening of sterling has had a positive impact on the its translation of revenues and profits.

Life insurance sector consolidator Resolution has confirmed its intention to float next month and to focus on opportunities in the life assurance and asset management sectors.