Market Report: Trading update fears add to Kingfisher jitters

Fears that Thursday's trading update from Kingfisher will disappoint the City sent shares in the DIY giant tumbling 4.75p to 300p yesterday. The group failed to impress investors with it statement in December and analysts believe trading at its B&Q stores are unlikely to have improved much since then.

Fears that Thursday's trading update from Kingfisher will disappoint the City sent shares in the DIY giant tumbling 4.75p to 300p yesterday. The group failed to impress investors with it statement in December and analysts believe trading at its B&Q stores are unlikely to have improved much since then.

"We believe overall second-half trading has been somewhat subdued for B&Q," Shore Capital was heard warning its clients yesterday. And the broker fears there is a reasonable likelihood that market forecasts for 2005 may have to be downgraded in the wake of Thursday's statement.

Credit Suisse First Boston agrees. It believes that recent industry data suggests that both Kingfisher's B&Q division and Castorama in France have been experiencing a challenging environment and as a result will struggle to achieve positive like-for-like sales growth for the fourth quarter. The main problem for Kingfisher seems to be that it faces weak consumer demand in the UK and France.

Elsewhere, Allied Domecq raced 11.5p higher to 533p on speculation that Pernod Ricard may team up with someone such as Fortune Brands, which owns Jim Beam bourbon, to buy Allied. According to weekend reports, the French group has already held talks with the US-based Fortune.

Although analysts have on the whole dismissed suggestions that Pernod will bid for Allied, on the grounds that the French group lacks the fire-power for such a deal, they do admit that a joint offer for the company is a possibility. Along with Fortune, Bacardi and Brown-Forman are seen as possible partners for Pernod.

MmO ₂ added 1.5p to 123.5p as Deutsche Bank ushered its clients into the mobile phone operator. Setting a 150p price target on the stock, the broker argued that mmO ₂'s German division continues to benefit from the problems being experienced by its local rival T-Mobile. Deutsche is also convinced that the group's main UK business is performing very well. "Despite slowing market growth among the incumbent operators, mmO ₂ continues to outperform the market," Deutsche said.

Cadbury Schweppes lost 4.75p to 513.25p as Numis Securities played down rumours that the group may be about to be acquired by Kraft Foods. "One can appreciate obvious synergies between the confectionary businesses of the two companies but it is less clear why Cadbury's beverages portfolio would be of strategic interest to Kraft," the broker said. Numis also warned investors that Cadbury is likely to face growing competition in beverages given the recent launch of a Diet Coke formula containing the zero-calorie sweetener Splenda.

AstraZeneca dropped 19p to 2,083p after the US Food and Drug Administration whistleblower David Graham told The Independent that the company's most important new drug, Crestor, should only be used after every other alternative has failed. His comments, on Saturday, are very bad news for AZ, which is trying to reverse a slide in sales of the anti-cholesterol drug. This began when Crestor's safety was first questioned by scientists in November.

Lower down the pecking order, White Nile, which floated last week at 10p, soared a further 26p to 125.5p as rumours circled dealing rooms that the AIM-listed group is about to unveil a major oil exploration deal in Sudan. White Nile has indicated it is in ongoing talks with the government of the newly recognised autonomous state in the south of Sudan regarding oil concessions.

However, given White Nile's market capitalisation (it presently totals more than £180m) the deal the company signs will certainly have to be very impressive. As it stands, the only asset the group has is the £9m it raised in last week's float.

Meanwhile, the mania for mining stocks helped Zereba register a 125 per cent rise on its first day of dealings. Shares in the group, set up to invest in the mining sector in Australia and Africa, closed at 2.12p. It raised £1.5m and it is thought it will soon unveil two acquisitions. Elsewhere, dealers reported strong institutional demand for Management Consulting, up 0.75p to 60.5p.

Finally, Oakdene Homes jumped 11p to 109.5p on whispers that the entrepreneur Nigel Wray has taken an 8 per cent stake in the AIM-listed housebuilder. His initial investment in the company is believed to have been in May last year, when he took a very modest shareholding in Oakdene as part of its 110p float.

One can see why the housebuilder might attract the likes of Mr Wray. The group's shares trade at just 3 times forecast earnings. Now that looks cheap, even for the housebuilding sector.