Market Report: Footsie belying data with second downer

The FTSE 100 lost ground for the second time in a row yesterday as fears over the US Federal Reserve slowing the pace of money printing lingered in dealing rooms across the square mile. Although the market rose 10.35 points to 6,493.69, it fell 0.45 per cent during the week, the first two successive weeks of losses since June.

“After the losses of the last couple of days we’ve seen a fairly subdued trading session to end what has been, to all intents and purposes, a rather choppy week,” said Michael Hewson, senior market analyst at CMC Markets.

“Despite most of this week’s economic data being of the broadly positive variety the FTSE 100 has posted its second negative week in succession.So much for the theory that good data is perceived as being positive for markets.”

There was bad news for Ross McEwan yesterday. Royal Bank of Scotland’s new boss hasn’t even got his feet under the table yet, but respected banking analyst Ian Gordon reckons he’s in for a tough time.

“RBS shares have (understandably) responded well to the appointment of Mr McEwan and a wave of speculation that the worst excesses of the government’s threatened ‘good bank/bad bank’ split may yet be avoided,” Investec’s Gordon said yesterday.

“We hope sense will prevail, and that this proves to be the case. However, we still believe that even the current status quo offers a painfully slow pace of recovery with estimated return of equity of 0 per cent in 2013, 3 per cent in 2014 and 5 per cent in 2015. RBS’s valuation appears full ahead of actual recovery.”

The downgrade from hold to sell hit RBS shares, with the state-owned lender falling before closing up 2.4p to 343p.

Lower diesel and jet prices hit Stanlow, Britain’s second-biggest oil refinery, where margins fell by more than a third in the first quarter, its Indian owner Essar Energy said. The London-listed power division of Indian conglomerate Essar Group bought Stanlow from Shell in July 2011, and is in the process of refurbishing the Cheshire site, which employs more than 800 people.

It said throughput production there dropped 2 per cent to 19.27 million barrels in the three months to July, and the current gross refining margin in the first quarter of the year was $4.86 per barrel, compared with $7.53 in the same period last year.

But Essar added that turnaround plans at the refinery are on track.

“Preparations are at an advanced stage for a planned turnaround at Stanlow in the second half of the 2014 financial year, allowing major maintenance projects to be completed, including a 25-year re-lifting of the residue catalytic cracking unit, the largest in Europe,” it said.

Essar has improved performance at Stanlow by cutting its dependence on North Sea crude from more than 90 per cent in 2011 to about a third, and saved money by switching from using fuel oil to natural gas in its burners.

Shares in the company fell 0.3p to 135p. Further down the scale, investors fled IT consultant Anite after the company described trading in the first quarter of the year as being “relatively quiet”.

“Following a strong close last year, the handset-testing business has had a slow start to the current year, with momentum in order intake building gradually,” George O’Connor at Panmure said.

“The phasing of this, and a relatively low opening product backlog at the start of the period, has meant that revenue and adjusted operating profit in that division was down year on year.”

Elsewhere, Sports Direct, the UK sportswear retailer controlled by Mike Ashley, had a day to forget as its shares slipped 12p to 635p.

The sports equipment giant has been a stock-market darling of late but billionaire Mr Ashley will not have enjoyed his lunchtime pint ahead of the new football season starting for his Newcastle United club, when they travel to Manchester City on Monday.

And finally, Avon Rubber shares fell 12.55p to 476p despite the group saying it expected full-year results to be in line with market expectations.

You can’t please everyone, it seems.

Buy

Centamin

Egypt may currently be in turmoil, but that hasn’t taken the shine off Centamin, the African country’s gold miner, for Peel Hunt. Centamin this week unveiled record volumes of the precious metal in its second quarter and boasted $168m (£107.5m) of free cash. The FTSE 250 firm faces legal issues over an operating licence to mine gold. But Peel Hunt has set a target of 56p, for shares at 37p, citing a “world-class asset that continues to deliver good operating performance”.

Sell

Pearson

Some analysts believe the new Common Core Standards (CCS) across children’s education in the US will be a growth catalyst for Pearson, the publisher of the Financial Times. They believe the group will benefit from US states buying new textbooks for the standardised testing system. But Liberum is not so bullish about Pearson, explaining challenges from several states to CCS’s introduction and a drain on education budgets from implementation. Liberum has slapped a 1,332p target on Pearson, which closed at 1314p.

Hold

Imperial Tobacco

Canaccord Genuity is sticking with Imperial Tobacco, although it believes the manufacturer is set to face ongoing tough trading. Furthermore, its analysts feel Imperial’s late-entry into the e-cigarette market will weigh on its shares. But Canaccord sees it rising to 2,450p, from 2,205p.