Market Report: National Grid basks in the heatwaves

Heatwaves across the UK and the US warmed up interest in energy group National Grid yesterday.

As the UK basks in another day of sunshine it was even hotter in the States with temperatures forecast to top 100 degrees from the East Coast to the Midwest, according to the National Weather Service. Power-grid operators were expecting record demand as people turned up their air conditioners to try to stay cool.

Traders betted that National Grid, which operates in the US, would benefit from the forecasted record power usage – it was expected to even beat the previous high from 2006.

National Grid was also in favour as defensive stocks were preferred in a weak day for the benchmark index. National Grid surged 10p to 774.5p. Electricity and gas group SSE jumped 11p to 1,632p and water and waste group United Utilities flushed out a 7.5p rise to 727.5p.

The market was largely dull and fell into negative territory after weak updates on Thursday, out of the US, from Google and Microsoft dampened buyers’ spirits. During the afternoon the FTSE 100 recovered some of its falls and finished only 3.69 points weaker at 6,630.67.

William Nicholls, dealer at spread-betting outfit Capital Spreads, said: “The upward trend seen over the last four weeks seems to be coming to an end now, particularly with so many indifferent earnings results, and now could be a prime time to take some profit, particularly with any big moves to the upside unlikely from here before the QE quandary is sorted.”

British Airways owner airline group IAG flew to the top of the Footsie, up 6.5p to 288.9p. This followed a rally for airline stocks on Thursday after a positive update from analysts on the sector.

Engineer IMI received a boost from analysts at Citi. It was rated the most-preferred stock and picked up 28p to 1,400p.

Smirnoff vodka-to-Guinness group Diageo was one of the top risers in a weak market following a buy recommendation from analysts at JP Morgan. They upgraded the business to overweight, up from neutral, because they think its wide global reach is a safe haven compared with other stocks exposed to single markets.

Fears of a slowdown in China, and to a lesser extent Brazil, have led many investors to shy away from stocks exposed to the once fast-growing emerging markets. But JP Morgan argued that Diageo is still a good bet because it has “exposure of no more than 4 per cent of group earnings to any individual emerging market”. Diageo advanced 21.5p to 2,046p and JP Morgan raised its price target to 2,150p.

News that a Sheikh Mansour bin Zayed Al Nahyan has sold his shares in Barclays did little to damage the price. The Abu Dhabi sheikh came to Barclays rescue with a £3.5bn investment five years ago at the height of the credit crisis. He sold his 7 per cent stake in the past month but Barclays was the best-performing banking stock yesterday, up 2.95p to 320p

Standard Life was one of the worst performers, down 5.4p to 385p, attributed to news that rival Aviva has poached its investment director Euan Munro. Aviva was 0.3p stronger at 372.3p.

Smartphone microchip designer ARM Holdings took the wooden spoon, falling 23.5p to 897.5p, after it was dragged down by weak results from other technology companies in the States.

On the mid-tier index, defence-technology contractor Chemring declined 22.9p to 298.2p when UBS scribblers took the red pen out and rated it neutral.

Small-cap property group Quintain Estates & Development launched its first-ever bond issue. The £115m bond with institutional investors is part of chief executive Max James’s plan to manage its debts better.

The group, with investments in Greenwich and Wembley, built up a 3p gain to 87.5p.

Aim-listed Sirius Minerals dug down another 4p to 18.5p after publication of a report yesterday questioned the economic case for the development of its planned potash mine in Yorkshire.

Sirius said that it rejected the report, which had been compiled by consultants Amec for the North York Moors National Park Authority. The miner has already asked the authority for a delay in the decision-making process.

West African-focused diamond and gold group Golden Saint Resources, led by Singapore-born entrepreneur Cyril D’Silva, began trading on Aim yesterday and the shares glinted 2p to 12p. The miner raised £3.5m and will use the funding to begin exploration at three licence areas in Sierra Leone.

Buy

Antofagasta

Snap up shares in miner Antofagasta, Westhouse argues. The broker likes its “low cash costs and production growth potential”. It admits weakness will remain in the copper market but this is “reflected in the price, which is at a three-year low”. So it rates it a buy with a 980p price target for shares that are 846p.

Sell

Informa

Flog shares in publisher Informa, Liberum Capital suggests. The broker admits that the recent sale of its corporate training business does “improve the quality of the business” and the hint it could return cash is good news for investors. However, it thinks rival UBM is a better buy at the moment and rates Informa a sell with a 450p price target for shares that are 503.5p.

Hold

Capital & Counties

Hang on to property company Capital & Counties, Jefferies insists. The broker thinks the London specialist’s joint-venture deal with freeholder Transport for London at Earls Court overcomes a major hurdle but there are still risks from dealing with “the long, slow reporting lines at TfL” and “maintaining momentum” is key. So Jefferies rates it a hold for now until there is further detail and gave it a 271p price target for shares that are 348p.