A market rally off the back of the capture of Saddam Hussein proved shortlived yesterday as late selling of tobacco and highly liquid telecoms stocks brought the market back to parity.
The FTSE 100 closed just 0.4 points better at 4,348, having sported a 50-point gain in early trade. However, the mid-cap FTSE 250 added 0.4 per cent gain at 5,714.3. Volume was a touch light at 2.5 billion shares.
Even a tentative rally in travel-related stocks largely melted away, although British Airways clung to a gain of 2.3 per cent at 2291/4p and Carnival, the cruise operator which reports full-year results on Thursday, rose 0.8 per cent to (pounds) 22.30.
Lloyds TSB, rose 2.8 per cent to 416p as fears the high street bank might have to cut its generous dividend receded after it said full-year trading was in line with market expectations.
HBOS, which is due to update the market today, added 1.5 per cent at 718p. With bad debts one of the main concerns at HBOS, the UK’s largest mortgage lender, an improvement in bad debts at Lloyds was well received.
Wm Morrison rose 2.9 per cent to 2291/2p as it offered (pounds) 3 billion for rival Safeway, 1.7 per cent better at 2881/2p.
Energy supplier Centrica continued its recent rally to finish up 2.8 per cent at 211p, having gained more than 7 per cent in the past three trading days. There was talk of hedge funds that have shorted the stock getting squeezed as they scrambled to buy back stock and limit their losses, as well as speculation that Centrica may be a takeover target.
Tobacco stocks were weaker after HSBC cut its rating for Gallaher to “add” from “buy” and reduced its target price for Imperial Tobacco after the German government rebutted the European Commission’s directive to increase taxes on other tobacco products. Imperial fell 2.9 per cent to (pounds) 10.56 with Gallaher off 2.8 per cent at 5821/2p.
Among the mid caps, WH Smith fell 6.5 per cent to 2771/4p amid mounting fears of a dividend cut given rumours of poor Christmas trading.
Troubled discount retailer Matalan, which unnerved the sector with a profit warning last week, fell a further 6.6 per cent to 167p.
