BP shares fell 23p to 610.5p as word went around the market that the company was advising analysts to lower their forecasts for the fourth quarter. While BP denied this was the case, it is true that it had rung analysts to get their estimates ahead of the announcement of its figures on February 5. This seems to have concentrated minds, and as a consequence Merrill Lynch for one has slashed its fourth-quarter numbers - by a hefty 25%. In a five-page note out yesterday, Merrill pointed to a higher tax charge because of the recent surge in the oil price to - briefly - $100 a barrel.
Analyst Mark Iannotti said: "We increase our fourth-quarter tax charge to 43% from 36%. This is largely due to tax that will be accrued in the quarter on significant profits (in excess of $1bn) made on inventory gains. Note that in the fourth quarter of 2006, when the company made roughly the same level of inventory losses as gains this year, the tax rate fell from a 'normal' 35% to 25%."
He has cut his fourth-quarter estimates from $5.9bn to $4.4bn because of the tax charge and also "higher than forecast field commissioning costs and weaker than expected marketing margins". Credit Suisse has lowered its forecasts by a similar amount.
Elsewhere, there was more gloom for retailers after poor Christmas sales from Marks & Spencer. M&S lost 94.25p to 409.25p despite chief executive Sir Stuart Rose and three other directors buying shares after the trading statement. The M&S news hit rival high street chains indiscriminately. B&Q owner Kingfisher fell 10.9p to 115.3p, Next dipped 76p to £13.31, Debenhams lost 8p to 63.75p, Woolworths edged down 0.5p to 11.25p and jeweller Signet was 5.5p lower at 54.25p. Carphone Warehouse dropped 38.25p to 299.75p before a trading update next week. Its shares have been pushed higher on bid speculation and also by talk that its Christmas sales, particularly of the Apple iPhone, would not disappoint. Now investors seem to be less certain, and there was talk of Credit Suisse placing 6m shares on behalf of a shareholder. Others seen as vulnerable included the travel companies. TUI Travel fell 36.25p to 218.75p, not helped by news that German shareholder TUI planned to sell a 9.1% stake in the business. Thomas Cook was 14.5p lower at 231p.
Restaurant Group, the owner of Garfunkel's, lost 55.75p to 119p after it warned it was expecting a subdued performance in 2008.
Overall the FTSE 100 ended 83.8 points lower at 6272.7, while the FTSE 250 dropped below the 10,000 level, closing down 197.6 points at 9964.0.
Housebuilders were unwanted after Persimmon said forward housing sales were down 14%, which overshadowed news that 2007 profits would be in line with expectations. Persimmon fell 6.5p to 645p, Taylor Wimpey 9.3p to 161.8p and Barratt Developments 29p to 333p.
Broadcaster ITV continued its slump, down another 3.8p to 72.2p as Deutsche Bank became the latest to issue a negative note. The bank cut its recommendation from hold to sell and its target price from 100p to 75p.
Investors were keen again on defensive stocks. So AstraZeneca added 67p to £23.01 and GlaxoSmithkline 24p to £13.85. Mining group Lonmin climbed 118p to £33.80, the biggest riser in the FTSE 100, on the back of platinum reaching another record high.
Analyst Mark Iannotti said: "We increase our fourth-quarter tax charge to 43% from 36%. This is largely due to tax that will be accrued in the quarter on significant profits (in excess of $1bn) made on inventory gains. Note that in the fourth quarter of 2006, when the company made roughly the same level of inventory losses as gains this year, the tax rate fell from a 'normal' 35% to 25%."
He has cut his fourth-quarter estimates from $5.9bn to $4.4bn because of the tax charge and also "higher than forecast field commissioning costs and weaker than expected marketing margins". Credit Suisse has lowered its forecasts by a similar amount.
Elsewhere, there was more gloom for retailers after poor Christmas sales from Marks & Spencer. M&S lost 94.25p to 409.25p despite chief executive Sir Stuart Rose and three other directors buying shares after the trading statement. The M&S news hit rival high street chains indiscriminately. B&Q owner Kingfisher fell 10.9p to 115.3p, Next dipped 76p to £13.31, Debenhams lost 8p to 63.75p, Woolworths edged down 0.5p to 11.25p and jeweller Signet was 5.5p lower at 54.25p. Carphone Warehouse dropped 38.25p to 299.75p before a trading update next week. Its shares have been pushed higher on bid speculation and also by talk that its Christmas sales, particularly of the Apple iPhone, would not disappoint. Now investors seem to be less certain, and there was talk of Credit Suisse placing 6m shares on behalf of a shareholder. Others seen as vulnerable included the travel companies. TUI Travel fell 36.25p to 218.75p, not helped by news that German shareholder TUI planned to sell a 9.1% stake in the business. Thomas Cook was 14.5p lower at 231p.
Restaurant Group, the owner of Garfunkel's, lost 55.75p to 119p after it warned it was expecting a subdued performance in 2008.
Overall the FTSE 100 ended 83.8 points lower at 6272.7, while the FTSE 250 dropped below the 10,000 level, closing down 197.6 points at 9964.0.
Housebuilders were unwanted after Persimmon said forward housing sales were down 14%, which overshadowed news that 2007 profits would be in line with expectations. Persimmon fell 6.5p to 645p, Taylor Wimpey 9.3p to 161.8p and Barratt Developments 29p to 333p.
Broadcaster ITV continued its slump, down another 3.8p to 72.2p as Deutsche Bank became the latest to issue a negative note. The bank cut its recommendation from hold to sell and its target price from 100p to 75p.
Investors were keen again on defensive stocks. So AstraZeneca added 67p to £23.01 and GlaxoSmithkline 24p to £13.85. Mining group Lonmin climbed 118p to £33.80, the biggest riser in the FTSE 100, on the back of platinum reaching another record high.
BAE Systems rose 15p to 507p after winning a contract from the US defence department as sole producer of mine-protected vehicles in a programme worth up to $2.3bn in total, while insurer Legal & General was 2.8p better at 130.1p ahead of an investor briefing today, even though analysts at Keefe, Bruyette & Woods downgraded the company in expectation of disappointing news.
Among the mid-caps oil group Imperial Energy added 192p to £17.55, as UBS raised its target price by 3% to £19, while software group Misys climbed 4.75p to 170p after positive notes from Credit Suisse and Seymour Pierce.
Social housing group Mears was 4p better at 254p after winning a £65m repair and refurbishment contract from Birmingham City Council. Analysts at Numis said: "Mears is regaining the momentum in social housing contract wins but is overshadowed short-term by speculation that it may buy Nestor Healthcare." Nestor, down 0.5p at 48.5p, said last week it was in early-stage talks about a takeover.
Secure Design, the Japanese designer of biometric fingerprint authentication technology, fell 7p to 5p. The company warned that profits and revenues for the year would be reduced because of poor trading and bad debts.
UK diagnostics group BBI added 8.5p to 202.5p. The company agreed in December to an £84m all-share takeover from US rival Inverness Medical Innovations. Traders said investors were buying into BBI despite the shares being higher than the offer price because Inverness had climbed in the US.
Biodiesel producer D1 Oils was on the slide yesterday. Its shares dropped 7.5p to 113.5p as Lehman Brothers started coverage of the company with an underweight rating and a 100p target. "D1 Oils benefits from a strategic joint venture with BP and a platform on which to deliver potential substantial output in 2009 or 2010," the bank said. "However, the company and the rest of the biofuel area face significant concerns. These relate to the sustainability of the industry and the prospect that the carbon savings are actually more attractive for wind and solar names. In the near term, we believe that sentiment and regulatory changes present further downside risk for biofuels."
Among the mid-caps oil group Imperial Energy added 192p to £17.55, as UBS raised its target price by 3% to £19, while software group Misys climbed 4.75p to 170p after positive notes from Credit Suisse and Seymour Pierce.
Social housing group Mears was 4p better at 254p after winning a £65m repair and refurbishment contract from Birmingham City Council. Analysts at Numis said: "Mears is regaining the momentum in social housing contract wins but is overshadowed short-term by speculation that it may buy Nestor Healthcare." Nestor, down 0.5p at 48.5p, said last week it was in early-stage talks about a takeover.
Secure Design, the Japanese designer of biometric fingerprint authentication technology, fell 7p to 5p. The company warned that profits and revenues for the year would be reduced because of poor trading and bad debts.
UK diagnostics group BBI added 8.5p to 202.5p. The company agreed in December to an £84m all-share takeover from US rival Inverness Medical Innovations. Traders said investors were buying into BBI despite the shares being higher than the offer price because Inverness had climbed in the US.
Biodiesel producer D1 Oils was on the slide yesterday. Its shares dropped 7.5p to 113.5p as Lehman Brothers started coverage of the company with an underweight rating and a 100p target. "D1 Oils benefits from a strategic joint venture with BP and a platform on which to deliver potential substantial output in 2009 or 2010," the bank said. "However, the company and the rest of the biofuel area face significant concerns. These relate to the sustainability of the industry and the prospect that the carbon savings are actually more attractive for wind and solar names. In the near term, we believe that sentiment and regulatory changes present further downside risk for biofuels."
By Nick Fletcher
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