Friday’s Stock Market report featuring Diageo, BT, Inchcape and Newmark Security

The Markets

The Eurozone has seen a rise in the level of deflation during January, as prices dropped to a level 0.6% lower than a year ago, according to the latest flash estimate from Eurostat. This is against analysts’ expectations, with a Reuters poll suggesting that consensus forecasts were looking for 0.5% inflation. Teumis Brosens from ING Financial Markets said that the figures “fully vindicate the ECB’s decision to embark on QE. That said, QE will not raise inflation in the coming months. Unless oil prices stage a quick recovery, the energy component will keep headline inflation well below zero in the months ahead. But the key number to watch in the coming months is core inflation. Any further falls may raise concerns that QE has come too late to stave off deflation”.

The Russian rouble has fallen further against the US dollar after the country’s central bank cut interest rates from 17% to 15% just weeks after a 650 basis point increase in base rates. The bank said that it was worried about consumer price growth and a cooling economy in a statement that accompanied the decision. Western sanctions mean that Russian financial firms are locked out of international markets and the fall in oil prices over recent months is also impacting the economy.

At the London close the Dow Jones had decreased by 130.92 points to 17,285.93 and the Nasdaq fell by 1.94 points to 4,179.41.

In London the FTSE 100 closed down by 61.20 points at 6,749.40 and the FTSE 250 fell by 53.25 points to 16,305.77. The FTSE All-Share decreased by 28.45 points to 3,621.81 while the FTSE AIM Index rose by 3.86 points to 689.94.

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Broker Notes

Cantor Fitzgerald reiterated its “buy” rating on mining and exploration outfit Trans-Siberian Gold (TSG) and set its target price at 35p after a period of the shares being under review. The broker said that the firm ended 2014 with a record quarter of production, driven by the highest average head grade in recent years. Fourth quarter production comprised 10,310 ounces of gold and 11,939 ounces of silver, 23.1% and 15.2% higher than in 2013. The shares fell 0.25p to 14p.

Oil and gas exploration outfit Bowleven (BLVN) retained its “buy” rating from Westhouse Securities after news that it has received a signed presidential decree for the transfer of assets involved in the Etinde farm-out process. The farm-out is expected to deliver around $170 million (112.7 million pounds) in cash upon completion with further deferred payments and drilling carry also involved. Bowleven shares rose by 3p to 28.75p.

Beaufort Securities has rated drinks maker Diageo (DGE) as a “buy” after yesterday’s half yearly results for the period ended 31st December. The broker is positive that steps have already been taken to control costs and improve long term earnings, but has lingering concerns around declining volumes in key US markets as consumer preferences shift to other spirits. The shares fell by 52.5p to 1,970p.

Broker expects brewer to fix

Blue Chips.

Sales in the three months ended 31st December at telecoms outfit BT Group (BT.A) fell by 3% to 4,475 million pounds despite strong take up for its openreach products. The market for broadband internet in the UK remains highly competitive, but BT is now able to offer superfast coverage in over three quarters of the country. Statutory profits before tax grew by 12% to 694 million pounds. Broker Oriel Securities has a 530p target on the shares, which fell by 11.2p to 417.9p.

What do falling revenues at BT signal?

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Mid Caps

Diversified metals business Vedanta Resources (VED) traded strongly during the three months ended 31st December, posting EBITDA of $1.02 billion (0.68 billion pounds) after seeing good zinc production at its Indian operations. Oil and gas production also returned to normal levels after planned maintenance shut downs, while new aluminium pot-lines ramped up. Shares in the firm grew 2.4p to 373.4p.

Automotive distributor and retailer Inchcape (INCH) announced the appointment of Stephan Bomhard as its CEO with effect from the 1st of April. Bomhard holds a marketing PhD and is currently European President of Bacardi. He has previously held positions at Cadbury, Unilever, Diageo and Proctor & Gamble. The board believes his style and approach will fit the firm’s existing culture. The shares rose by 2.5p to 697p.

From drinks to driving for new Inchcape CEO

Small Caps

Media and music retail firm Mood Media (MM.) announced the cancellation of trading in its shares on AIM as the company believes that the present and future benefits are exceeded by the costs associated with the listing and the related compliance burdens. Mood Media’s last day of trading on AIM will be 27th of February and the firm will maintain a listing on the TSX. The shares fell by 3p to 24.5p.

Livestock trader John Swan and Sons (SWJ) saw its pre-tax profits for the six months ended 31st October improve to 329,798 pounds, up from a 212,370 pounds loss in 2013, driven primarily by gains arising from the sale of the lairage field at Chesser, Edinburgh. Core livestock trading profits were around 20% lower than the prior year as prime cattle and sheep returns fell. The shares ended the day flat at 1,262p.

Emission reductions specialist Camco Clean Energy (CCE) made significant progress towards commercial production on its REDT Clean Energy Storage during 2014 as well as winning a contract to build a 1.26MW wind energy storage facility in Scotland. The group expects to report a substantially smaller net loss than in 2013, exceeding management expectations for the year. Camco shares rose by 0.375p to 5.5p.

Equipment design and manufacturing outfit Newmark Security (NWT) recorded revenues of 11.9 million pounds for the six months ended 31st October, a 34% increase on the equivalent period of 2013, driven by the acquisition of CSI at the start of November last year. Profits from operations before exceptional items were 1.5 million pounds. Following the end of the period, the company has received a new 4 million pounds loan from a high street bank. The shares climbed by 0.65p to 2.68p

Health and social care infrastructure firm Ashley House (ASH) saw revenues for the six months ended 31st October tick up slightly to 5.6 million pounds, but the pre-tax loss widened to 1.9 million pounds due to financing costs and number of major impairments. Management said that the firm’s extra care developments were taking longer to complete than forecast due to difficulties in securing funding. The shares fell by 1.875p to 5.25p.

Are Ashley House’s foundations crumbling?