London's leading shares ended the last day of the quarter lower as profit taking in heavyweight miners and the collapse of ITV bid talks offset a better-than-expected early session on Wall Street.
The FTSE 100 index closed just off the lowest level of the day, down 50.6 at 5,964.6, having given up an early morning high of 6,019.2. Volume was solid with 2.9 billion shares changing hands in 328,088 deals.
Wall Street gained ground in early trade after the latest economic data eased interest-rate concerns, with a pullback in crude-oil prices also lending some support. Market sentiment took a turn for the better after data showing a rise in US consumer spending in February, and a modest increase in personal incomes, a factor that eased wage inflation fears.
By London’s close, the Dow Jones was up 20 points at 11,170.
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In London, ITV was the top blue chip casualty, down almost 5 per cent or 5.75p at 119.25p as a consortium led by Goldman Sachs pulled the plug on buying the broadcaster.
Earlier today, ITV rejected a sweetened 130p per share takeover proposal from the consortium, which added a new 44p cash element to its previous offer.
Apax Partners, Blackstone and Goldman Sachs had initially been proposing create an unorthodox partnership between themselves and shareholder, whereby the predators would take 48 percent of the company in return for £1.3 billion in equity, then load up with debt and return 86p per share to shareholders. Its first offer had been pitched at 120p per share.
Shareholders were not to be swayed by what was essentially a nil-premium offer from the consortium, whose main selling point appeared to be that Greg Dyke, the former BBC director general, would be installed into the chief executive's chair. "No point changing horses mid-stream," one investor commented.
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Carphone Warehouse rose 2.5p to 309p. The company is due to host a strategy meeting on April 11 where, according to industry gossip, it will outline a scheme to bundle internet services in with its existing voice and mobile subscriptions.
"Carphone has an unrivalled opportunity to be a truly disruptive pricing force in the provision of residential broadband," said Merrill Lynch in a morning note. "We believe that Carphone could break-even at exchange level with an ARPU (average revenue per user) of just £12. Its shared access rivals currently enjoy ARPU of £30 to £40."
Merrill reckoned that, if Carphone can sign up 625,000 of its 2.5 million TalkTalk voice line customers for a triple-play offer at an ARPU of £25, it could more than double earnings at the group's telecoms services division. "Such an outcome .... would force investors to value the group with reference to other triple play operators such as Iliad and Fastweb," said the US broker. It retained "buy" advice on a share-price target hiked to 375p.
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Leading the FTSE 100, Man Group closed up 61p to £24.65 after it said its annual profit is set to beat market forecasts, helped by a strong performance by its funds. The hedge fund manager said it expects profit for its year through March to come in ahead of the current analyst consensus of £1.197 billion.
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There were also strong maiden results from New Star Asset Management. The fund manager posted 2005 operating earnings 82 per cent to £46.1 million, topping its own pre-flotation guidance of £43 millon. Shares closed up 7p to 417p.
"Subject to movements of financial markets and to external events, New Star is on course to achieve a significant advance in operating profits in 2006," it said.
Read New Star's statement here.
Elsewhere on the leaderboard, Marks & Spencer added 3.5p to 556.5p after it revealed plans to sell Kings Super Markets to a US investor consortium, for £61.5 million in cash. The retailer has tried and failed to sell Kings twice before.
The price tag was below the £67 million M&S paid for it last decade, and was equivalent to just 9 times annual earnings for the division. Still, analysts were glad to see the back of it.
"Although very small in a group context, the disposal of Kings represents the last part of M&S's refocusing programme and removes an operation that is strategically challenged," said Citigroup.
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William Hill firmed 17p to 599.5p after UBS raised its rating on the bookmakers to "buy" from "neutral".
The Swiss broker argued that the UK betting sector "offers good value" and should feel the benefit of the World Cup and online growth this year. But it noted that William Hill shares had gained just 8 per cent so far in 2006, compared with a 17 per cent underlying gain for peer Ladbrokes (that figure discounts Ladbrokes' 240p special dividend, which due to be paid next month).
If William Hill was given the same valuation to earnings as Ladbrokes it would be worth 765p, UBS calculated.
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Bluetooth chip designer CSR climbed 65p to 1,200p at the close, after Nokia yesterday raised its 2006 handset growth estimate by 15 per cent, versus prior guidance of 10 per cent. That implies 915 million units.
CSR is the biggest supplier of Bluetooth chips to Nokia so the growth forecast was seen as positive for sentiment, if not for earnings forecasts. Much of Nokia's expected growth will be coming from emerging markets in Asia and Africa, where bells and whistles such as Bluetooth compatibility will likely be sacrificed to keep unit costs low.
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Peter Hambro Mining moved lower, with shares dropping £78p to 1,362p after it warned that 2005 net profit would fall about 15 per cent from 2004.
"Our preparation for further expansion, combined with significant input cost increases for all key raw materials, have impacted the earnings of an otherwise excellent year in which gross sales rose by about 33 per cent," it revealed.
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Shell dipped 13p to 1,872p and BP closed 9p lower at 661p ahead of a trading statement due Wednesday. New York's benchmark crude contract was lately at $66.73 a barrel, having reached $67.15 late yesterday, its highest reading in nearly two months.
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Shanks Group, the mid-cap listed waste management group, drifted 1.25p lower to 177p after it said that overall trading for the year would in line with expectations, but for a small additional accounting charge.
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Among the small caps, Kingston Communications slumped 7.25p to 59.75p after admitting that discussions related to an unsolicited potential offer for the company have ended because the parties failed to agree on price and structure.
The telecoms company had said in November it had received a bid approach, which was rumoured to have beem from US private equity house Carlyle. Kingston also warned today that revenues and earnings will be below market expectations in its Affiniti business division.
For detailed information on Kingston, click here.
Selected mining stocks drifted lower even as as metals prices pushed further into record-high territory. Rio Tinto slid 59p to 2,922p BHP Billiton retreated 20p to 1,051.5p and Anglo American was off 28p to 2,218p.
The resources sector had powered yesterday's rally, with an extra push coming late in the day when Morgan Stanley printed a research note arguing that high prices would last for another decade. The US broker argued that the two-year-old metals bull run was only reaching its second stage, when prices will be kepy high by supply constraints rather than rising demand.
Not so, argued JP Morgan. It reckoned supply and demand has only a small effect on metals trading, which tends to be determined by financial market influences. Currency movements account for about 60 per cent of price volatility, with the remainder defined by interest rates as much as by demand fundamentals, the US bank's team calculated.
A weaker dollar makes greenback-denominated metals contracts cheaper to buy for investors using other currencies. And low interest rates encourage so-called carry trades, where investors guarantee profit by borrowing to invest in securities with higher yields than the lending rate. Carry trades are relevant to the metals futures markets because the contracts usually trade in backwardation, meaning prices for immediate delivery are higher than in distant delivery months.
In an effort to track the distorting effect of these carry trades, JP Morgan today revealed its metals price "barometer". It measured the differerence between interest rates and futures contract backwardation over the past decade, then folded the results into a graph of inventory data.
The conclusion was that, during the current bull run, falling interest rates worldwide had created most favourable period for carry trades in 15 years. That position is now closing due to the recent sharp increase in borrowing costs, it said.
JP Morgan told clients that its barometer "accurately sent out warning signals near the top of metal cycles/sub-cycles in 1996, 1997 and 2001, but it also has signaled that this current bull market would have ended six months ago".
It continued: "We ask ourselves if we should conclude that this barometer ought to be consigned to the waste-bin, or if it is as reliable as a blood pressure check and is warning that the patient has simply been lucky to escape a heart attack so far."
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Elsewhere on broker watch:
Merrill Lynch rated Qinetiq a "buy" in new coverage, with a target price of 240p.
ABN Amro raised EMI to "buy" from "hold".
And BNP Paribas cut London Stock Exchange to "neutral" from "outperform".
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