By Sarah Turner
LONDON (Dow Jones)-- British stocks ended with a small loss
Tuesday, as a weaker tone for insurers and banks offset gains by
media giant Thomson Reuters and drugmakers.
A rout on Monday sent the FTSE 100 index down to levels last
seen in April. On Tuesday, London's top index lost another 4.03
points, or 0.1%, to close at 4,230.02.
In the insurance sector, Legal & General shares fell 7.9%
after Societe Generale cut its rating on the insurance firm to sell
from hold, saying the shares have had a strong performance since
the recovery in equity markets in March.
This rebound, the investment bank said, has cut the risk of a
capital increase, but L&G still has the highest exposure to
equities among U.K. life insurers it covers. It also has lower
provisions against bond defaults.
A weaker-than-expected rise in U.S. existing home sales helped
send equity markets lower for the day. In the banking sector,
Lloyds fell 4.2%, while Standard Chartered fell 3.4%.
On the upside, Thomson Reuters (TOC)(TRIN) rose 3.6%, making the
firm one of the top advancers on a plan to consolidate its separate
share classes into a single one.
Thomson Reuters, which will be de-listing from the London Stock
Exchange and the Nasdaq while keeping listings on the Toronto Stock
Exchange and the New York Stock Exchange, will swap one Thomson
Reuters Corp. share for each Thomson Reuters plc share. The firm
may buy back $500 million of its shares.
Analysts at Deutsche Bank noted that Monday's closing prices
imply 8% upside for the plc shares.
"Assuming that there is some flowback due to plc holders unable
to hold the Corp., the Corp. line will trade down modestly and the
plc up in order to close the gap," they said.
Drugmakers were one of the best performers by sector, with
GlaxoSmithKline (GSK) shares up 1.6% and AstraZenenca (AZN) shares
up 0.9%.
The sector is perceived as less sensitive to underlying economic
trends, as it sells essential products.
Anglo American rejects Xstrata
Shares of mining giant Anglo American fell 2.7%, after it
rejected an offer proposal from rival Xstrata late Monday.
Brokers were weighing up the situation on Tuesday, with Merrill
Lynch upgrading the firm to buy from underperform.
"Our simple merger analysis implies material potential value
could be unlocked by Xstrata from operational synergies and tax
savings," the broker said.
However, Investec Securities downgraded the firm to sell from
hold, citing recent share price performance and the firm's outright
rejection of Xstrata's proposal.
"While we do agree with Anglo's assessment . . . we think that
many Anglo shareholders would have wanted Anglo to more explicitly
explore a deal with Xstrata," it said.
Xstrata shares trimmed early gains to finish 0.8% higher.
BSkyB shares advance
Still, shares of British Sky Broadcasting climbed 3.1% after
ESPN acquired Setanta's Premier League soccer rights.
"We see this as a positive outcome insofar as the re-auctioning
of the rights posed potential risks to Sky," said analysts at
Jefferies International.
News Corp. (NWSA) owns a 39% stake in British Sky Broadcasting
and is also the parent company of MarketWatch, the publisher of
this report.
Shares of retailer Burberry rose 3.5% outside the top index
after Morgan Stanley upgraded the firm to overweight from
equalweight.
"We think it has the potential to take share in a fragmented
market as its brand position will make it more attractive versus
high-end luxury peers," the broker said.
Morgan Stanley also upgraded pub operator J.D. Wetherspoon ,
this time to overweight from underweight.
Shares in the firm climbed 6% after the broker said that it sees
it as a "long-term winner in the pub industry" and that refinancing
risks are well reflected in the price.
On the downside, Aggreko shares fell 6.2% outside the top index
after the supplier of temporary power said that it still expects to
report a flat profit in 2009 compared to a year ago.
There has been some pressure on rates, the firm noted, and it
expects conditions to remain challenging in its local business
unit.
Services Desk; Dow Jones Newswires; +44-20-7842-9319/9274