IT doesn’t take long in a bear market for defensive stocks to find their way back into investors portfolios. Take British American Tobacco, up 18p at 1898p today after Credit Suisse repeated its outperform rating and jacked up its target from 1800p to 1950p.
The broker thinks BAT current valuation is underpinned by the group strong defensive attributes, and believes its fundamental strengths stand out in the current market. It has slightly raised its 2007-12 forecasts for the group, and still sees scope for further modest upgrades in 2008.
Rival Imperial Tobacco was also blowing smoke rings at the stock market bears as its shares rose 25p to a record 2564p after positive comments by Deutsche Bank.
The bears were feeling the squeeze elsewhere, as prices rallied after several days of losses. Investors have convinced themselves that the Bank of England monetary policy committee will choose to ignore inflationary pressures and cut interest rates by a quarter-point tomorrow to bail out hard-pressed banks and borrowers.
If it decides against a cut in rates, be prepared for another sell off. The low levels of turnover indicate that today rally is likely to prove short-lived anyway. The FTSE 100 index today rose 83.5 to 6398.7 while the FTSE 250 index bounced back from yesterday drop with a gain of 129.5 to 10,398.
Xstrata was up 72p at 3392p ahead of a presentation in the City today. The Anglo-Swiss miner has joined the bidding for Australian owned coal producer Resource Pacific Holding. Xstrata offer is worth $408 million and it has agreed to buy Marubeni Corp stake, taking its holding to 15.6%.
Anglo American put on 80p at 3198p amid suggestion from Credit Suisse that it may bid for Vedanta Resources, 57p better at 2281p. Rio Tinto rose 110p to 5625p, fuelled by talk of a bid by Chinese steelmakers designed to block the approach from BHP Bilton, up 33p at 1596p.
Housebuilders perked up after a slow start on the back of the biggest drop in house prices for five years Bellway, down 6p at 896p, gives a trading update tomorrow. Barratt Developments, which reports on Friday, rose 22p to 463p, Taylor Wimpey 7.9p to 195.4p, and Persimmon 22p to 782p.
The Competition Commission has given the green light to the $74million takeover of Games Station by Games Group, up 25p at 205p. Game and Games Station are the biggest retailers of video games and video consoles in the country, but the Commission concluded the merger would not lessen competition. Altium has repeated its buy rating and 240p target on Game Group.
Capita, current operator of the London congestion charge, firmed 2p to 716p as Citigroup set about placing a parcel of $3.6 million shares in a bookbuilding exercise.
Merrill Lynch has cut Standard Life, down 1% at 261p, from buy to neutral. The broker has downgraded its earning estimates by an average of 2%.
Fashion retailer Moss Bros fell 5p to 33p on the back of its profit warning. Numis says the news could have implications for other retailers, such as Next, 43p dearer at 1750p, Marks & Spencer, up 12p at 595p, Debenhams, down 3p at 84p, and French Connection, 5p cheaper at 89p.
Fashion brand Hot Tuna, off 0.25p at 6.75p, has completed a placing of $5.42million shares with an institution at 6.65p a share.
It was the first day of dealing on AIM for FoaMasters International, a maker of polyurethane foam and finished products for retailers such as Wal-Mart, Ikea, Litterwoods and Land of Leather. The shares opened at 39.5p following a placing that raised $5million ($2.4million).