Banking bounce stalls on Barclays downgrade

A RALLY by the troubled banking sector was held back today by a downgrading in shares of Barclays, which responded with a fall of 24p to 2207p after briefly touching 2190p.

Broker UBS Warburg has lowered its recommendation on the shares from buy to hold because it believes they are too expensive, but it maintained its 12-month target price of 2300p.

The Swiss-owned broker is also concerned that Barclays chief executive Matt Barrett may be about to hit the acquisition trail. Only last year it bought mortgage lender Woolwich.

Rival broker Charterhouse Securities yesterday repeated its sell recommendation on the shares, but raised its fairvalue price from 1707p to 1915p.

The sector has made a poor start to 2002, overshadowed by the collapse of the Argentinian economy which has led the government there to default on loans totalling billions of pounds.

Abbey National, off 4p at 1014p, has already admitted to writing off loans worth pounds 115 million and yesterday HSBC, 11/2p firmer at 7751/2p, declined to comment on reports that its exposure to Argentina could be as high as pounds 1.3 billion.

Broker WestLB yesterday downgraded HSBC from underperform to sell and slashed fair value from 706p to 632p.

Lloyds TSB fell 31/2p to 7091/2p but Royal Bank of Scotland put on 15p to 1710p and HBOS added 101/2p to 8071/2p.

The rest of the market opened on a flat note, reflecting a fall of almost 100 points for the Dow overnight in New York and fresh losses in the Far East today. The FTSE 100 fell 7.8 to 5105.7 - its seventh consecutive day of decline - in thin, scrappy trading. All eyes will be on key US retail sales data today.

Speculators who have been punting debtladen Marconi were counting their losses as the price slumped 33/4p to 35p on turnover of more than 70 million shares.

The telecom equipment supplier is sacking a further 4000 workers in an effort to cuts costs and reduce its pounds 3.5 billion debt.

It also warned that third-quarter sales had fallen sharply on the previous year.

Broker Williams de Bro has downgraded the shares from hold to sell, and whispers circulating in the Square Mile claim one of the German banks has slashed its target price to just 10p.

Broker ABN Amro was behind the push in drinks giant Diageo, up 18p at 787p, making it the best performer among the top 100 companies.

South African Breweries fell 53/4p to 4711/4p. It says beer volumes remain "slightly ahead" of last year and believes volume growth for the year will be similar to that of the first six months.

The City is worried about the group's exposure to a weak rand.

Business support services group Amey firmed 31/2p to 394p after saying full-year profits will be in line with City expectations. US securities house Morgan Stanley is telling clients to buy ahead of those results in March and expects the uncertainties relating to London Underground to abate during the next couple of months.

Contract caterer Compass firmed 111/2p to 503p on the back of positive comments from Morgan Stanley. It says it prefers Compass to its French rival Sodexho.

Industrial services firm Delta slipped 31/2p to 1101/2p after it emerged that a pounds 5.8 million restructuring charge would be included in this year's results.

Prices and indices in this section are supplied from various sources and calculated at different times and may not always match those listed in the tables. Ofex prices relate to the previous close.

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