Leading shares have dipped back into negative territory, with Barclays the biggest faller after a broker downgrade.
The bank’s shares have dropped 4.55p to 253.90p as Investec moved from buy to hold. Analyst Ian Gordon said:
In truth, the main plank of our investment case for buying Barclays over the past year has been its extreme relative and absolute cheapness, reinforced by an absolute cost reduction story and the material foreign exchange tailwind in evidence in the third and fourth quarter 2014 results, which, we believe, is likely to continue in 2015.
However, now trading on 0.9 times 2015/16 estimated tangible net asset value, we think the valuation case is no longer overwhelming in the context of our deteriorating expectations for the scale and pace of return on equity recovery.
Meanwhile SABMiller has fallen 31p to £36.34 on talk that Brazilian private equity firm 3G Capital would be less likely to make a move on the brewer, given it is now interested in US food group Kraft.
Mike van Dulken, head of Research at Accendo Markets, said:
[The Kraft] talks likely imply a previously mooted £75bn bid for SABMiller being off the table, in the near-term at least, from competitor Anheuser-Busch InBev and partner 3G (which controls a 21% Budweiser stake since the 2008 Belgian-US merger), flattening some of the sector M&A fizz which had been bubbling for a while even if SAB’s prospects remain strong thanks to an enviable emerging markets growth story.
Overall the FTSE 100 has lost its early gains and is now down 9.22 points at 7010.46.
