British Airways is moving higher after a buy note from Merrill Lynch, with its shares up 3.9p at 143.2p The bank said:
"We think a combination of BA's low valuation and more positive newsflow over the next 12 months could provide significant upside for the shares. This newsflow could include potential upside from merger and acquisition activity (a merger with Iberia and a joint venture with American Airlines) and lower operating costs (including labour and a decline in fuel costs reflecting lower hedging).
"Recent comments from BA and Iberia management were more encouraging and suggested prospects of a merger were "definitely possible."
"Against the difficult near-term trading backdrop, share price performance may remain volatile. We think the current trough valuation reflects the low point in the industry cycle and does not discount any potential benefit from further capacity reductions, cost savings and M & A synergies. We expect further details at the Annual Investor Day on the 5th March."
Overall though the market has dropped back ahead of UK bankers attending a select committee hearing, and the unveiling later of the US government's bank bail out plan.
The announcement of huge losses from Swiss bank UBS has hit sentiment in the sector, with Royal Bank of Scotland down 1.2p at 23.6p, Lloyds Banking Group 3p lower at 97.5p and Barclays down 5.7p at 110.5p.
Miners are also weaker on a dip in metals prices on concerns about the economy ahead of the US stimulus package. So Kazakhmys is down 37.25p at 284.25p, while Xstrata has lost 70.5p to 724p.
With all that the FTSE 100 is now down 76.56 points at 4231.05. Chris Hossain at spread betters ODL Securities said:
"The markets have been in a state of paralysis waiting for the much anticipated revamping of the US Banking bailout, so today's announcement by US Treasury Secretary Tim Geithner will hopefully allow a trend to form, be it up or down. One can't help but feel that today could be pivotal in dictating the direction for the next 12 months."
