The FTSE 100 nudged a new intraday high for 2009 this morning, despite rumours of a cash call at Severn Trent.
The water utility firm leads the Footsie fallers, down 2.5% or 25.5p at 972.5p. Traders pointed to a note issued yesterday by Evolution Securities, which predicted that Ofwat's draft determination for allowed water sector price increases for 2011-2015 might force Severn Trent's interest cover (ratio of profits to debts) too low.
Raising fresh funds through a rights issue would help keep Severn Trent's interest cover up, but Evolution believes the dividend could also be cut.
There are also fears that other utility firms could find themselves in the same position, and this helped to push United Utilities 2.5% lower to 453p. In the FTSE 250, Northumbrian Water has lost 2.5% to 248p.
Eurasian Natural Resources Corp is finally feeling the benefits of yesterday's upgrade from Citigroup. It is leading the risers, up 5.2% or 45.5p at 920.5p. Citi raised its rating on ENRC from 'hold' to 'buy' after it agreed a deal to buy the former cricketer Phil Edmonds' business, Camec.
With other miners rallying, the FTSE 100 hit 5189.88 this morning. It is now trading at 5180.95, up 46.59 points or 0.91%.
Manus Cranny, senior market commentator of MF Global Spreads, has a lingering doubt that this rally is the real thing:
"The facts of the market seem quite difficult to palate in isolation that is a tumbling US dollar, a crashing pound, rising unemployment, oil nudging achingly higher and quantitative easing being operational but by all accounts not making its way through to the end user. Thus we have rising commodity prices bolstering the FTSE 100 along with the oil and gas components, added to which we have some fairly substantial merger and acquisition activity.""All in all clients are beginning to ask if these are the fundamentals should we really be up 45-50% from the March lows."
In the FTSE 250, Bluebay Asset Management is down 4.4% at 285p, a drop of 13p. That is despite UBS hiking its target price from 255p to 310p. Bluebay's shares stumbled late last week, after its profits fell and two directors said they would sell three million shares.
Aveva is the next biggest faller at 899p, down 31p or 3.33%. Piper Jaffray cut its rating on the engineering software group to 'underweight' from 'neutral'.
Construction stocks have not been badly hit by this morning's £130m fine for bid-rigging from the Office of Fair Trading. Carillion is off 1.8% at 282.9p, while Balfour Beatty has lost 1.3% at 335.5p.
