CFD Traders Diary
A severe wing clipping at British Airways
22/5/2009
All the flying metaphors are in use today for British Airways (BAY), and unfortunately for bulls, all refer to descent e.g. tailspin, severe turbulence, perfect storm etc. The flagship carrier announced its first loss in 7 years, and while this may have been factored in by the stock market, it has had a negative impact on the share price, currently down some 5%. BA turned a £900m profit last time into a £400m loss, thanks to last summer's high fuel prices and a slump in passenger and cargo volumes. Even the collapse in the price of crude oil came too late to turn BA's fortunes around. An overall lack of guidance hasn't helped the brokers either, with Charles Stanley perhaps rather generously rating the stock a "hold."
After yesterday's orderly rout, thanks to Standard & Poor's "negative" credit rating, the FTSE 100 and leading stocks regained some of their composure this morning, finding support above the 4,300 level. Indeed, as much commentary in the markets was of the downgrade, as of the organisation which had delivered it. Miners led the way higher, boosted by the push higher in metals prices after a recent rough patch. Gold in particular is now above $950 an ounce, with the best of the gainers in the sector being Eurasian (ENRC), Rio Tinto (RIO) and silver group Fresnillo (FRES). Multiple price target hikes by Credit Suisse throughout the sector resulted in typical gains of between 5% - 7%,
Real estate group Brixton (BXTN) was the hottest play in the FTSE 350 as its shares rose by over 20% on the back of some M&A rumours. Brixton admitted it had received multiple takeover approaches, and sector scrutineers will already know that several big players have already said they are looking to bottom fish the property market. This may be yet another positive sign heralding the end of the property downturn. Goldman Sachs had its eye on the housebuilders to end the week with a buy rating on Barratt Developments (BDEV), and price target lifted from 155p to 195p, and a neutral rating for Berkeley Group (BKL). The upgrade lifted shares in both companies by 2%.
