Pearson missed out on a London market rally amid fears that results next month from the publisher might require another cut to earnings guidance.
Exane BNP Paribas downgraded Pearson to “neutral”, sending the shares 1 per cent lower to 774p. Destocking by US bookstores means textbook sales appear to have shown no improvement since July when key competitor Wiley warned on demand going into peak selling season, Exane told clients.
“After last year’s shock profit warning, Pearson has needed to deliver on expectations to rebuild confidence. However, the US higher education courseware market looks weaker than expected despite signs of an improvement in enrolment over the summer. This raises the risk of a further setback at the third-quarter results,” Exane said.
Mining stocks led the wider market sharply higher after dovish signals from the Federal Reserve weakened the dollar and lifted gold. The FTSE 100 added 1.1 per cent, up 76.63 points, to 6,911.40.
Glencore led the FTSE gainers, up 5.5 per cent to 207.9p. Liberum took Glencore off its “sell” list in response to China’s restrictions on coal production, which triggered a sudden tightening of seaborne coal markets.
While Glencore might still suffer as copper prices weaken, the stock looks better positioned than its iron ore reliant sector peers as the group reduces debt, stabilises its marketing business and moves towards paying a dividend next year, Liberum said.
Power station owner Drax, which was ex a 2.1p dividend, edged 0.7 per cent lower at 312.8p after Jefferies downgraded to “underperform” as part of a sector review.
Jefferies forecast 10 per cent downside in UK power prices due to weakening demand and a surge in capacity from renewable generation and cross-border interconnectors.
Estate agent Countrywide was down 3.2 per cent to 219.1p. Barclays cut its target on Countrywide to 250.5p to reflect what it called “a Mexican stand-off” between buyers and sellers in London. It forecast second-half transaction volumes to slump 32 per cent in London and by 15 per cent outside the capital.
Separately, Countrywide said it had completed the sale of its stake in Zoopla, the property website, at an average price of 317p a share. Zoopla ended 0.3 per cent weaker at 333p.
Chip designer Imagination Technologies was up 4 per cent to 263.5p as Takeover Panel restrictions on Apple, its biggest customer, expired. It was six months to the day since Apple said it had held acquisition talks with Imagination but did not “plan to make an offer for the company at this time”.
Having started 2016 at a six-year low, Imagination has jumped 150 per cent on hopes that it will be the chip sector’s next consolidation target.
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