FTSE 100 movers: Sage gains on upgrade; packaging stocks take a hit
London's FTSE 100 was down 1.1% to 7,159.68 in afternoon trade on Wednesday as the pound popped higher on Brexit hopes.
A day after it was downgraded by Barclays, Sage Group got a boost as Deutsche Bank lifted the software company to 'hold' from 'sell', highlighting the valuation and the potential for private equity interest.
Deutsche noted that the shares have fallen 16% over the past two months and now trade at 16x the bank's FY19 earnings per share estimates, which is the low end of its five-year valuation range.
"While competition is rising, we believe Sage has a relatively sticky, defensible product set and forecast mid-single percentage EPS compound annual growth rate over the next three years, along with a 3% yield."
On the downside, paper and packaging stocks DS Smith, Mondi and Smurfit Kappa were under the cosh after Goldman Sachs downgraded US-based peer International Paper to 'neutral' from 'buy'.
The move lower also came after it emerged that a US subsidiary of Hong Kong's Nine Dragons will invest $300m into its new mills in Wisconsin and Maine.
Luxury fashion brand Burberry was weaker amid concerns about Chinese demand for luxury goods as Morgan Stanley suggested it may have peaked.
The bank downgraded its stance on the EU luxury goods sector to 'underweight' from 'neutral', noting that Chinese consumer confidence - traditionally a good indicator for the sector - appears to have peaked. The bank added that its China economist Robin Xing expects Chinese consumption trends to slow further in the second half of the year.
"The weakness in Chinese consumer confidence has weighed on the sector of late, and is likely to remain a drag going forward if Chinese consumption trends continue to slow as our China economist Robin Xing expects.
"Robin argues in his recent report that consumption in China currently faces a number of near-term headwinds, including tighter consumer credit and lower housing subsidies, so could continue to slow further in 2H 2018."
Intertek was in the red as Morgan Stanley started coverage of the stock at 'equalweight' with 4,879p price target.
FTSE 100 - Risers
BT Group (BT.A) 238.66p 4.35%
Kingfisher (KGF) 261.70p 3.89%
Barclays (BARC) 172.98p 3.11%
United Utilities Group (UU.) 719.00p 3.07%
Lloyds Banking Group (LLOY) 59.04p 3.04%
Sage Group (SGE) 563.00p 3.00%
Royal Bank of Scotland Group (RBS) 252.00p 2.65%
Vodafone Group (VOD) 154.60p 2.57%
Marks & Spencer Group (MKS) 294.50p 2.51%
Severn Trent (SVT) 1,879.00p 2.31%
FTSE 100 - Fallers
Burberry Group (BRBY) 1,768.00p -5.96%
Smith (DS) (SMDS) 420.90p -5.88%
Mondi (MNDI) 1,843.00p -5.27%
Smurfit Kappa Group (SKG) 2,602.00p -4.90%
Halma (HLMA) 1,297.00p -4.56%
Croda International (CRDA) 4,665.00p -4.15%
Antofagasta (ANTO) 791.40p -4.10%
Rolls-Royce Holdings (RR.) 895.40p -3.70%
Intertek Group (ITRK) 4,419.00p -3.56%
Johnson Matthey (JMAT) 3,183.00p -3.55%