Traders remained focused on the banking sector today after two major rating agencies downgraded Barclays' (LON:BARC) outlook in the wake of the Libor rate fixing scandal, while Aviva (LON:AV.) also generated interest after revealing plans to close or sell 16 businesses.
The life insurer also said it will focus on the UK and a few other markets including France, Poland and Canada in hopes of a turnaround. Businesses now deemed non-core include South Korea; UK large-scale bulk purchase annuities; and small Italian partnerships.
Head of Aviva’s UK and Irish insurance business has been appointed to carry through the plan, which is expected to largely take place over the next 12 months.
Broker Investec welcomed the update, saying the strategic review has gone into the heart of the Aviva problem, which is that it has too many operations that didn’t make enough money for the group.
“This sharper focus is to be applauded, but selling businesses in the current environment is likely to be challenging,” said analyst Ken Ryan, who upheld his ‘buy’ recommendation with a 517 pence per share on the stock.
Meanwhile, both Moody’s Standard & Poor’s cut their outlook on Barclays to negative form stable, saying that the pressure that has led to the resignations of CEO bob Diamond and CEO Jerry del Missier could force it to shift its business model away from investment banking.
“Although this could have potentially positive implications over the longer term, the uncertainty surrounding such a change in direction is credit negative in the short term,” Moody’s sai din the statement today.
The agency added that the bank could also be challenged to replace its senior staff, particularly find a new chief executive.
Barclays was hit with fines totalling £290 million by British and US regulators last week for manipulating the Libor rate, at which banks lend money to each other.
Other talked about blue chips included GKN (LON:GKN), which was the most popular search on Google Finance after acquiring Volvo’s aero engine business for £633 million. The group said the deal will create a market leader in aero engine components.
For 2011, Volvo Aero posted earnings before interest, taxes, depreciation and amortisation (EBITDA) of £75 million on sales of £600 million, which would have boosted revenues at GKN Aerospace to more than £2 billion.
GKN expects sales at the business to reach £670 million this year with an EBITDA of £100 million.
Traders speculated that the company is due to make an announcement, which could be a share buyback or
Popular Google searches also included two of today’s biggest movers in London markets, small caps Aurelian Oil & Gas (LON:AUL) and GCM Resources (LON:GCM). Aurelian tanked 20 percent on a disappointing operational update from Poland and GCM, which did not have news out today, added nearly 50 percent, rising 21.5 pence to 66 pence.
Aurelian’s Sosna-1 wildcat exploration well in the Torzym concession encountered good oil shows in the target reservoir, but did not flow with brine in the wellbore when perforated.
Additional analysis of the well will now be undertaking and further testing options including mobilisation of coiled tubing for nitrogen unloading of the well will be considered.
GCM did much better today along with its 29.8 percent owner Polo Resources, which rose seven percent to 2.97 pence.
GCM is developing the Phulbari Coal Project in Bangladesh, which has a JORC standard compliant resource of 572 million tonnes, and is currently awaiting the approval of the project’s scheme of development by the government of Bangladesh.
On message boards, traders speculated that the share price rise could be due to expectations of progress with the approval process, while some suggested that the company is due to launch a share buyback.
In the meantime, Polo said in an update today that “GCM Resources plc has intensified work with stakeholders at (Phulbari) as it seeks approvals for mine development”.
In the meantime, the most read RNS statements of the day included a report from Sirius Minerals’ (LON:SXX) York potash project and a mixed trading update from Cineworld (LON:CINE).
The update form Sirius was met with a positive response as shares in the group climbed 1.5 percent to 16 pence this morning.
The company said assay results from the deflection of the third borehole (SM3) on the project confirmed similar thickness and grade of polyhalite as SM3, intersecting 23.02 metres at 93 percent polyhalite.
Hole SM4 and its deflection SM4A have been completed with preliminary results confirming the presence of high grade polyhalite in the Shelf Seam approximately 4 miles from SM3.
Elsewhere, coring at SM6 and drilling at SM7 has now started and a 2D seismic survey currently underway.
“The results of deflection drilling at SM3A and SM4A help to confirm the lateral consistency of the deposit which is an important step to achieve sufficient defined resource to underpin financing of the project,” said managing director and CEO of Sirius Chris Fraser.
“These results provide further confidence of the world-class nature of the York Potash Project following the release of our maiden Resource delivering the world's largest and highest grade resource of polyhalite.”
In its trading statement, Cineworld reported a 1.1 percent increase in revenues for the first half, but said that the outlook was tough, in part due to the anticipated impact of the upcoming Olympic Games in London.
However, the group noted that the film line up has strong 3D product in the second half, which includes The Amazing Spiderman, Ice Age 4 and The Hobbit, while its 2D range includes The Dark Knight Rises, the concluding film of the Twilight series Twilight Saga: Breaking Dawn (part 2) and the next Bond title Skyfall.
“As a result we remain confident of delivering growth for the year as a whole in line with current market expectations,” Cineworld told investors this morning.
Box office takings for the 26 weeks to June 28 were up 4.1 percent, while retail was down 2.1 percent and “other income” fell 18.7 percent.