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Broker spotlight including Glaxo, Shire, G4S, Tesco, ASOS and Gemfields

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More than £700mln was wiped from the value of GlaxoSmithKline (LON:GSK) after heavyweight Bank of America Merrill Lynch (BAML) downgraded the stock.

Going to ‘underperform’ from ‘neutral’ the bank said it saw few ‘material pipeline catalysts’ for the shares.

Not even the potential float of its £12bn ViiV HIV joint venture would ‘crystalise value’. In fact it could lead to a dilution of earnings, BAML contended.

The price target has also been pegged back - to £14.50 a share from £16. The stock was off 1% at £14.45 in early trade.

GSK wasn’t on its own in receiving the thumbs down from BAML. Fellow druggie Shire (LON:SHP) fell 1.5% after the house downgraded to ‘neutral’ from ‘buy’.

Elsewhere, closed end life fund Phoenix Holdings (LON:PHNX) was cut to ‘underweight’ from ‘equal weight’ by Barclays, while Jefferies lowered temporary generators group Aggreko (LON:AGK) to ‘underperform’ from ‘buy’.

The major upgrade of the day was the Credit Suisse move to ‘outperform’ from ‘neutral’ on guarding group G4S (LON:GFS), naming it as one of its ‘bull’ stocks for the year ahead.

Cantor Fiztgerald, meanwhile, initiated coverage of the asset management sector, naming Aberdeen (LON:AND), Ashmore (LON:ASHM) and Schroders (LON:SDR) ‘buy’. It rates Henderson (LON:HGG) and Jupiter (LON:JUP) ‘hold’.

In the news today, Tesco (LON:TSCO) issued its third profit warning of the year – knocking the share price a further 10%.

While Barclays remained ‘equal weight’ on the stock, Societe General repeated its ‘sell’. The French banks said: “Only a few details were provided by the group during the conference call and it is still difficult to understand the whole equation.”

Elsewhere ASOS (LON:ASOS), the online clothing retailer that has also been in the wars of late, reported results in line with much reduced expectations.

The City was split on its prospects, with N+1 Singer saying ‘sell’, Deutsche Bank sitting on the fence with a ‘neutral’ stance and JP Morgan Cazenove swimming against the tide with its ‘overweight’ recommendation.

JPMC told its clients: “The rate of sales growth accelerated during the quarter.

“The period started relatively slowly as ASOS deliberately held back sales growth as it made the switch from manual to mechanised picking at Barnsley.

“The commentary regarding gathering momentum since then, and the biggest ever trading week over cyber weekend at the end of November, suggest to us that the exit rate into second-quarter has been strong.” 

Finally, Sanlam repeated its ‘buy’ and 60p price target for Gemfields (LON:GEM), which this morning said its ruby auction was its largest on record, including the sale of a 40 carat stone called the Rhino Ruby.

“It is quite clear that the ruby property in Mozambique will generate higher value per carat and probably higher revenues than Kagem [the company’s emerald mine] on an annual basis,” the broker said in a note to clients.

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