Weekly stock market round-up

BP

shocked investors by downgrading its production forecast for the third time in eight weeks. It now expects output to grow by just 3%, instead of 5.5%. The group is now reviewing all its output targets. The shares dipped below 400p for the first time in four years. Shell did better, with lower third quarter profits but no changes to forecast output.

P&O Princess has abandoned its plans to merge with Royal Caribbean after Carnival proposed a dual-listed company structure as part of its offer. The offer values Princess shares at around 524p. Some feel a discount may open up between the US and UK shares, though, as far more shares will be traded in the US.

Diageo said its ready-to-drink products are starting to struggle. The company is withdrawing Captain Morgan Gold, strengthening the suspicion that market leader Smirnoff Ice may have been a one-off success. Management says the group will struggle to meet profit expectations this year, raising doubts over the merit of Diageo’s premium sector rating.

Kingfisher chief executive Sir Geoff Mulcahy is leaving the group three months before his replacement arrives. Carlton chief executive Gerry Murphy will take over, but not until next February. Chairman Francis Mackay, who is also chairman of catering firm Compass, will hold the reins until then.

BAT’s third-quarter results provided some reassurance to investors in the tobacco sector after profit warnings from US rivals Philip Morris and RJ Reynolds last month. With a 5.7% prospective yield, and a positive trading outlook, the shares are attractive.

AstraZeneca revealed positive new research data for its anti-clotting agent Exanta, but the news was overshadowed by reports that another of the pipeline hopefuls, lung cancer treatment Iressa, had led to 39 deaths in Japan, where it was launched just three months ago. We advise selling the shares.

Rolf Stahel, chief executive and the driving force behind Shire Pharmaceuticals, surprised investors by announcing that he is stepping down. It is thought that a rift had opened between Mr Stahel and US investors who were troubled by his failure to reverse the collapse in the share price following a profit warning in February.

Anglo-Dutch consumer products giant Unilever this week unveiled strong third-quarter results. The numbers prompted upgrades in the City’s earnings projections and provided justification for the group’s strategy of focusing on around 400 core brands. The shares are highly defensive, but hardly cheap.

Vodafone’s ambitions were dealt a blow this week when Vivendi turned down a Euro 6.8bn offer for its stake in Cegetel, which controls French mobile operator SFR. Vodafone says it will still win control of SFR through the acquisition of the stakes held by BT and SBC. But Vivendi could yet scupper those deals – which may be a blessing in disguise as many think Vodafone is overpaying.