MARKET REPORT: Broker Upgrades Turn the Tide for Water Stocks

Water companies rose higher as two banks upgraded industry ratings to reflect hopes for a more favorable pricing deal with regulators.

Citi said it expects a constructive set of proposals from watchdog Ofwat on December 19.

JP Morgan Cazenove also expects significant improvements in statutory allowances, which should lead to a revaluation of the UK water sector.

In line with their views, Citi analysts upgraded United Utilities to buy and upgraded Severn Trent to neutral, while Pennon remained at neutral.

Meanwhile, JP Morgan analysts upgraded Severn Trent to overweight and raised their rating on Pennon to overweight. The analysts maintained an overweight rating on United Utilities.

In response, Severn Trent on the FTSE 100 gained 3 per cent, or 78p, at 2648p, United Utilities added 3.2 per cent, or 32.5p, to 1059.5p, and FTSE 250-listed Pennon rose 3 per cent, or 16p, up to 555p.

As investors awaited the outcome of the US presidential election and interest rate decisions from both the Bank of England and the Federal Reserve this week, markets were cautious.

The FTSE 100 index fell 0.14 percent, or 11.85 points, to 8,172.39 and the FTSE 250 lost 0.45 percent, or 91.25 points, to 20,370.04.

Aerospace manufacturer Melrose gained 5.2 per cent, or 24.6p, to 498.8p, after analysts at Citi reiterated a high buy rating, seeing a valuation of 600p to 800p per share on strong cash flow prospects.

Interdealer broker TP ICAP led the mid-cap gainers, rising 7 percent, or 16 cents, to 243.5 cents as it reported record third-quarter revenue, rising 10 percent after strong performances from its Global Broking and Liquidnet activities.

Workplace provider IWG also posted gains, up 3.1 percent, or 5 cents, to 166.1 cents, as it reported robust growth in its managed and franchise segment, which posted a 19 percent increase in third-quarter revenue , although total sales only increased. by 2 percent on an annual basis.

Among small caps, newspaper wholesaler Smiths News rose 8.4 per cent, or 4.8p, ​​to 61.8p after reporting solid full-year results, with sales up 1.1 per cent year-on-year, boosted by strong sales during Euro 2024 and an extra trading week.

On AIM, Aferian rose 85.2 percent, or 2.8 cents, to 6.05 cents, after the business-to-business video streaming company said it expects to post about a 20 percent increase in second-half revenue compared with the first half.

The group also expects to report positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the second half of the year.

Bigblu Broadband also performed strongly, rising 47.1 per cent, or 12 cents, to 37.5 cents, after Australian media speculation was confirmed that the company is in talks with Melbourne-based alternative investment manager Salter Brothers over a potential transaction for its SkyMesh subsidiary.

Mineral explorer Kodal Minerals fell 14.1 percent, or 0.06 cents, to 0.34 cents, as a dispute with Chinese partner Hainan Mining over taxes payable in Mali emerged.