MW: Oil majors keep gains for British shares in check
By Sarah Turner, MarketWatch
LONDON (MarketWatch) -- Royal Dutch Shell shares were lower in London on Wednesday, dragging on the top British share index, after a broker downgrade for the oil major.
Royal Dutch Shell (UK:RDSA 1,858, -39.50, -2.08%) (RDS.A 61.07, -1.41, -2.26%) shares were down 1.8% on the London Stock Exchange.
Morgan Stanley downgraded the firm to underweight from equalweight, saying that it made the move to reflect the positioning of Shell's portfolio relative to the broker's near-term macroeconomic outlook.
"With valuation multiple premium/discounts converging - relative performance is likely to be determined by stock-specific catalysts and portfolio bias," the broker said.
Rival BP (UK:BP. 626.40, -7.90, -1.25%) (BP 61.50, -0.39, -0.63%) lost 1.2%.
Still, the sector is well positioned to outperform equity markets in 2010 due to expected positive earnings revisions, margin expansion, and continued cost reduction and restructuring, Morgan Stanley said.
"On valuation, the group appears cheap on an absolute and relative basis," it added.
One of its top picks in the sector is natural gas producer BG Group (UK:BG. 1,243, +7.00, +0.57%) , up 0.6%, which it said should perform well if its bullish call on crude oil plays out.
Overall, the U.K. FTSE 100 index (UK:UKX 5,490, -8.79, -0.16%) rose 0.1% to 5,504.37. Other European shares were also mildly higher while U.S. stock futures were pointing to mild gains on Wall Street.
Miners lost ground in the previous session in part due to weaker-than-expected results from U.S. metals giant Alcoa but were higher on Wednesday, with Vedanta Resources (UK:VED 2,749, +5.00, +0.18%) up 1.2% and BHP Billiton (UK:BLT 2,072, +15.00, +0.73%) (BHP 78.97, -2.83, -3.46%) shares up 1.2%.
Morgan Stanley said that Vedanta Resources is one of its favorite stocks in the sector.
"Vedanta's confirmed growth plans over the next 24 months and further operational improvements could lead the share price to more than double without material changes to spot commodity prices," the broker said.
Outside the top index, shares of specialist emerging markets asset manager Ashmore Group (UK:ASHM 245.30, -5.00, -2.00%) rose 0.8%.
It said that its estimated assets under management at the end of December were $31.6 billion, a 2% rise from the end of September. The group said net inflows in the quarter were $300 million, with the remaining $200 million increase in assets under management coming from performance gains.
Ashmore said trading conditions are in line with management expectations and the group remains confident of its prospects for the current year.
