Rail operator back on track with spend plan

This week’s stock market review

Railtrack has acted to avoid fresh confrontations with the rail regulator by
announcing plans to inject £2.5bn into modernising the UK’s ageing railways
during the next financial year from 1 April.

The company delighted the City last week with the size of its proposed
infrastructure spend, which the Railtrack said is a record budget for one year.
The news pushed the stock price up by about 10 per cent.

The chances of it being fined over punctuality in the near future may have
diminished, as the company revealed it has already cut delays by a significant
amount. Railtrack admitted that it is not out of the woods yet but pledged to
maintain service improvements.

Much of the new money will be earmarked for track, stations, bridges and
signaling works. Many analysts believe the regulator will soften its approach
when details of the ongoing regulatory review are published in July.

WPP finds there’s just no pleasing some people

WPP Group, the UK advertising empire and third largest in the world, failed
to impress the City last week with its good results for 1999. Despite unveiling
excellent figures for the year and brilliant prospects with a lot of new
business initiatives and ambitious profits targets, WPP saw its share price
slump by more than 12 per cent.

The stock, which traded at £11.55 before the sharp fall, had been widely
perceived as overpriced. It seems nothing the company could have done to
persuade the markets otherwise and the discomfort felt by some analysts have
prompted a sell recommendation to be slapped on the stock with a target price
of £8.

Words speak louder then actions in global markets

Words can be more effective than action in the stock markets. When Alan
Greenspan, chairman of the US Federal Reserve, warned last week about the need
to control US domestic demand, stock markets around the world became very
volatile, albeit temporarily.

Similarly, when Chancellor of the Exchequer Gordon Brown said cutting
Internet costs would help develop a knowledge economy, the City seems to have
misconstrued his comments as a statement of government policy. The contents of
the Chancellor’s speech caused some concern among analysts and for the second
time in as many weeks BT’s stock price was badly hit.

Banks’ prospects are back in the black

Green shoots of recovery appeared in the banking sector last week when Abbey
National and Halifax stock prices jumped, hard on the heels of the Woolwich
during the previous week. Abbey National, the UK’s second-largest mortgage
lender, disclosed a healthy rise in profits and also announced its e-commerce
ambitions, in particular its on-line bank Cahoot. Halifax is developing an
on-line car and home insurance venture called esure.

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