Market Report: PlayStation 2 shortages plague Game Group

Evolution Securities became the second broker in as may days to urge investors to reduce their holdings in Game Group ahead of Christmas, a vital period for the computer software retailer.

Evolution Securities became the second broker in as may days to urge investors to reduce their holdings in Game Group ahead of Christmas, a vital period for the computer software retailer. Shares in the group have suffered this week on rumours that the UK is facing a shortage of PlayStation 2 consoles resulting from production and supply problems at the manufacturer Sony.

Evolution said yesterday it believes that the potential impact of this is being underestimated by the market. "Whilst Game expect another delivery of PlayStation 2 consoles shortly, given the current level of demand among consumers we believe this is likely to be well short of requirements," the broker predicted. Such a scenario will inevitably also hit software sales at Game stores and as a result Evolution cut its pre-tax profit forecast for the retailer's current year to £32m from £40m.

If this were not enough, the broker believes that the shortage of consoles has led to greater price competition on software from the likes of Dixons and Woolworths. So it was no surprise that Game shares closed lower for the third day in a row, falling 1.75p to 64p.

Meanwhile, the FTSE 100 was unaffected by the Chancellor's pre-Budget report and registered a rise of 15.5 points to 4,751.2. In the discount retail arena, Matalan gained 7.25p to 225p as Deutsche Bank ushered its clients into the stock telling them that the healthy trends reported at the group in September and October have continued. The German broker tipped 2005 to be another "strong year of recovery" for Matalan.

The oil sector continued to suffer from the falling crude price. BP lost 16.5p to 515.5p, BG Group retreated 8.75p to 353p and Shell fell 3.25p to 437.75p. Of course this is all great news for airlines, for which fuel is a major cost. British Airways added 8.5p to 234.5p, Ryanair improved 0.25 cents to ¤5.55 and easyJet ticked 2.25p better to 186.25p.

Invensys lost 0.75p to 18p after disappointing first-half results from engineering sector peer FKI, down 7p to 125.5p. FKI complained that the second half of its year would be negatively impacted by the falling dollar and strong raw material prices. Like FKI, Invensys does the bulk of its business in the US and is also dependent on steel prices.

Lastminute.com rallied a further 3.5p to 117p after rival Ebookers, 3.5p better to 315.5p, confirmed that it is to be taken over over by US giant Cendant. Market professionals took the view that bid speculation is now bound to circle Lastminute as the company becomes the "last man standing" in the European online travel arena.

SkyePharma retreated 3.25p to 67p as the company poured cold water on speculation that it is in takeover negotiations. SMG dropped 3.75p to 102.25p after Merrill Lynch downgraded the media player to "sell" from "neutral". The US broker also slashed its 2004 earnings forecast for SMG by 14 per cent and warned that the group's radio businesses are likely to suffer a poor fourth quarter amid declining sales.

Manchester United jumped 2p to 272p after John O'Neil, a non-executive director, bought 481,237 shares in the club at 271p each. It emerged yesterday that he acquired the stock from David Gill, the club's chief executive, who sold them after exercisingvarious share options. Mr Gill made a profit of more than £500,000 from the arrangement.

Something of a tussle between bulls and bears of Neteller has been evident for the past few weeks and it looks like the bulls are winning. Shares in the software specialist jumped 10p to 302.5p on rumours that the group will soon issue a positive trading statement. Bulls reckon it will see the company boast that it is close to securing a number of important contract wins.

Kryso Resources, where famous bear raider Simon Cawkwell is deputy chairman and also a major shareholder, enjoyed a strong debut on AIM. The company is to explore for gold in Tajikistan and raised £2.5m at 10p a share. Kryso closed at 14.75p. Meanwhile, brokers are expecting a solid debut from Premier Research today. The group specialises in conducting clinical trials for biotech firms and is said to have seen its fund raising heavily oversubscribed.

Finally, Arbuthnot Securities slashed its rating on BetonSports, steady at 89p, all the way to "hold" from a previous "strong buy". "Issuing a severe profit warning only four months after floatation has left BetonSports with impaired credibility and a revenue crisis that may take some time to turn around", the brokerage warned.

BetonSports shares stand at a 36 per cent discount to their float price but even at this level the broker does not believe they are desirable given the "significant uncertainties". The group declined to comment on Arbuthnot's downgrade.