Friday May 9, 09:19 AM
London shares open lower; high oil sparks concerns; financials down UPDATE
(updating with further details)
LONDON (Thomson Financial) - Leading shares opened lower as Asia fell back this morning as record oil prices sparked concerns of worldwide inflationary pressure and disappointing earnings news from U.S. insurer AIG weighed on sentiment with financials trading weaker.
At 8:54 a.m., the FTSE 100 index was off 36.3 points at 6,234.5 after closing 9.8 points higher yesterday at 6,270.8, while the FTSE 250 (news) index was down 40 points at 10,509.8.
'Its a quiet day today with a lack of economic news in the U.S., with the gains that has been made over the past week I think there is now a bit of profit taking going on,' said Manoj Ladwa, senior trader at TradIndex.
In the U.S. yesterday, Wall Street closed a quiet session with a moderate advance, with energy and other commodities companies leading the market as oil prices extended their record-breaking run.
The DJIA closed up 52.43 to 12,866.78, the S&P 500 index rose 5.11 to 1,397.68, and the Nasdaq composite (NASDAQ: news) index gained 12.75 to 2,451.24.
Over in Asia, the Nikkei 225 (news) index fell back 227.33 points at 13,715.93 after disappointing earnings news, while the Hang Seng (news) index ended the morning 411.73 points lower at 25,038.06 ahead of a holiday weekend and higher oil prices.
Oil prices traded near new all-time highs above $124 a barrel even after the Organization of the Petroleum Exporting Countries (OPEC) insisted the market is well-supplied and being driven by speculators.
Analysts said OPEC's view has already been factored into prices.
New York's main oil futures contract, light sweet crude for June delivery, rose 62 cents to $124.31 a barrel in Asian trade after closing at a record $123.69 on Thursday at the New York Mercantile Exchange.
Brent North Sea crude for June delivery was 78 cents higher at $123.62 a barrel.
Turning to the United Kingdom blue chips, insurers were under pressure as U.S. insurer AIG said it swung to a first-quarter loss of $7.81 billion because of losses tied to credit swaps and mortgage-related operations and that it plans to raise a total of $12.5 billion in new cash to shore up its capital base.
Friends Provident (LSE: FP.L - news) was off 1.2 at 117.8, Aviva (LSE: AV.L - news) was down 8-1/2 at 638-1/2 and Prudential fell back 8 at 701-1/2.
Banking stocks were also in the doldrums, with HSBC 13-1/2 lower at 868 as Morgan Stanley (SPU - news) downgraded the group to 'underweight' from equal-weight'.
Peers were also weaker, Barclays (LSE: BARC.L - news) was down 10 at 453, Royal Bank of Scotland (LSE: 91ID.L - news) fell back 5-3/4 at 351-1/2, HBOS (LSE: HBOS.L - news) was 7-1/2 lower at 506 and Lloyds TSB lost 6-3/4 at 437.
Away from financials, British Airways (LSE: BAY.L - news) was off 5 at 233-1/2 as record oil prices continued to weigh on sentiment about the group.
Elsewhere, a broker downgrade left shares in Johnson Matthey (LSE: JMAT.L - news) down 37 at 1,920 as Morgan Stanley cut its rating on the group to to 'underweight' from 'equal-weight'.
And, WPP Group fell back 10 at 628-1/2 after ABN Amro (Amsterdam: ABAGB.AS - news) downgraded the group to 'hold' from 'buy'.
Turning to the upside there were few risers with Imperial Tobacco Group (LSE: IMT.L - news) gaining 9 at 2,493 after Credit Suisse upgraded the company to 'outperform' from 'neutral'.
Elsewhere, Next gained 15 at 1,317 after SG Securities upgraded the group to 'hold' from 'sell'.
Looking at the midcaps, on the downside, AGA Foodservice Group (LSE: 386132.L - news) was off 13-1/2 at 293 as it announced that trading was mixed.
The group said sector data indicates the value of cooker sales has fallen this year in most international markets and added it expects to show underlying progress this year, while a slowdown in housing deals continues.
Elsewhere, a broker downgrade left shares in Micro Focus International (LSE: MCRO.L - news) 7-1/2 weaker at 265-3/4 as Goldman Sachs (NYSE: GS - news) cut its rating on the group to 'neutral' from 'buy'.
Headlam fell back 8-1/4 at 397 after Goldman Sachs downgraded the group to 'sell' from 'neutral'.
Turning to the midcap gainers, back to earnings news, IMI (Milan: ISP.MI - news) was the top riser, up 33-3/4 at 512 after the group said its revenues for the four months to end-April 2008 show organic growth of around 7 percent with all the five businesses contributing positively over the period.
HMV Group (LSE: HMV.L - news) the music, DVD, games and books retailer, was 9-1/2 higher 158-3/4 as the group forecasted full year underlying pretax profit at the top end of market expectations as it reported better than expected second half sales growth.
Prior to today's trading statement market expectations for year to April 26 2008 pretax profit were 46 million pounds to 58 million pounds.
Sticking with earnings news, Laird Group (LSE: LARD.L - news) was 20 firmer at 539 as the group said it has made a strong start to 2008, with trading in line with its expectations and that it expects to make further good progress in 2008.
Finally, a broker upgrade helped shares in Renishaw (LSE: RSW.L - news) move 12-1/2 higher at 781-1/2 after UBS (Virt-X: UBSN.VX - news) raised its recommendation on the electronics equipment group to 'neutral' from 'sell'.
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