Friday May 9, 10:27 AM
London shares weak midmorning, miners, financials weigh; Carphone Warehouse down
LONDON (Thomson Financial) - Leading shares fell further midmorning, led lower by Carphone Warehouse (LSE: CPW.L - news) amid ongoing strategy and cost concerns, with both the mining and financial sectors also applying pressure.
At 10:06 a.m., the FTSE 100 index was 70.9 points lower at 6,199.9, while the FTSE 250 (news) index was down 100.8 points at 10,449.0.
Carphone Warehouse was the main casualty, after announcing Thursday that Best Buy it is to acquire 50 percent of its Distribution business for 1.1 billion pounds.
Citigroup (NYSE: C - news) said in a note Friday that although the cash injection will help pay down Carphone's net debt, it does not resolve its cash conversion issues and the full-year results on June 3 should provide important detail on the deteriorating cash position. The broker stuck with its 'sell' advice.
Elsewhere, financials were out of favour after 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.
Aviva (LSE: AV.L - news) lost 14-1/2 pence at 632-1/2, Friends Provident (LSE: FP.L - news) was off 2.1 at 116.9, and Prudential fell back 8-1/2 at 701.
Banking stocks were also in the doldrums, with HSBC 15-1/2 pence lower at 866 as Morgan Stanley (SPU - news) downgraded the group to 'underweight' from equal-weight'.
Other banking plays also extended Thursday losses, with Barclays (LSE: BARC.L - news) down 9-3/4 pence at 453-1/4, Royal Bank of Scotland (LSE: 91ID.L - news) off 8-1/2 at 348-3/4, HBOS (LSE: HBOS.L - news) 11 weaker at 502-1/2 and Lloyds TSB 10-1/4 lower at 433-1/2.
The miners also weighed on profit taking after takeover rumours surrounding Eurasian Natural Resources and Kazakhmys (LSE: KAZ.L - news) , and Xstrata (LSE: XTA.L - news) and Alcoa (NYSE: AA - news) , sent the sector higher late Thursday.
Kazakhmys fell back 55 pence at 1,859, Eurasian slipped 16 at 1,272, and Xstrata dropped 106 at 4,201.
Among broker changes, Sage Group (LSE: SGE.L - news) gave back some of the previous session's gains, down 11 pence at 215-1/2 as Investec Securities cut its stance to 'hold' from 'buy' on valuation grounds following Thursday's first-half numbers.
WPP Group was hit by an ABN Amro (Amsterdam: ABAGB.AS - news) downgrade to 'hold' from 'buy' as part of a media sector review in which the broker said the agency sub-sector is facing pressure from all directions and it sees advertising budgets stagnating and agency margins stalling.
WPP (LSE: WPP.L - news) slipped 16 pence to 622-1/2.
Johnson Matthey (LSE: JMAT.L - news) was down 35 pence at 1,922 as Morgan Stanley cut its rating on the group to 'underweight' from 'equal-weight', citing downside risks as including a slowdown in global automotive production, a lack of pipeline in Fine Chemicals & Catalysts and volatile platinum prices.
Among just a handful of blue-chips making headway Friday midmorning, retailers were prominent after Next's results Thursday, with SG Securities upgrading the group Friday to 'hold' from 'sell' and increasing the target price to 1,307 pence from 910.
Next added 10 pence at 1,312, while Kingfisher (LSE: KGF.L - news) took on 2.3 at 147.5, Wm Morrison Supermarkets (LSE: MRWA.L - news) gained 2-1/5 at 190-1/5 and J Sainsbury rose 1-1/4 at 395-1/2.
Yet another record high crude oil price fuelled buying in the oil sector, with oil heading towards $125 a barrel on Friday, even after the OPEC cartel insisted the market is well-supplied and driven by speculators.
Royal Dutch Shell (Amsterdam: RDSA.AS - news) was up 2 pence at 2,039, BP (LSE: BP.L - news) added 0-1/2 at 618, and Cairn Energy (LSE: CNE.L - news) was boosted 9 higher at 3,351.
Turning to the mid-caps, AGA Foodservice Group (LSE: 386132.L - news) led the casualties, down 12-3/4 pence at 293-3/4, after announcing current trading is mixed, with cooker sales down in most international markets.
Bearish broker comment hit a number of stocks, with a Goldman Sachs (NYSE: GS - news) downgrade to 'neutral' from 'buy' on valuation grounds sending Micro Focus International (LSE: MCRO.L - news) shares 10-1/4 pence weaker to 263.
The same broker downgrading Headlam to 'sell' from 'neutral' saw the stock slide 9-3/4 pence to 395-1/2.
A pubs sector note from ABN Amro in which the broker cut its rating on JD Wetherspoon to 'neutral' from 'overweight' on valuation grounds sent shares in the pubs operator down 6-1/4 pence to 309-1/4.
The broker also downgraded Restaurant Group (LSE: RTN.L - news) , while upping Greene King (LSE: GNK.L - news) and Marston's in the note. The latter took on 2 pence to 226-3/4.
Among other mid-cap risers, IMI (Milan: ISP.MI - news) was the top performer, up 6 percent or 27 pence at 505-1/4, 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.
Sticking with earnings news, Laird Group (LSE: LARD.L - news) was 4 pence firmer at 523 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.
Again, as with blue-chips, mid-cap oil producers also enjoyed gains, with Premier Oil (LSE: PMO.L - news) 26 pence better at 1,718, Hardy Oil & Gas 11 ahead at 810, and JKX Oil & Gas 5-1/2 higher at 506-1/2.
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