Wednesday May 14, 05:29 PM
London shares close flat; strong miners offset weak banks; Wall St up UPDATE
(Updating with full report)
LONDON (Thomson Financial) - Leading shares closed flat on Wednesday, as solid trade on Wall Street after below-forecast inflation figures and buoyant UK mining shares amid sector consolidation hopes offset a weak banking stocks following Bradford & Bingley (LSE: BB.L - news) 's rights issue.
The FTSE 100 index closed 4.1 points higher at 6,216.0, having reversed from a peak of 6,253.1, with the FTSE 250 (news) index off 96.8 points at 10,275.3.
At the UK close, the DJIA was up 116.00 points at 12,948.20, the Nasdaq Composite (NASDAQ: news) index was 22.83 points firmer at 2,517.95, and the S&P 500 index added 10.43 points to 1,413.47.
'The lower-than-expected U.S. inflation figures allow the Fed more room for an interest rate cut,' said Mic Mills, of tradindex.com.
The consumer price index for April was up 0.2 percent compared with the median estimate of analysts surveyed by IFR Markets of a 0.3 percent rise, while core CPI (NYSE: CPY - news) , which excludes food and energy, ticked up 0.1 percent compared with an expected 0.2 percent increase.
In UK economics news, the Bank of England published its gloomiest outlook for inflation in a decade. The BoE Governor, Mervyn King, said he expected inflation to reach 4 percent later this year, but then to fall to nearer the 2 percent target.
Back with UK equity movements, mining issues dominated the FTSE 100 riser board, amid talk of stake-building and sweetened takeover offers, and further helped by pleasing production figures.
BHP Billiton (LSE: BLT.L - news) added 98 pence to 2,118, on the back of market talk Chinese state-owned Chinalco is considering raising its stake in the Anglo-Australian miner.
BHP's takeover target, Rio Tinto (Frankfurt: 855018 - news) was also strong, rising 236 pence to 6,881, amid talk which started circulating in late London trade on Tuesday that BHP could again enhance its offer for the group.
But Eurasian Natural Resources was the top blue-chip riser, adding 99 pence to 1,476, after the release of its production figures which revealed a 'very significant increase' in first-quarter revenue on higher commodity prices, particularly in the ferroalloys and iron ore divisions.
Meanwhile, Vedanta Resources (LSE: VED.L - news) ended 109 pence ahead at 2,532, Antofagasta (LSE: ANTO.L - news) took on 16 pence to 773-1/2, Xstrata (LSE: XTA.L - news) climbed 63 pence to 4,283, while Kazakhmys (LSE: KAZ.L - news) climbed 74 pence to 1,809, following Tuesday's decline after ENRC said it would not make a bid for its Kazakh peer.
A trading statement from Compass Group (LSE: CPG.L - news) saw the shares add 15-3/4 pence to 358. Earlier, the contract caterer posted a 29 percent increase in first-half underlying pretax profit, boosted by benefits from its management and performance programme (MAP) and said it would continue to buy back shares.
In response, Seymour Pierce upgraded Compass to 'hold' from 'sell', saying the results were better than expected and the broker will need to raise its full-year 2008 estimates.
Elsewhere, AstraZeneca (LSE: AZN.L - news) climbed 39 pence to 2,130, after announcing the U.S. Food and Drug Administration has approved Seroquel for the maintenance treatment of patients with bipolar I disorder, as adjunct to lithium or divalproex.
Among the blue-chip casualties, banks featured strongly after mid-cap mortgage lender Bradford & Bingley said it will raise about 300 million pounds, net of expenses, in a 16-for-25 rights issue at an issue price of 82 pence per share.
This represents a 48 percent discount to the closing price of 158.75 pence per share on May 13, the bank said.
Bradford & Bingley fell 9.2 percent or 14-3/4 pence to 144, while among the large caps, Barclays (LSE: BARC.L - news) lost 10-1/2 pence to 427-1/4, Lloyds TSB shed 7-1/2 pence to 410-1/2, HBOS (LSE: HBOS.L - news) slid 14-3/4 pence to 470-1/4, and Alliance & Leicester, also hit by numerous target price changes after interim results Tuesday, was 13 pence lighter at 445-3/4.
But FirstGroup was the biggest FTSE 100 faller, sliding 6.2 percent or 37-1/2 pence to 561-1/2, after accompanying its full-year results with news it is launching an equity placing of up to 10 percent. The travel group said this would strengthen its capital structure and would increase flexibility.
Also on the back foot was AMEC (LSE: AMEC.L - news) , which closed 10-1/2 pence lower at 822-3/4, following its trading statement, which prompted Seymour Pierce to downgrade to 'sell' from 'hold'.
The broker said AMEC's first-quarter numbers were slightly better than expected, but it thinks the company's recovery is already factored into the price.
Investors also sold off J Sainsbury, which ended 15-1/4 pence weaker at 374-1/2, following full-year results which Merrill Lynch (NYSE: MER - news) said were bang in line with expectations but provided no colour on the company's outlook.
Seymour Pierce said it remains cautious on the broader consumer outlook and cautious of a share that has rallied on hopes of a quick return from its Qatari suitors, while Panmure Gordon kept its 'sell' rating on the group.
Tesco (LSE: TSCO.L - news) , meanwhile, dropped 7-1/2 pence to 429-1/4, after it said it has acquired 36 Homever stores in South Korea from the E-Land Group for 958 million pounds, including existing debt.
On the second line, shares in Johnston Press (LSE: JPR.L - news) lost 20-1/2 pence to 115-1/4, after the regional newspaper publisher announced a 212 million pounds rights issue and subscription to repay its debt, as the company moves to avoid breaching its banking covenants amid deteriorating advertising conditions.
Among mid-cap risers, LogicaCMG (LSE: LOG.L - news) was 5 pence higher at 130-1/2, after the IT services company said its first-quarter revenue stood at 856 million pounds against pro forma revenue of 826 million pounds a year ago, and reaffirmed its 2008 guidance, prompting Landsbanki to reiterate its 'buy' rating.
Dimension Data (LSE: DDT.L - news) ticked up 1-1/2 pence to 52-1/2, after reporting a 58.6 percent increase in first-half pretax profit, helped by a 22.7 percent jump in sales. Altium Securities described the results as 'solid'.
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