Wednesday May 14, 12:32 PM
London shares mixed at midday after inflation report; U.S. seen flat
LONDON (Thomson Financial) - Leading shares were mixed at midday, with the Bank of England's quarterly inflation report having relatively little effect, strength in the miners offsetting bank sector weakness following Bradford & Bingley (LSE: BB.L - news) 's rights issue, and Wall Street set to open flat.
At 11:58 a.m., the FTSE 100 index was up 2.9 points at 6,214.8, off a high of 6,246.8. The FTSE 250 index was down 116.2 points at 10,255.9.
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.
With the Consumer Price Index, released Tuesday, showing a 3 percent rise in the last year, the markets were already pessimistic about the prospects of further rate cuts in the near future and there was relatively little reaction to the governor's remarks.
'The market is absorbing the inflation report and will now see that rate cuts aren't on the cards,' Brewin Dolphin (LSE: BRW.L - news) strategist Mike Lenhoff said. 'What's encouraging is that although the market can't seem to get much above the 6,200 level, it doesn't want to go much below it either, despite bad economic news.'
In the United States, shares may be mixed, with consumer price inflation data due out before the market opens.
The Dow Jones Industrial Average will open at about 12,832, little changed from Wednesday's close, according to spread betting firm IG Index.
In equity movements, it was a continuation of Tuesday's pattern, with miners higher and banks lower,
BHP Billiton (LSE: BLT.L - news) was up 61 pence at 2,081 on the back of market talk Chinese state-owned Chinalco is considering raising its stake in the company.
BHP's takeover target, Rio Tinto (Frankfurt: 855018 - news) was also buoyant, rising 111 pence higher to 6,756, amid talk that started circulating in late London trade Tuesday that BHP could again raise its offer for the group.
Sticking with the miners, Eurasian Natural Resources was 55 pence firmer at 1,432 after announced a 'very significant increase' in first-quarter revenue on higher commodity prices, particularly in the ferroalloys and iron ore divisions.
Among its peers, Vedanta Resources (LSE: VED.L - news) was up 64 at 2,487, Antofagasta (LSE: ANTO.L - news) was ahead 14 at 771-1/2, Xstrata (LSE: XTA.L - news) took on 28 at 4,248. Kazakhmys (LSE: KAZ.L - news) was 15 lower at 1,720, extending the decline from Tuesday, when ENRC said it would not make a bid.
Elsewhere, a trading statement from Compass Group (LSE: CPG.L - news) saw the shares add 7-1/2 pence to 349-3/4 after 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.
AstraZeneca (LSE: AZN.L - news) climbed 28 pence at 2,119 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.
Barclays (LSE: BARC.L - news) fell back 9-1/4 pence at 428-1/2, Lloyds TSB fell 8-1/2 to 409-1/2, HBOS (LSE: HBOS.L - news) slipped 20-1/4 at 464-3/4, and Alliance & Leicester was 16 weaker at 442-3/4 -- also hit by numerous target price changes after interim results Tuesday, while on the second line Bradford & Bingley dropped 15-3/4, or 9.9 percent, to 143.
FirstGroup (LSE: FGP.L - news) , remained the biggest FTSE 100 faller at midday, which slumped 50-1/2 pence to 548-1/2 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.
The higher oil price, off record levels but still above $125 a barrel in New York, still continued to impact British Airways (LSE: BAY.L - news) , which fell back 3-1/4 pence at 225-1/42, ahead of full-year figures on Friday
Returning to earnings results, AMEC (LSE: AMEC.L - news) dipped into the red, down 11 pence at 822-1/2 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, down 11 at 378-3/4 following full-year results that 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 the Qataris, while Panmure Gordon kept its 'sell' rating on the group.
Rival Tesco was down 4 at 433 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, as with Bradford & Bingley, Johnston Press (LSE: JPR.L - news) slumped 18 pence, or 13 percent, to 117-3/4, 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.
Fellow newspaper publishers Daily Mail (LSE: DMGT.L - news) & General Trust and Trinity Mirror (LSE: TNI.L - news) in sympathy fell 20 pence to 420-1/2 and 7-1/2 to 255-1/4, respectively.
Among mid-cap risers, LogicaCMG (LSE: LOG.L - news) was 4-142 pence higher at 129-3/4 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 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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