Wednesday March 26, 05:43 PM
London shares close weaker but off lows; US falls on durable goods data UPDATE
(updating with full report)
LONDON (Thomson Financial) - Leading shares fell but were off lows by the close, suffering only limited damage from Wall Street's poor showing after durable goods orders fell, and with Xstrata (LSE:
XTA.L - news) remaining a major faller after bid talks ended.
At the close, the FTSE 100 index was off 28.7 points at 5,660.4, having been in negative territory for the whole session, and down as much as 50 points in earlier trade. The FTSE 250 fell 38.5 points to close at 9,756.1.
Volume was light, with 2.6 bln shares having changed hands in 747,236 deals.
Wall Street opened lower after US durable goods orders fell unexpectedly in February, as increased orders for civilian aircraft and computers were unable to offset a record decline in machinery orders.
The Commerce Department today reported February new orders for durable goods fell 1.7 pct. Excluding transportation, durable goods fell 2.6 pct. Goods excluding military equipment fell in the second consecutive month by 1.6 pct.
Economists polled by Thomson IFR Markets had expected orders to rise 0.7 pct for the month overall and to fall 0.4 pct excluding transportation goods.
Investors also weighed a report from the Commerce Department showing sales of new homes fell in February for a fourth straight month as the housing slump continues. The 1.8 percent decline, however, was a bit better than economists surveyed by Thomson Financial/IFR had anticipated.
Some traders had expected the FTSE 100 to give up more of the gain of 193.9 points it enjoyed yesterday.
Jimmy Yates, dealer at CMC Markets, said: 'Perhaps most interesting has been the rather muted response we've seen on this side of the Atlantic to the US economic data released during the session after the durable goods orders came in well below expectations, suggesting that perhaps things can't get much worse across the Atlantic.'
Anthony Grech, market analyst, IG Index, said that the most significant event today was Bank of England Governor Mervyn Kings appearance before the Treasury Select Committee. Grech said that the meeting has raised hopes of a rate cut sooner rather than later for the UK.
King conceded that tighter lending conditions mean the Monetary Policy Committee is more predisposed to cut interest rates but said he will not follow the Federal Reserve's lead on policy.
King, asked if tighter lending conditions meant the MPC (A050540.KQ - news) was more predisposed to interest rate cuts, answered 'yes'. But he rejected the claim that the BoE should follow the Fed's lead and drastically cut interest rates, saying activity conditions in the US were 'materially worse' than in the UK.
As the London markets were closing, the Dow Jones Industrial Average was down 109.3 points at 12,423.3. The S&P 500 was 11.4 points lower at 1,341.6 while the Nasdaq Composite (NASDAQ: news) was down 26.06 points at 2,314.99.
Turning to UK equities, Xstrata was the second-biggest FTSE 100 faller, closing 194 pence, or 5.2 pct down at 3,522, although off lows after Vale said late yesterday it has ended talks to buy its rival.
Merrill Lynch (NYSE: MER - news) and JP Morgan analysts remain bullish on the group's prospects, although Numis was less bullish and repeated its 'hold' stance and cut its target by 10 pct to 3,674 pence.
However, the news helped other miners gain, as traders noted that Vale would consider other potential takeover targets. They were also helped by copper and gold prices rising today, boosted by a weaker dollar.
Anglo American (LSE: AAL.L - news) rose 103 to 2,945, Kazakhmys (LSE: KAZ.L - news) took on 64 pence at 1,606, Lonmin (LSE: LMI.L - news) was 76 higher at 3,101 and Rio Tinto (Frankfurt: 855018 - news) gained 65 at 5,050. But Eurasian Natural Resources Corporation was 6 lower at 970 on its FTSE 100 debut.
On the day of its re-entry to the FTSE 100, Tate & Lyle ended 29-1/2 lower at 553-1/2, following a strong run over the last three months.
Several stocks were going ex-dividend, including Wolseley (LSE: WOS.L - news) , down 23-1/2 at 527, and Aviva (LSE: AV.L - news) , the biggest FTSE 100 faller, down 34-1/2 at 601.
Among other fallers, pharmaceutical stocks were under pressure after Morgan Stanley (SPU - news) cut price targets on AstraZeneca (LSE: AZN.L - news) and GlaxoSmithKline (LSE: GSK.L - news) to 2,150 pence from 2,450 pence and to 1,161 pence from 1,391 pence respectively.
AstraZeneca fell 87 to 1,845 and GlaxoSmithKline dropped 28 to 1,046.
Reuters closed 4-1/2 pence lower at 599 pence after, as expected, its shareholders at an extraordinary general meeting in London approved the takeover by Thomson Corp, owner of Thomson Financial News. Thomson (Paris: FR0000184533 - news) shareholders also approved the deal today. Trading in shares in the new Thomson Reuters group is expected to start on April 17.
Turning to the upside, Sainsbury (LSE: SBRY.L - news) was 21-1/2 higher at 358 after reporting a 4.1 pct rise in fourth-quarter like-for-like sales excluding petrol and announced a joint venture with British Land (LSE: BLND.L - news) .
Market expectations for underlying sales growth in the quarter had ranged between 3.5 and 4 pct.
Vodafone (LSE: VOD.L - news) shares were 1.7 higher at 153.6 after the Financial Times said the mobile phone company had indicated it expects to start receiving dividends again from its joint venture in the US with Verizon Wireless.
A broker upgrade helped shares in Cable & Wireless rise 3.1 pence to 141.9, with UBS (Virt-X: UBSN.VX - news) upgrading its stance to 'neutral' from 'sell', following a 25 pct fall in the shares so far this year, while cutting its target to 140 pence from 150.
Some oil shares gained after crude prices jumped by more than 3 usd after weak US fuel stocks data heightened fears over supply tightness, adding to a move higher already fuelled by weakness in the greenback.
US crude stocks came in unchanged in the week to March 21, against market expectations for a gain of 2.1 mln barrels. Gasoline and distillate stocks fell by 3.3 mln barrels and 2.2 mln barrels respectively, which was a much bigger decline than the market had anticipated.
New York's WTI crude for May delivery was recently up 3.65 usd at 104.87 usd per barrel. In London, Brent crude for May delivery was up 3.15 usd at 103.75 usd per barrel.
Royal Dutch Shell (Amsterdam: RDSA.AS - news) ended the day 19 pence higher at 1,657 Tullow Oil (Dublin: TQW.IR - news) rose 9 to 657-1/2, despite Citigroup (ASFZ.PK - news) lowering its price target to 770, from 800, though the broker retained its 'buy' stance.
On the second tier, Debenhams (LSE: DEB.L - news) was the top faller, off 12-1/4 pence or 17.1 pct at 59-1/4, with Merrill Lynch placing 47 mln shares in the department stores group at 60-66 pence each.
Bear Stearns (NYSE: BSC - news) reiterated its 'underperform' stance on the group following the placing.
Meanwhile, Bellway (LSE: BWY.L - news) shed 21 pence to 789. The housebuilder reported a 3.9 pct fall in its first-half pretax profit but said it remains confident of its long-term prospects.
The company also warned of a further fall in new home sales, with total legal completions for the year to end-July 2008 likely to be down by around 5-10 pct on the previous year.
Peer Bovis Homes Group was 32 lower at 565-1/2, though this was partly as a result of going ex-dividend.
On the upside, Aquarius Platinum (LSE: AQP.L - news) was 51 higher at 710-1/2 after HSBC reiterated its 'neutral' stance on the group and raised its price target to 710 pence from 680.
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