Thursday March 27, 03:20 PM
London shares off highs midafternoon as NY falls back on banking trouble rumours
LONDON (Thomson Financial) - UK blue chips were firmer midafternoon, albeit off highs as Wall Street fell back after opening gains following vague rumours about trouble in the banking sector and as expected US GDP numbers which failed to alleviate concerns about the world's biggest economy.
At 2.54 pm, the FTSE 100 index was up 26.6 points at 5,687.1, having reversed from a peak of 5,735, with the FTSE 250 (news) index 162 points ahead at 9,918.1.
Volume was fair, with 1.66 bln shares changing hands in 520,976 deals.
Over in the US, Wall Street stocks lost ground midmorning following jitters in the banking sector on unsubstantiated talk of a possible Chapter 11 bankruptcy, exacerbated by negative broker comment while poor results from Oracle Corp overnight also knocked technology stocks.
A higher oil price also weighed on investor sentiment.
In midmorning trading, the Dow Jones industrial average fell 60.08 points to 12,362.78. Separately, the Standard & Poor's 500 index slid 8.76 points at 1,332.37, and the technology-heavy Nasdaq composite (NASDAQ: news) index fell 31.79 points to 2,292.57, hurt by Oracle's decline.
Back with UK equities, Cairn Energy (LSE: CNE.L - news) ticked up 130 pence at 2,816, fuelled by oil price gains as heavy fighting rocked crude-rich Iraq, and following yesterday's weaker-than-expected energy stockpiles report in the US.
Looking at earnings news, Compass Group (LSE: CPG.L - news) gained 11-3/4 pence at 322-1/4, as the group said trading in the first five months of the current year was ahead of its expectations and it is confident the current momentum will be maintained throughout the second half.
Merrill Lynch (NYSE: MER - news) said this positive statement and recent favourable currency moves could lead to consensus upgrades for the food caterer.
And, FirstGroup (LSE: FGP.L - news) was 17-1/2 ahead at 562, after the group said it forecasts full-year results to be in line with management expectations, following a strong trading performance throughout the second half of the year.
In response, Merrill Lynch repeated its 'buy' advice, saying today's news is reassuring and there could be small upgrades to estimates.
After broker generated news, Barclays (LSE: BARC.L - news) was 9-1/4 pence ahead at 454-1/4, as Merrill Lynch added the company to its 'most preferred' list on valuation grounds and on the expectation that the Bank of England will take action to help return the UK money markets to a more normal state.
Its peer HBOS (LSE: HBOS.L - news) was 23 higher at 564-1/2.
Elsewhere in the financial sector, Man Group (LSE: EMG.L - news) added 17 at 562-1/2, after the world's biggest listed hedge fund manager said its full-year profit is set to grow by more than 40 pct and ahead of analysts expectations.
Landsbanki repeated its 'buy' advice on the group.
And shares in Wolseley (LSE: WOS.L - news) ticked up 13 at 540 after Goldman Sachs (NYSE: GS - news) upgraded the group to 'neutral' from 'sell' as the broker thinks the tough operating environment is now reflected in the share price.
Housebuilders were also rallying Persimmon (LSE: PSN.L - news) was 38 higher at 775-1/2 while its midcap peers Bellway (LSE: BWY.L - news) gained 66 at 855, Barratt Developments (LSE: BDEV.L - news) was up 28-1/4 at 435-1/2 and Redrow (LSE: RDW.L - news) was 18-3/4 firmer 307-3/4.
On the downside, Kingfisher (LSE: KGF.L - news) was the top faller, down 5.6 pence at 129.5, after the global home improvement retailer slashed its final dividend payout by 50 pct and issued cautious comments about its cash position and trading outlook, overshadowing in-line full-year numbers.
The group, which trades from about 780 stores in nine countries in Europe and Asia, also said it expected to cut its interim dividend in the current year by the same magnitude.
In reaction, Pali International, which has a 'sell' rating on Kingfisher, said the dividend cut was not as bad as it had expected, but with the interim to be halved to 1.9p, the cut is actually worse than it looks, with the rebased annual dividend effectively 5.33 pence.
Turning to the second line, Rentokil Initial (LSE: RTO.L - news) led the mid-cap risers, 8 pence higher at 95-1/2, after being added to Merrill Lynch's Europe 1 List with a 'buy' recommendation, according to traders.
The broker lifted its price target for the stock to 120 pence from 105 following the group's management changes, according to traders.
Talvivaara Mining Company (LSE: TALV.L - news) was also up, taking on 29-3/4 at 363-3/4, as Merrill Lynch initiated the stock as one to 'buy', with a 420 pence target.
Among those reporting figures today, Chloride Group gained 15-1/4 at 184-1/2, after announcing it expects its results for the year ended March 31 to be ahead of its own expectations, with an increase in operating profit before amortisation of 50 pct over the previous year.
The power services company said it continues to make excellent progress, and that it expects sales for the year to be around 30 pct higher than last year 'with organic sales growth well ahead of the market'.
And Northern Foods was up 6 at 93 after saying its trading performance continued to meet expectations and it sees adjusted pretax profit for the year to March 29 beating the median market consensus.
In reaction, Evolution Securities said that Northern Foods (LSE: NFDS.L - news) rehabilitation continues, with good sales growth, a full recovery of commodity cost increases, margin progress in two out of three divisions, and pretax profit ahead of median market consensus. It (Frankfurt: A0MLX5 - news) added that management would appear to be rectifying the group's problems.
On the downside, Enodis (LSE: ENO.L - news) fell 5 to 146-1/2, retracing yesterday's gains, following what Merrill Lynch called a 'solid' first half trading statement, but with the broker saying it does not expect to make significant changes to its estimates.
The commercial food equipment manufacturer said it expects its first-half sales to rise about 7 pct on a like-for-like basis and added that its full-year expectations remain unchanged from the interim management statement issued on Feb 7.
Finally, Close Brothers was down 9 at 600 after the specialist merchant banking group announced it had bought two specialist lending businesses for a total of 33 mln stg, adding that the acquisitions will be earnings enhancing by 2009.
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