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London midday: Footsie unnerved by inflation and housing

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Date: Tuesday 13 May 2008

  • Market Movers
  • FTSE 100 6,165.40 -0.89%
  • techMARK 1,433.93 -0.43%
  • FTSE 250 10,364.00 -1.59%

LONDON (ShareCast) - London’s top stocks toppled in to the red by lunchtime on poor inflation data and a poor response to a trading update from Alliance & Leicester.

According to the Office for National Statistics, the Consumer Prices Index hit 3% in April driven by high food and fuel costs, up from 2.5% in March, and against expectations of 2.6%.

Alliance & Leicester's mortgage lending fell sharply in the first four months of 2008. Mortgage balances at 30 April 2008 were £41.2bn, £1.5bn lower than at 31 December 2007, but it was impairment charges of £388m that unsettled investors with analysts again wondering whether the dividend can be sustained. HBOS, Lloyds and Barclays are also down

Travel group TUI Travel's is doing well. Its underlying loss fell sharply in the first half of the year to £294m, compared with a £339m loss last year. The improvement reflected strong performances in the UK and Nordics and a "significant turnaround" in France, it said.

Security group GFS's underlying performance is now running slightly ahead of overall management expectations, aided in part by a small benefit from recent euro strength. In the year to March overall organic growth improved strongly to 11% with around 9% in developed markets and around 17% in New Markets. GFS remains very confident in the performance of the group for 2008.

Pub operator Enterprise Inns served up an 11% decline in first half profit, in line with expectations, as it warned of a tough trading environment. "Consumer leisure spend is likely to remain under pressure for some time," the group said in a company statement.

On the broker front, Credit Suisse has lowered its rating on Royal and Sun Alliance to ‘underperform’ from ‘neutral’ on valuation grounds. Shares in ITV fell after Goldman Sachs changed its recommendation on the company to ‘sell’ from ‘neutral’, saying the market is being overly optimistic.

Support services group Serco says that its increased pipeline of opportunities and strong performance so far in 2008 leaves it confident of delivering double-digit revenue growth for the foreseeable future. The group reiterated it also expects to see a 30 basis point increase in adjusted PBT margin for both this year and next.

Meanwhile housebuilder Redrow warned the conditions in the housing market have worsened faster than it expected with reservations down 50% on this time last year due to a lack of mortgage availability. Galliford Try was similarly gloomy over the housing market as it lowered guidance for the year to £60m profit.

Shares in Hovis and Campbell's Soups owner Premier Foods improved as the group passed on most of the increases in foodstuff costs seen last year. Meanwhile, Northern Foods is to mothball its Fenland Foods plant in Grantham after failing to agree a new contract with Marks & Spencer for the supply of ready meals.

Builders merchant Travis Perkins reported a 6.8% rise in turnover in the first four months of 2008, but said it expects markets to weaken further as the year progresses.

High street bakery Greggs said like-for-like sales in the 19 weeks to 10 May 2008 rose by 4.7% and is confident about its prospects.

Car dealer Lookers said it has started the financial year with a much stronger business compared to last year, but remains cautious about growth in new car sales.

Stockbroker Jarvis Securities rejected an unsolicited bid approach but said it is considering its options, which could include the sale of the company.

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