London afternoon: Blue chips bounce higher

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Date: Monday 07 Jul 2008

  • Market Movers
  • FTSE 100 5,456.00 +0.80%
  • techMARK 1,368.82 +0.61%
  • FTSE 250 8,572.50 +0.66%

LONDON (ShareCast) - London's blue chips are pushing on again as the afternoon session gets underway, helped by a smattering of broker tips and a slight dip in oil prices.

UK industrial production fell far more than expected in May, leaving the year-on-year figure down by the most since the end of 2005.

Output dropped 0.8% during the month, said the Office for National Statistics, much more than the 0.1% predicted by analysts. The annual decline came in at 1.6%.

Carphone Warehouse leads the index after Goldman Sachs re-initiated coverage of the mobile phone retailer with a ‘buy’ rating.

Broker coverage also lifts Amec. Citigroup lifted its rating on the oil services group to ‘buy’ from ‘hold’, saying it sees management targets as too cautious.

British Airways floats higher as the crude oil price retreats. Other transport stocks such as FirstGroup and Stagecoach also cheer the fall in the fuel price.

Elsewhere in the sector, no-frills airline Easyjet reported its June load factor remained strong at 86.9% and passenger numbers grew 19.5% to 4.1m compared to last year.

Irish airliner Aer Lingus also released strong figures, saying the total number of passengers grew by 7.6% in June 2008 compared with the same period last year. Passengers for short haul flights rose 7.8% while long haul flights increased 6.7%.

J Sainsbury moves higher after JP Morgan lifted its rating on the supermarket to ‘overweight’ from ‘neutral’ and on Tesco to ‘neutral’ from ‘underweight’ saying that valuations in the European food retail sector are defensive for the first time in two years.

However, there was more misery for Marks and Spencer again after JPM cut its price target on the clothes and food retailer to 200p from 345p and kept its ‘underweight’ rating. Boss Stuart Rose also faces a difficult week with one in four shareholders expected to abstain or vote against his election as executive chairman.

Elsewhere, JP Morgan has cut its target price on Shire to 882p from 1050p and kept its ‘neutral’ stance on the drug group after examining various profit and loss factors.

Royal Bank of Scotland is the worst performing blue-chip after it was down-rated to “under-perform”' from “in- line'' by Cazenove, which has concerns over the bank’s declining credit quality and the price it paid to acquire bits of ABN Amro.

Bradford & Bingley crumbled to a new low on fears its rights issue is still not a certainty despite the intervention by four of its largest shareholders after TPG walked away last week.

Miners are led lower by Rio Tinto after the European Commission said it will investigate BHP Billiton’s $163bn offer for its fellow mining giant, saying such as take-over may be incompatible with the single market. BHP also joins the 10 heaviest fallers.

Also in mining, Lonmin revealed the extent of production losses as normal smelting operations at its Number One furnace resumes after being closed because of a small water leak. The platinum giant estimates that the impact on production and sales of the power down is the deferral of between 5,000 and 10,000 ounces of the precious metal from the 2008 financial year into the 2009 financial year.

House builders are on the back foot with reports this morning already suggesting that Persimmon will make 1,000 staff redundant tomorrow.

Elsewhere, gaming machines group Inspired Gaming is to raise £40m through an issue of 80m convertible preference shares at 50p each. The pubs division is being sold to Danoptra for a nominal consideration. Inspired reported an after tax of loss of £45.3m for the half year to 12 April including a pub division write-down of £47.6m.

Engineer Morgan Crucible's turnover rose by about 13% in the first half of its financial year. On a like for like basis, excluding acquisitions, revenue growth is expected to be c.10% (c.4% on a constant currency basis). "Our organic revenue growth guidance for the full year remains in the 5-6% range on a constant currency basis," it added.

Courtesy car supplier Helphire reports satisfactory progress in the year to June just ended, but cautions that the UK non-fault accident management market is maturing and its caseload is growing less rapidly. If the economic environment remains challenging in the near future and fuel prices remain high, motoring activity and therefore growth in the use of credit hire may slow, it added.

Support services firm Spice reported a 40% rise in full-year pre-tax profit and said it continues to look to the future with confidence.Pre-tax profit increased to £17.1m in the year ended 30 April from £12.2m last time on revenue of £312.2m compared with £228.6m.

Cancer drug developer Antisoma is wanted after announcing the initial findings from its phase II trial of AS1411 in relapsed and refractory AML (acute myeloid leukaemia).

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