London open-Pre-Market Report

Vodafone hikes revenues

London open

City sources predict FTSE 100 will open down 16 points from yesterday's close of 4,560.

Stocks to watch

Vodafone said revenue rose 9.3% in the quarter to June, helped by positive exchange rate movements and M&A activity. The group also said it is trading in line with management's outlook issued in May 2009 for the current financial year. Revenue rose from Ł9,828m to Ł10,74m in the quarter to June.

Water supplier United Utilities said it is on course to continue its dividend payment policy after a successful year in a challenging economic environment. The day after regulator Ofwat outlined its proposals for all the water companies’ price plans over the next five years, United said recent trading has been in line with expectations.

South African private bank Investec continues to navigate a “steady” course through the “uncertain” global environment, maintaining profitability across the group in the first quarter. Net operating income for the quarter to 30 June 2009, after expenses and minorities but before impairments on loans and advances, fell 12% from the same time last year.

VT Group will pocket Ł250m after the defence firm agreed an extension to a couple of government support contracts. An option has been exercised to extend VT's engineering and communications framework contract with a government agency by five-years to 2015. Training and soft facilities management support agreements with the Royal Navy, run by VT’s Flagship training business, will also keep going, extended from June 2011 to December 2011 and April 2013 respectively.
In the Press

The world’s biggest banks could be penalised with onerous surcharges, forcing them to set aside proportionately far more capital than smaller rivals, Lord Turner of Ecchinswell, chairman of the Financial Services Authority, suggested yesterday.

Lord Turner, speaking after the FSA’s annual meeting, said regulators were determined to address the problem of banks regarded as too big to fail. That would mean a capital surcharge of some sort. “It may have to be x plus 2 per cent or x plus 3 per cent for large, systemically important banks,” he said, referring to the new capital ratio, the Times reports.

Lloyds Banking Group and Royal Bank of Scotland have submitted plans to Brussels on how to slash their businesses, in an attempt to avoid draconian measures being imposed by the European Commission. The two banks, which have received Ł35bn in aid from the British Government between them, have promised to reduce their share of certain markets and sell businesses. Lloyds is also thought to have said it could sell some of its 3,000 branches in the UK, the Times reports.

Angry investors blasted the Bank of England on Thursday when it sparked a sell-off in the gilts market after one of the biggest government bond offerings of the year. In an interview published 20 minutes after the Ł5bn bond deal was finalised, Andrew Sentance, an external member of the Bank’s interest rate-setting monetary policy committee, said it was considering whether to put on hold its quantitative easing programme designed to pump money into the economy, the FT reports.

Spain’s Cosmen family has teamed up with CVC, the private equity group, to make a joint takeover bid for National Express, in a deal that could value the debt-laden transport group at more than Ł500m ($826m). The family, which is the biggest shareholder in National Express with 18.5% of the shares, sent a letter to the board of the bus and rail company three days ago, according to people close to the situation, the FT reports.

Newspaper tips

After February’s €201m fundraising, Colt Telecom's balance sheet has never been in better shape, boasting net cash of €243m. That strength and rising cashflow explain why it is contemplating acquisitions for the first time in its 17-year history. But at 119˝p, or nine times next year’s earnings on broker estimates, the shares are no longer cheap — and, unlike those of BT, do not come with a dividend. Pass says the Times.

Capita's management cannot think of any substantial risks facing the outsourcing company, stressing that it benefits in a downturn by telling the private sector and the government that it can save them money. Target revenues for 2010 are already 90% booked. Capita should still be a core bet. Buy says the Independent.

Catering group Compass issued an update yesterday that was entirely in line with expectations, but the shares edged lower on concerns about easing organic sales growth. This slowdown is hardly surprising and the stance on the shares remains buy says the Telegraph.

US close

Wall Street closed above 9,000 and at its highest this year as earnings above forecasts from a number of household names sent buyers scrambling for stocks.

Dow Jones finished up 188 points to 9,069. Nasdaq rose for its twelfth day straight, its best run since 1992, ending up 47 points at 1,973. The S&P 500 was ahead 22 points at 976.

Corporate news fuelled the positive sentiment. Car maker Ford announced a second-quarter profit of $2.8bn, breaking the four straight quarterly losses posted previously. It saw net income of 69 cents a share, compared with a loss of $3.89 a share for the same quarter a year ago. Underlying losses, though, were $424m.

Post-it note maker 3M reported second-quarter EPS, excluding certain items, of $1.20, beating market consensus by about a quarter.

But it was not all good news. Fast food giant McDonald's fell after it said the stronger dollar hit second quarter profit by 8%, which was expected. The group said net income fell to $1.09bn from $1.19bn in the same quarter last year. Earnings per share (EPS) were 98 cents, in line with market expectations, making the stock the first Dow Jones 30-share index constituent not to exceed market expectations with its earnings.

Microsoft's revenue in the fourth quarter fell 17% from the same quarter a year ago to $13.1bn. Analysts were expecting $14.4bn. Profits dropped to $3.05bn, or 34c per share, from $4.3bn, or 46c per share. It marked the software giant's first annual sales dip in more than 20 years.

Sector Risers

Name	Value	% Change
Mining	15,885.47	+4.9%
Industrial Engineering	2,689.35	+3.8%
Banks	4,227.39	+3.6%
Industrial Metals	4,188.47	+3.1%
Oil Equipment & Services	13,438.18	+2.9%

Sector Fallers

Name	Value	% Change
Gas, Water & Multiutilities	3,574.66	-2.1%
Aerospace & Defence	2,553.57	-1.1%
Food & Drug Retailers	4,308.17	-0.8%
Travel & Leisure	3,381.61	-0.6%
Tobacco	21,779.46	-0.5%