Thursday, July 30, 2009

LONDON -Pre-Market Report

London open

City sources predict FTSE 100 will open up 41 points from previous close of 4,548.


Stocks to Watch

Royal Dutch Shell said its second quarter results were affected by weak global economy as net profit slumped 70%. Second quarter earnings, on a current cost of supplies (CCS) basis, came in at $2.3bn against $7.9bn a year earlier. In the six month period, CCS earnings fell 64% to $5.6bn.

Broadcaster and broadband provider BSkyB posted a sharp rise in profits in the year to June 30as householders continued splashing out on home entertainment amid tough economic conditions. The firm posted a profit before tax of Ł456m, compared with Ł60m over the previous year as revenues rose to Ł5.35bn from Ł4.95bn.

Aero engine company Rolls-Royce reiterated its guidance for the full year but said the global trading environment remains ‘very difficult’, adding that the recovery is likely to be slow. Underlying pre-tax profits, which excludes the non-cash impact of the hedge book and other financial instruments, rose 9% to Ł445m in the six month ended 30 June.

BAE Systems has swung to a half-year loss, but upped its dividend and said it expects good growth for the full year. The defence firm made a loss of Ł70m in the six month ended 30 June compared with a profit of Ł599m last time.



In the Press

Britain’s leading institutional investors are considering joining forces to bypass investment banks in a protest over the fees they charge for rights issues. The head of UK equities for one of the City’s biggest long-term shareholders told The Times yesterday that institutions are considering options to take control of what has traditionally been the banks’ turf because they are so frustrated by high underwriting fees and deep-discount cash-raising.

BAA has warned potential bidders it will not sell Gatwick airport unless the asking price is met, despite its London assets incurring a Ł545.7m first-half pre-tax loss, says the Telegraph.

The bank debt held by companies fell for the first time since records began in 1997, in a sign of the credit squeeze facing smaller businesses. The data from the Bank of England support the chancellor's claims this week that in spite of the tens of billions of pounds spent on rescuing banks, companies are still struggling to gain access to finance, reports the FT.


Newspaper Tips

Recent fluctuations in BG's share price, from 1162p in early June to 979.5p earlier this month (it has recovered since) suggest it is time to buy. The rating, at 14.3 times next year's earnings, is not overly demanding, although this stock, with its 1.3 per cent yield, is not for income seekers. Gordon Grey, at Collins Stewart, said: "We would view any weakness as a buying opportunity as the long-term growth outlook seems very much intact." The Independent agrees. Buy.

Yesterday’s first-half results from Inchcape provided a useful reminder of how plummeting new vehicle sales are not only a British or American phenomenon. Inchcape was careful not to call the turn. It does not expect a sales recovery until “well into” 2010. Even so, it is taking market share and stimulus measures, such as scrappage schemes and tax incentives, should start to feed through. At 26˝p, the shares, which come without a dividend, have quadrupled from their rights price to trade at 17 times 2010 earnings. That is high enough for now, says the Times.

Halfords has again signalled that sales of satellite navigation systems, which veered off course at the end of last year, are still falling, albeit in line with expectations. The group's forward price-earnings ratio is a modest 10.4 for 2010 and the forecast yield is 4.9 per cent. Despite a sharp jump since the depths of the autumn, Halfords' shares have a clear(ish) road ahead. Buy, says the Independent.


European close

Europe’s leading shares closed with good gains but off session highs, as a number of better than expected corporate results lifted investor sentiment.

Car maker Peugeot Citroen reported a smaller than feared first half net loss and said the European market should recover towards the end of 2010.

Elsewhere in the sector, indebted sports car maker Porsche is in advanced talks regarding the sale of cash-settled options in Volkswagen stock to “one or several” investors and said it expects to report a full-year pre-tax loss of up to €5bn.

Peugeot was the best performer in Paris, up more than 10%, while fellow car makers Renault, BMW and Daimler were also on the rise.

Bayer gained as the German pharmaceutical and chemicals group’s 7.3% profit fall to €532m was not as steep as expected.


US close

all Street finished in the red though off its worst despite weak durable goods order data and disappointment with Yahoo's partnership deal with Microsoft.

Microsoft and Yahoo confirmed reports that they are to collaborate in the search engine and online advertising arena. Yahoo has signed a ten-year agreement with Microsoft to use the latter’s Bing search engine technology to process search requests on its iconic and hugely popular web portal.

It will assume responsibility for selling premium search advertising services for both the Yahoo and Bing web sites. Yahoo fell heavily on the news, while Microsoft posted modest gains.

On the economic front, the Commerce Department said durable goods orders fell 2.5% in June against expectations of a 0.6% drop. It rose 1.3% in May. The Fed's beige book of economic conditions economic activity remained weak but the pace of the decline has slowed overall.

Media giant Time Warner saw its second-quarter profit from continuing operations slip to 43c per share from 47c a year ago.

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