Pre Market Report - LONDON

Friends gets new Resolution offer

London open

City sources predict FTSE 100 will open down 19 points from the previous close of 4,732.

Stocks to watch

Life insurer Friends Provident is close to agreeing a takeover by Resolution after the terms of the original offer were improved sufficiently for talks to start between the two sides. In a statement, Friends Provident confirmed it had received a new offer of 0.9 Resolution shares for each Friends Provident share. The offer also includes a partial cash alternative up to Ł500m.

Construction and regeneration group Morgan Sindall said first half results were in line with expectations despite posting a 28% slide in profits due to the challenging conditions in the period. Profit before tax fell to Ł20.5m from Ł28.6m on revenue that slipped 8% to Ł1.14bn.

Occupancy fell again at care home operator Southern Cross over the last three months with the average occupancy of the mature portfolio 87.5% (2008: 89.8%). Revenues in the 14 weeks to 5 July were Ł254.8m (2008: Ł245.6m) and operating profits Ł22.2m (2008: Ł24.4m). Operating margins were 31.8%, 0.2% lower than during the same period in the prior year.

In the Press

China has accused Rio Tinto of spying on its steel industry for six years, costing the country Rmb700bn ($102bn) in excessive charges for iron ore.

The remarks, contained in an editorial in the magazine of the National Administration for the Protection of State Secrets, indicate that Beijing’s detention of four Rio employees in China on accusations of stealing state secrets about iron ore price negotiations could be the start of a widening campaign, the FT reports.

Sir Win Bischoff, the chairman designate of Lloyds Banking Group, is believed to be pushing for the bank to raise up to Ł15bn from the stock market to keep down the cost of insuring toxic debt with the Government. The Treasury is understood to back the bank’s tentative plans to raise cash from the markets and scale back its exposure to the Government’s asset protection scheme, which has been agreed in principle although contracts have yet to be signed, the Times reports.

Clive Cowdery’s Resolution is inching towards a take­over of Friends Provident

Newspaper tips (Sunday)

There was more positive new this week from oil producer and explorer Gulfsands Petroleum. The company said that it had successfully completed the expansion of its early production facility at Khurbet East in Syria. It now has a capacity of 18,000 barrels per day. The shares are trading on a December 2009 earnings multiple of 9.2 times, falling to 6.7 in 2010. This is a growth share, so it does not pay a dividend, making it unsuitable for those investors pursuing an income strategy. Buy says the Sunday Telegraph.

Last week's trading update from contractor Mouchel reassured and the shares moved higher, The shares are trading on a current year earnings multiple of 7.2 times and yielding 3.5%. Hold says the Sunday Telegraph.

Shareholders have done well out of oil and gas group BG and some who bought shares back in the 1980s or even in 2006 may be tempted to take profits. There is no harm in selling some stock - maybe even 30%- but hold on to the rest. This company is solid, reliable and should continue to deliver for many years says the Mail on Sunday.

US close

US blue chips climbed to new 2009 highs after the jobless rate fell for the first time in a year.

Across the markets, Dow Jones closed up 113 points at 9,370 with Nasdaq rising 27 points to 2,000. The S&P 500 was up 13 points at 1,010.

The Labor Department said 247,000 jobs disappeared in July, far less than the 320,000 predicted by analysts and almost half the 467,000 reported in June. Today’s number was the least jobs lost in a month since August 2008, while an unemployment rate fell of 9.4%, down from 9.5% last month, was the first decline since April last year.

In corporate news, insurer American International Group reported its first quarterly profit since 2007. Profit came in at $1.82bn in the second quarter, against the $5.4bn loss same time last year. after the two sides neared an agreement over the valuation of the life assurer over the weekend. Both sides are trying to reach agreement before the time Friends announces its interim results on Tuesday on a deal that will value the company at Ł1.86bn on Friday’s closing share prices, the FT reports.

Sector Risers

Name	Value	% Change
Forestry & Paper	3,005.21	+3.7%
Mobile Telecommunications	2,940.52	+2.7%
Pharmaceuticals & Biotechnology	8,090.67	+2.4%
Automobiles & Parts	2,627.99	+2.2%
Electricity	6,137.09	+1.9%

Sector Fallers

Name	Value	% Change
Real Estate	1,910.81	-1.7%
Industrial Engineering	3,080.65	-1.1%
Mining	16,142.10	-1.0%
General Financial	4,788.14	-1.0%
Industrial Metals	4,822.85	-0.8%