M&S profits at top end of range
London openCity sources predict FTSE 100 will open up 36 points from yesterday's close of 5,037.
Stocks to watch
High street giant Marks & Spencer produced interim results right at the top of expectations, with underlying profits rising slightly as food sales improved for a fourth quarter in a row. Group sales to end September grew 2.8% to Ł4.3bn. Adjusted profit before tax was slightly ahead of last year at Ł298.3m. Most analysts had expected profits of about Ł290m compared with Ł297.8m last year.
Fashion chain Next has upped its guidance for second half sales up to Christmas Eve after reporting better than expected sales in the third quarter. Retail like-for-like sales dropped 1.3% in the three month ended 31 October, while directory sales were up 5.1%, with both Next Retail and Next Directory performing ahead of the second half guidance the group gave in September.
Trading conditions are on the mend for shopping centre owner Liberty International. The retail tenant market still faces challenges but activity levels are on the up while the number of retailers going belly up declined substantially in the third quarter, the company said.
In the Press
GM has abandoned its planned sale of Opel to Canada’s Magna and Russia’s Sberbank The surprise move will be an embarrassment for the German government which has expended a lot of political capital on the controversial deal.
After a six-hour board meeting on Tuesday, the US carmaker said it would hold on to Opel and start restructuring its European unit, which also comprises British marque Vauxhall. The decision marked a U-turn in GM’s strategy and reflects improved business confidence in the car sector, highlighted on Tuesday by another positive month of increased car sales in the US, the FT reports.
Toyota Motor has decided to follow Honda and BMW out of Formula One racing to save costs as the Japanese carmaker braces for its second straight annual loss, a person with knowledge of the situation said on Wednesday. Akio Toyoda, the Japanese automaker’s president, is expected to announce the move later on Wednesday, the FT reports.
Kraft, the giant American food company, said last night that it would “remain disciplined” in pursuing a bid for Cadbury, the British chocolate maker, even as it lowered its outlook for sales for the coming year. The US group’s statement of intent came as reports suggested that Kraft had obtained $9bn (Ł5.5bn) of financing for its bid from nine banks. The lead underwriters are understood to be Citigroup, Deutsche Bank and Barclays. Kraft declined to comment, the Times reports.
Newspaper tips
The Telegraph says investors in UK banks had a lot to digest on Tuesday, what with the confirmation of Lloyds’ Ł13.5bn rights issue and Royal Bank of Scotland (RBS) coming back to the taxpayer cap in hand and the asset sales forced upon the banks by European regulators.
The paper suggests existing Lloyds shareholders should take part in the fund-raising, if only to avoid heavy dilution of their stakes. If they choose not to take up their rights, Lloyds estimates that shareholders’ voting interests will slump by almost 80%.
The shares will be priced on 24 November at the higher of 15p, or a 38% to 42% discount to the ex-rights price, calculated as 29p to 34p based on Monday’s closing price. With the stability provided by the huge capital raising, Lloyds can start afresh as a profitable retail bank. Existing investors should certainly take up their rights, concludes the Telegraph.
The Telegraph's top banking pick is Barclays, which it says has deftly manoeuvred its way through this financial crisis. Barclays avoided the dramatic caps on bonuses that Lloyds and RBS were forced to accept yesterday. As such, it can scoop up any of the top talent inclined to jump ship if their pay package is hit.
Barclays is also at liberty to pay a dividend and is trading on just 1.1 times its tangible book value, which looks cheap considering its growth prospects over the next three years. Barclays seems the safest bet of the lot. Buy says the paper.
New Britain Palm Oil is on course to open its first refinery on these shores, in Liverpool, in April. NBPO is already vertically integrated — it breeds seeds, plants trees and processes palm oil itself — but this new facility will enable it to capture the margins it loses from using rival refiners in Europe, its biggest market. At 362˝p, or 11 times next year’s earnings, and yielding 4.5%, the shares are a buy says the Times.
US close
Wall Street again picked up late in the day, but despite gains for Nasdaq and the S&P 500, the Dow could not offset earlier losses.
Dow Jones closed down 17 at 9,771. Nasdaq added 8 at 2,057 while the S&P 500 added 2 at 1,045.
Trains were the big news as Berkshire Hathaway, Warren Buffett’s investment vehicle, dug deep and splashed out $44bn in cash and shares on the Burlington Northern Santa Fe railway.
Berkshire Hathaway, which already owns 22.6% of the business, is paying $100 a share for the rest of the firm. Today’s acquisition, which includes $10bn of Burlington Northern debt, is the biggest in Berkshire’s history, and more than twice as big as the second biggest acquisition the so-called ‘Sage of Omaha’ has ever made.
Sector Risers
| Name | Value | % Change |
|---|---|---|
| Food & Drug Retailers | 4,683.75 | +0.4% |
Sector Fallers
| Name | Value | % Change |
|---|---|---|
| Industrial Metals | 4,074.96 | -4.1% |
| Forestry & Paper | 3,567.47 | -3.7% |
| Automobiles & Parts | 2,445.62 | -3.5% |
| Technology Hardware & Equipment | 320.73 | -2.7% |
| Construction & Materials | 3,351.97 | -2.6 |
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