LONDON Pre-Market Report

Sainsburys profits jump

London open

City sources predict FTSE 100 will open up 33 points from previous close of 5,230.


Stocks to Watch

Supermarket Sainsbury’s posted a healthy rise in profits in the 28 weeks to October 3 as shoppers continued seeking bargains in tough economic times, but repeated a warning that lower food price inflation will affect growth in the second half. Pre-tax profits rose to Ł342m from Ł258m, ahead of expectations, as total sales climbed by 3.7% to Ł11.15bn from Ł10.76bn.

Reed Elsevier chief executive Ian Smith has resigned as the publisher says its key professional information businesses have not escaped the downturn, while advertising and promotion markets are badly hit.

Micro Focus’s two recent acquisitions, Borland and Compuware, have performed much better than expected and the legacy software specialist has upped its forecasts for both interim sales and underlying profits. After a “strong close to the first half” the group now expects to report total revenues of approximately $195m, up from $135.6m, while underlying profits will also be above expectations.

In the Press

John Paulson, the US hedge-fund manager who made billions betting on the collapse of the US sub-prime mortgage market, increased his stake in Cadbury, the subject of a hostile takeover bid by Kraft. Paulson & Co., Mr Paulson's fund, now has almost 2.1pc of Cadbury's shares, according to a filing, after buying shares on the same day the Dairy Milk maker rejected a 717p-a-share, cash-and-paper offer from US food company Kraft, writes the Telegraph.

National Express is expected to announce its controversial rights issue today as Renfe, the Spanish state rail operator that has been linked with the company’s former East Coast franchise, confirmed that it was planning to enter the British market. The rights issue is to be pitched between Ł300 million and Ł400 million, according to the Times.

British Midland (bmi) has admitted that it may not be able to continue as a going concern beyond next year in the face of an acute funding crisis at the airline. The full extent of bmi’s difficulties are revealed in previously unpublished financial accounts seen by The Times. The document reveals that bmi, which employs 4,800 people, needs Ł190 million of additional funding by the end of next October.

In a huge setback for government prosecutors, a jury in New York City last night acquitted two former hedge-fund managers with Bear Stearns of lying to clients about the safety of their money even when they themselves allegedly saw disaster around the corner because of the imploding sub-prime mortgage market, says the Independent.

Newspaper Tips

As most things have crashed down around the feet of investors in the past year, so gold has enjoyed a revival as investors flocked to safer ground. As such, Randgold Resources, possibly the biggest company you might never have heard of, has cashed in. The mining group is the only pure gold miner on the FTSE 100 and, with the price of gold shooting through the $1,000 per ounce barrier over the past few months, so its shares have soared. It certainly isn't cheap, but we think there is still value in Randgold. The Independent recommends the shares as a ‘buy’.

Seven billion pounds is a sizeable sum — the stock market value, say, of a Wm Morrison or a WPP. But that is also the amount of new money pulled in by Schroders in the three months to September 30. Schroders’s private banking operations are exerting a drag and provisions for asset continue to flow through. But at Ł11.70, or 14 times 2010 earnings, it is not too late to buy, thinks the Times.

Compared with vaguely positive comments from one or two of its rivals, yesterday’s third-quarter trading update fromInterContinental Hotels Group (IHG) looked rather downbeat. Third-quarter numbers beat consensus forecasts but the tone of the comments sent the shares down 17˝p to 825p. The economic picture remains hard to call but IHG’s strong brands and US exposure should enable it to prosper when a recovery ensues. Despite a full-looking multiple of 18 times 2010 earnings, hold on, says the Times.

US close

Leading shares were mixed on Wall Street as some disappointing corporate announcements tempered recent enthusiasm.

The S&P 500 index’s six day winning streak came to an end, albeit only just; it closed a fraction of a point lower at 1,093. The NASDAQ Composite also headed lower, shedding 3 points to close at 2,151 but the 30-share Dow Jones industrial average advanced 20 points to 10,246.

The NASDAQ Composite’s performance was hampered by news that games developer Electronic Arts plans to slash 1,500 jobs. The stock was the biggest faller on NASDAQ. Shrinking sales mean that EA has lost money in 11 quarters in a row.

On the big board, the world’s largest bond insurer MBIA was hit by falling securities prices. MBIA reported a $727.8m net loss after various write-downs.

Shares in database software giant Oracle fell after the European Commission (EC) raised objections to its proposed takeover of Java software company Sun Microsystems. The EC fears the merger will materially reduce competition in the database software market, a charge vigorously contested by Oracle.

Sector Risers

Name	Value	% Change
Banks	5,040.83	+1.4%
Health Care Equipment & Services	3,099.14	+1.4%
Gas, Water & Multiutilities	3,737.45	+1.2%
Tobacco	24,018.27	+1.0%
General Industrials	2,123.03	+0.9%

Sector Fallers

Name	Value	% Change
Forestry & Paper	3,559.93	-5.0%
Automobiles & Parts	2,597.59	-3.3%
Technology Hardware & Equipment	330.39	-2.2%
Life Insurance	3,854.24	-1.9%
Industrial Metals	4,461.53	-1.7%