LONDON Pre-Market Report

Date: Wednesday 02 Jun 2010

London open City sources predict FTSE 100 will open down 63 points from yesterday's close of 5,163. Stocks to watch Prudential was this morning facing calls for a clear-out of its senior management after it scrapped it contentious plans to buy AIG's Asian arm (AIA). In a statement, chairman Harvey McGrath said the Pru took the decision to withdraw after failing to negotiate a cut in the $35.5bn purchase price for AIA. The Pru's $21bn right issue to finance the deal will now also be scrapped. Scottish soft drinks maker AG Barr said it has made a good start to the year, thanks to strong performances by its Irn Bru and Rubicon brands. Total revenue for the period from 31 January to 29 May on a like for like basis increased by 17.9% compared with last year. Overall operating margins continue to be in line with expectations, the group added. Water company Northumbrian Water has pumped up full-year profits by 11.5% and says it will not need to raise any new debt before the end of 2011. Profit before tax for the year ended 31 March increased to Ł170.2m from Ł152.7m on revenue up 1.5% to Ł704.7m, mainly due to the uplift in tariffs to support ongoing high capital investment. Barclays said its TAV unit has made a recommended cash offer to buy Stockholm-listed carbon developer Tricorona for about Ł98m. The deal, which is expected to complete in the third quarter of 2010, would be accretive to Barclays earnings within one year from completion. In the Press BP’s long-term credibility was at stake last night as its chief executive fought to halt a headlong slide in its stock price and the Obama Administration announced a criminal investigation into the Deepwater Horizon oil disaster. After losing a third of its value in six weeks, BP is expected to promise shareholders this week that their annual dividend — more than $10bn last year — will be maintained. Eric Holder, the US Attorney-General, announced a criminal and civil investigation, to be conducted by the FBI and other federal agencies, after meeting local officials in New Orleans, the Times reports. Activity at British factories increased at the fastest rate in more than 15 years in May, matching April’s rate of growth, but the data was clouded by fears over inflationary pressures. The Purchasing Managers’ Index of activity at British manufacturers remained at 58 in May, the highest since September 1994. It has been above the 50-mark, which indicates that activity is rising rather than falling, for eight months as manufacturers take advantage of the weak pound to boost exports, the Times reports. The European Union could seize control of green taxes across the continent in order to make low-carbon energy cheaper. Biofuels and wind or wave power would become less costly than energy produced from fossil fuels, under draft plans obtained by Reuters, reports the Telegraph. Newspaper tips National Grid has reiterated its target of growing dividends by 8% a year at least until 2012. Based on an adjusted post-rights price, it is now trading on ten times next year’s earnings and yielding more than 7%. On that basis, National Grid remains attractive. Buy says the Times. Whitbread's stock has fallen back recently, partly because of profit-taking by investors, since hitting a 12-month high of Ł16.31 on 26 April. The shares now trade on a 2011 forecast multiple of 13, which is a significant discount to rivals. While Whitbread could be hit by a relapse in spending by consumers and businesses, it is over the worst and its shares offer good value compared to rivals, so buy says the Independent. FirstGroup shares trade on about nine times 2011 earnings, making the company the lowest-rated public transport group. That seems unwarranted, particularly since last month the company also promised to increase its dividend by 7% a year for the next three years. The dividend yield of almost 6% is certainly attractive and makes the shares worth tucking away. Buy says the Times. US close Wall Street succumbed to a late sell-off Tuesday, dragging the Dow Jones back close to 10,000 despite some encouraging economic data. The blue chip index trading above 10,200 after lunch as investors welcomed a 2.7% increase in US construction spending during April, the largest increase for nearly six years. Even a drop in the Institute for Supply Management's manufacturing index to 59.7% in May from 60.4 the previous month was better than expected. Eventually, the sellers returned. Chevron and Exxon Mobil took a hiding as oil prices fell, while sentiment was soured by BP’s 15% slump. It still hasn’t figured out how to stop the leak in the Gulf of Mexico. Oil services and exploration companies fell in sympathy. Anadarko Petroleum, Halliburton and Diamond Offshore Drilling were among the worst performers. Across the markets, the Dow Jones ended the session down 112 points at 10,024, the Nasdaq Composite fell 34 points, or 1.5%, to 2,222, while the broad-based S&P 500 was off 18 at 1,070.

Sector Risers

Name	Value	% Change
Life Insurance	3,530.50	+3.2%
Tobacco	25,080.18	+3.1%
Fixed Line Telecommunications	1,873.05	+1.9%
Electricity	6,119.01	+1.8%
Technology Hardware & Equipment	416.43	+1.5%

Sector Fallers

Name	Value	% Change
Oil & Gas Producers	7,122.30	-4.5%
Alternative Energy	5,712.17	-3.7%
Industrial Metals & Mining	5,197.06	-2.2%
Forestry & Paper	4,415.18	-2.1%
Automobiles & Parts	2,852.44	-1.8%