LONDON Pre-Market Report

Date: Thursday 03 Jun 2010

London open

City sources predict FTSE 100 will open up 90 points from yesterday's close of 5,151

Stocks to watch

DIY retailer Kingfisher, which owns the B&Q chain in the UK, reported a 1.8% decline in like for like (LFL) sales in the first quarter in which adverse weather conditions across Europe and ongoing economic uncertainty impacted consumer demand. Total sales in the 13 weeks ended 1 May were broadly flat on a reported basis and 0.2% down in constant currency terms. Retail profit was up 12%, helped by margin and cost self-help initiatives.

The recovery in platinum prices last year came slightly too late for Johnson Matthey, which refines the precious metal, to post a rise in profits or revenues in the year to March 31. Pre-tax profits for the year totalled Ł254.1m, down from Ł267.9m the previous year, on revenues that slipped to Ł7.84bn from Ł7.85bn.

BP has agreed to fund the six sections of the Louisiana barrier islands proposal, which is estimated to cost the oil explorer $360m. The group will not manage or contract directly for the construction of the island sections and said it will not assume any liability for unintended consequences of the project.

In the Press

Mervyn King, the governor of the Bank of England, is paid more than twice the amount the prime minister receives, according to the FT. The Telegraph says King has refused a pay rise for the next two years as the public sector braces itself for a period of restraint.

An urgent review of impending regulation costing billions of pounds a year has been announced by Vince Cable, the business secretary, as part of a wider package designed to cut red tape, says the FT.

Coutts, the Royal Bank of Scotland (RBS) unit best known as the Queen's banker, is to bear the brunt of a round of 500 job cuts at the state-owned bank's wealth-management operation, according to the Independent.

Star fund manager at Jupiter emerges as largest shareholder as it goes ahead with London listing worth up to Ł868 million, writes the Times.

Newspaper tips

Water is a great a sector to be in but if you're in Northumbrian, take profits and switch into alternatives that offer better value, such as United Utilities or Severn Trent, says the Independent. The Times says Northumbrian offers certainty at a time when the stock market is volatile. Hold.

Independents may be leaving the market but there is no less competition from DIY multiples. Even at a discount to the sector, at 7.4 times expected earnings, Topps Tiles shares still look like a sell, says the Times.

Opsec Security shares have more than doubled from a 12-month low of 9.50p last June and trade on 13.5 times 2011 earnings. That's edging towards pricey but there's enough here for speculative buyers to tuck a few away, recommends the Independent.

Hamworthy trades on 4.1 times enterprise value to earnings before interest tax, depreciation and amortisation, leaving the stock at a 30 per cent discount to the sector, according to Numis. Given that valuation gap, we think that, even if the recovery is delayed, the market will likely treat Hamworthy better than some of its peers. Buy, writes the Independent.

US close

US stocks powered ahead, closing up more than 200 points as house sales data gave sentiment a boost.

The pending home sales index rose 6% in April compared with expectations of 4.3%. The March figure was revised from 5.3% to 7.1%.

Car sales figures had GM reporting a 32% gain in sales and Ford reporting a 23% increase in May. Toyota's sales rose 7%.

On the corporate front, AIG was in focus after UK insurer Prudential 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.

US authorities have launched a criminal investigation into the Deepwater Horizon oil disaster. BP, which has seen over Ł40bn wiped off its value since mid-April, is facing increasing anger over the Gulf of Mexico spill, the biggest in American history.