London close City sources predict FTSE 100 will open up 45 points from their previous close of 5,218.
Stocks to watch
Sainsbury’s has outdone arch rival Tesco in the growth stakes with a 4.6% increase in like for like sales during the first quarter and is apparently doing a roaring trade in Vuvuzela horns. Britain’s third largest supermarket said like for like sales excluding petrol increased by 1.1% during the 12 weeks to 12 June. Tesco yesterday reported UK like for like sales up 1.1% and just 0.1% without fuel. “We have made a good start to the financial year in line with our expectations,” said boss Justin King.
The environment for government and public sector contracts has worsened markedly under the new coalition government, consultant and civil engineer contractor Mouchel warned, with its order pipeline falling since March. It said the short-term outlook is difficult, but the underlying performance for the current year to the end of July will be in line with its expectations, excluding any one-off costs of restructuring.
Part-nationalised lender Royal Bank of Scotland has sold another piece of its sprawling empire, getting shot of a Pakistani subsidiary at the second attempt. It has reached agreement for the sale of its 99.37% holding in RBS Pakistan to Faysal Bank Limited for €41m, or about 2.5 rupees per share, a substantial discount to last night’s closing price in Karachi.
In the Press
From his desk in the Oval Office, President Obama demanded last night that BP hand over control of compensation payments for the Gulf Coast oil spill and challenged America to break a century of addiction to fossil fuels to ensure that such a disaster never happens again. As official estimates of the oil being spilled rose to 60,000 barrels a day - twelve times the original figure - Mr Obama vowed that BP would pay for its “recklessness” and promised that 90% of the oil pouring from the ruptured well would be captured “in the coming weeks”, the Times reports.
BP’s credibility as an international oil company was under further threat last night after the Brazilian Government raised doubts over its $7 billion deal to buy deepwater assets in Brazil. The Times has learnt that the Brazilian oil industry regulator is reviewing the BP deal with Devon Energy announced on March 11 — six weeks before the Deepwater Horizon blast that killed 11 people and sent hundreds of thousands of barrels of oil spewing into the Gulf of Mexico. Top Brazilian officials are being sent to Texas to question BP about the catastrophe.
George Osborne will use the chancellor’s annual Mansion House speech to warn big banks that they will have to pay for the damage they inflicted on the British economy and could be broken up. Mr Osborne will confirm his plans to introduce a bank levy and faces pressure from his Liberal Democrat partners in the coalition to raise a substantial amount from the tax in next week’s Budget The chancellor has also approached Sir John Vickers, former head of the Office of Fair Trading, to lead a review into whether Britain’s biggest banks should be forced to split their retail and investment banking arms, the FT reports.
Newspaper tips Fasion retailer Ted Baker's strong brand and distinctive product ranges appear to have lost none of their niche appeal. Neither does a share price of 510p, or 13 times earnings, look stretched for a company producing consistent double-digit profit growth, which has Ł15m of cash on its balance sheet, and which comes with a 4% dividend yield. Hold on says the Times.
Housebuilder Bellway yesterday reported that the uncertainty regarding the looming fiscal squeeze had resulted in a "slight reduction in both site visitor levels and weekly sales rates" since the election. The housing sector holds immense promise in the long term but the short to medium-term picture is clouded by the prospect of sharp public spending cuts, the possibility of a below-par economic recovery and continued weakness – in historical terms – in the availability of mortgages, so sell says the Independent.
Western Coal has one of the best production growth prospects around. The company plans to increase its output from 3m tonnes a year to 10m tonnes over the next four to five years. It plans to do this organically and without raising new money. It should be able to do this from cashflow. For a company that has low debt and a strong growth profile, the shares appear undervalued. They are trading on a March 2011 earnings multiple of just 5 times, falling to 4.3 in 2012. The shares are a buy for their growth prospects says the Telegraph.
US close
US shares stormed ahead as all of the eurozone-inspired fears that hit sentiment yesterday evaporated and investors hunted for bargains.
The Dow added 213 points to finish the day at 10,404. Nasdaq added 61 at 2,305 while the S&P 500 added 25 at at 1,115.
A rally in the euro sparked the buying, with decent demand for debt auctions in Spain and Belgium helping the upbeat mood.
Even BP picked up despite a downgrade by ratings agency Fitch and another kicking from US politicians over the Gulf of Mexico spill.
On the economic front, a report from the Labor Department showed May import prices fell 0.6%, while New York state manufacturing rose even though employment declined.
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