London open City sources predict FTSE 100 will open down 58 points from yesterday's close of 5,072.
Stocks to watch
Outsourcing specialist Serco remains on course to meet guidance given in May, although it gave no clue as to the possible impact of spending cuts announced in last week’s Budget. “We remain on track to deliver our financial guidance for 2010, which is for continued strong organic revenue growth and further progress this year towards our 2012 margin guidance,” it said in a statement.
Bus and train group National Express expects first half pre-tax profits to show good progress after trading was in line with forecasts through the second quarter. Revenue trends have been resilient, whilst progress on cost saving programmes and delivery of a stronger operational focus across the business has accelerated, it added.
Things are on the up at floor coverings retailer Carpetright with revenue and profits both improved last year. Total group revenue in the 52 weeks to 1 May 2010 rose 7.0% to Ł516.6m from Ł482.8m the year before. The inclusion of Sleepright for its first full year contributed 2.0% of this increase.
In the Press
Fresh tensions erupted between BP and the Kremlin last night after the British oil giant was forced to deny reports that Russia’s Deputy Prime Minister had suggested its chief executive was on the verge of resignation. Just hours before Tony Hayward was due to meet Igor Sechin in Moscow for talks aimed at restoring confidence that BP remains financially viable despite its Gulf of Mexico spill, three news agencies reported that Mr Sechin had told reporters that Mr Hayward “is leaving his position and he will introduce his successor”, the Times reports.
Meanwhile, the FT reports BP has the most shorted bond among US investment grade corporate issuers, and, unusually, more of its bonds are being borrowed for shorting than its shares.
Drugs maker AstraZeneca, defence company BAE Systems and infrastructure group Balfour Beatty have been named by Standard & Poor's as potential takeover targets for cash-rich US companies. Analysts at the credit rating agency listed the three UK-listed companies among nine in Europe that most closely matched the characteristics of groups acquired by US corporates in the past 12 months. "Large US corporate cash balances, combined with currently low European and UK equity forward price-to-earnings ratios and the euro's 16% year-to-date fall against the US dollar, leave US corporations well positioned to pursue European target company acquisitions," S&P said, the Telegraph reports.
Newspaper tips
The Catcher oil field in the North Sea could be one of the best finds in the region in recent years, and comes just as UK production is declining. As the 35% owner of this prospect, Premier Oil is in a good position to benefit from the rich resources of the formation, which is thought to hold up to 155m barrels of recoverable oil. For Premier, the next two years should see an extra 75,000 barrels per day of production and a substantial increase in cash flows. In time, Catcher should add to this compelling production pipeline. A buy says the Telegraph.
Having fallen by a third on Friday night, shares in Connaught lost another third yesterday. They have effectively been in freefall since a profit warning on Friday. The problem relates to the company's business in social housing. Local councils have been delaying spending, putting Connaught's work such as re-wiring and other repairs, on hold. There could be an argument for buying again at these low levels. But the trouble is, profit warnings often come in threes. Sell says the Independent.
At 104˝p, Max Property shares have fallen back 19% from their post-float high and trade at a 14% discount to Oriel Securities’ estimate of net asset value. That discount is not unreasonable given Max’s size and non-prime niche but, for those shareholders prepared to play a long-term game, is a good point of entry. Tuck away says the Times.
US close
US stocks closed lower as a rally after personal income data and the G20 summit fizzled out late in the day. Across the markets, the Dow fell 5 points to 10,138. Nasdaq dropped 2 at 2,220. The S&P 500 fell 2 points at 1,074.
Personal spending increased 0.2%, according to the Commerce Department. It was flat in April. Personal income rose 0.4% in May after climbing 0.4% in April. Leaders of the industrialised World left the latest G20 summit with a vow to halve government debt by 2013 and to force banks to hold significantly more capital.
Tobacco companies Altria, Reynolds American and Lorillard are all higher as the US Supreme Court refuses to hear the US government’s appeal in its litigation against the tobacco industry.
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