City sources predict FTSE 100 will open up 31 from yesterday’s close of 5,271. Stocks to watch
This year continues to “shape up well” for Rio Tinto, but the mining heavyweight today warned investors to expect further volatility in commodity prices on fears of a double-dip recession and concerns about Chinese demand. In a second quarter update, chief executive Tom Albanese said operations are close to capacity and markets for most products are strong and the overall long term demand outlook is positive.
Budget pub group JD Wetherspoon reported a 1% rise in like-for-like sales in the 11 weeks to July 11 and said it was confident of a resilient future performance despite economic worries. Wetherspoon, which has recently been moving away from its traditional role as a pub to compete with the likes of Starbucks by selling takeaway teas and coffees, saw overall sales climb by 5.8%. It has opened 41 pubs so far this year and disposed of two.
London Stock Exchange’s decision to cut its dealing tariffs helped it increase market share in the core cash equities business, but meant a mixed performance overall in the last three months. “Market conditions remained variable in the first quarter, with new issue activity down on higher levels last year in terms of money raised and strong trading activity from market volatility in May contrasting with relatively lower levels in the remainder of the period. Trading across the group's platforms in early July shows similarly varied trading levels,“ the LSE said.
In the Press
Democratic senators in the US are calling for an investigation into BP’s business interests in Libya, accusing the British oil company of being part of a deal to free a convicted terrorist in return for oil licences. BP has faced a slew of Congressional investigations following its catastrophic oil spill in the Gulf of Mexico, the majority of which have centred on its safety record in the US and whether it knowingly cut corners, the FT reports.
Taxpayers could be on the hook for between Ł7.3bn and Ł22.8bn ($11.1bn-$34.6bn) if BT were to become insolvent and its pension scheme terminated, according to written papers submitted to the High Court on Tuesday. The gulf between the figures illustrates why BT and its scheme trustees and government ministers have not been able to settle a dispute about the extent of the liability that was made public 2006. Mr Justice Mann is being asked to determine the extent of a “Crown guarantee” for the pension scheme, the FT reports.
GlaxoSmithKline said yesterday that it had reached a settlement in a lawsuit alleging that the company’s blockbuster Avandia diabetes drug can cause heart attacks and strokes. News of the settlement coincided with the start of a two-day meeting at the US Food and Drug Administration to consider whether the drug is too dangerous to stay on the market. GSK refused to confirm a Bloomberg report that it had agreed to pay about $460m (Ł303m) to resolve about 10,000 suits, out of an estimated 13,000 it is facing, the Times reports.
Newspaper tips
Northern Foods expects trading to remain challenging, which might be stating the obvious, but it says it is prepared for further squeezes on consumer spending, having already expanded the range of lower-value products it provides to Tesco, in particular. The shares sell on about seven times’ this year’s profits, which looks cheap given the 9.5% yield. But uncertainties over that dividend will continue says the Times.
Cranswick is relying on the trend towards pork as a cheap and healthy form of protein and towards its premium sausages, again seen as good value for stretched family budgets. A Jamie Oliver range is just appearing in the shops. Companies such as Cranswick are inevitably reliant on what used to be called the pork cycle. The shares sell on about 12 times’ this year’s earnings. Not cheap, but worth picking up on weakness, says the Times.
Property advisory group DTZ yesterday reported a return to full-year profits, with analysts predicting that profits before tax would rise to Ł11m in 2011, before jumping to Ł20m the year after. DTZ says that shareholder value will be better created by pumping funds into organic growth projects rather than through a final dividend. Avoid says the Independent.
US close
US stocks posted strong gains as the start of the results season gave investors optimism, with Intel posting its biggest quarterly profit in a decade.
After the close, Intel posted earnings and revenue that beat analysts' expectations. Net income was $2.89bn in the quarter ended June 26 against a loss of $398m last year. It also raised its forecast for the year. “Strong demand from corporate customers for our most advanced microprocessors helped Intel to achieve the best quarter in the company’s 42-year history," said Paul Otellini, chief executive.
The news gave markets a boost today. The Dow Jones finished up 146 points to 10,363 with the Nasdaq rising 43 points to 2,242. The S&P 500 is up 16 points to 1,095.
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