City sources predict FTSE 100 will open down 20 points from yesterday’s close of 5,410.
Stocks to watch
International Power shareholders will own 30% of the new company to be formed by the merger of the UK power company with French electricity giant GDF Suez Energy International. The proposed combination, which has the full backing of the International Power board, will take the form of a contribution of GDF SUEZ Energy International into International Power in exchange for newly issued International Power shares in order to create an enlarged International Power.
Half-year results from InterContinental Hotels underpin that the hotel trade is showing signs of recovering from the effects of the recession, and not just at the budget end of the market. The Holiday Inn owner reported a better than expected 22% rise in operating profit to $219m in the six months ended 30 June. Broker Charles Stanley expected to see earnings of $210m. Pre-tax profit increased from a loss of $50m to a profit of $192m. Revenue rose to $772m, up from $726m.
Worries over the economy have caught up with travel group TUI Travel, which warned profits this year will be at the low end of forecasts after UK bookings faltered. UK bookings fell by 2% over the past 12 weeks with the Netherlands also down by 3%. The market has been hit hard by ash cloud disruption, good weather and the uncertainty around the emergency budget, resulting in a later booking pattern that has adversely affected profitability.
In the Press
Fears of a new slide in house prices emerged yesterday amid signs that the economy is sagging again, the Times reports. First-time buyers are finding it harder to get on to the property ladder than at any point for a quarter of a century because they need to raise larger deposits and borrow more money, according to analysis by the Nationwide building society. This is making the market virtually inaccessible to tens of thousands of would-be home owners who cannot rely on help from their parents.
The Independent adds that a fall in house prices later this year and in 2011 is becoming increasingly likely, according to the latest survey of the property market from the Royal Institution of Chartered Surveyors. The RICS's July poll of estate agents found more members saying that prices were falling than rising – the first time the index has turned negative since June last year. In contrast, last month saw 8% more surveyors reporting improvements.
The European Union is to push for the right to levy direct taxes on Britons and the citizens of other member countries, the EU Budget Commissioner has disclosed. The EU hopes that the plan, to be unveiled next month, which could see new taxes on air travel and financial transactions, will give it more independence and fund controversial expansion proposals. The direct taxes would reduce each country's annual payment to the EU, the Telegraph reports.
Newspaper tips
Wm Morrison, the supermarket chain, trades on a 2011 price to earnings ratio of 11.9, which makes it one of the cheapest European food retail stocks. Morrisons will face a constrained consumer over the next year, but its plans to become a "nationwide" grocer by further expanding in the south, progressive dividend policy and robust financial position make it a buy says the Independent.
Taken in isolation, the sale yesterday by Mitchells & Butlers of its ten-pin bowling business for Ł39m does not move the dial in any significant way. But in the context of the strategic path laid out by John Lovering, the former Debenhams boss parachuted in as chairman in January, it is a key stage on the road back to stability and credibility. One concern is the combined 40% stake held by Joe Lewis and the racing tycoons JP McManus and John Magnier, but, in time, M&B may put the travails of the past three years behind it and once again become a normal company. Buy says the Times.
Shares in RM have fallen by almost a third, from 195p at the end of June to 137p yesterday and the stock is cheap as it trades at 8.4 times earnings. However, only 12% of its revenue is derived outside the UK — which pales in comparison with Promethean, Britain’s other listed education technology play, which derives less than 10% of its revenue on home soil. Hold on to RM until it expands its horizons says the Times.
US close
Wall Street built on its early gains on hopes that the Federal Reserve's interest rate statement tomorrow will also reveal more help for the US economy.
Across the markets, the Dow was 45 points higher at 10,698, with the Nasdaq up 17 points at 2,305. The S&P 500 advanced 6 points to 1,127.
The Fed is expected to hold interest rates at 0%, but how it responds to the recent weak US economic data will be the main point of interest.
Google and Verizon unveiled a joint proposal for a new web standard called "Net neutrality". The proposal would give the Federal Communications Commission authority to regulate wired broadband providers.
Hewlett-Packard dropped after the technology giant’s chief executive Mark Hurd resigned after an investigation into a sexual harassment claim against him by Jodie Fisher, who worked on contract for HP's marketing department, revealed expenses irregularities. Finance director Cathie Lesjak takes over as chief executive on an interim basis.
source:digitallook
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