Markets

London - The London market finished the week on the front foot yesterday after a recovery from transport and banking shares offset disappointing UK growth figures. Early gains on Wall Street kept the mood buoyant in London despite data showing UK economic growth of 0.4% in the first quarter of 2008 - the slowest for three years. The Footsie closed 40.7 ahead at 6091.4

The improved sentiment over banking stocks helped Alliance & Leicester, whose shares have been hit by speculation of a possible rights issue in recent days. It climbed the riser’s board with a gain of 21.5p to 514.5p. Barclays added 12p to 467.25p and Royal Bank of Scotland gained 8.25p to 349p as banks shrugged off the cautious comments on the prospects for the sector from analysts at Goldman Sachs.

Shares in transport firms recovered recent losses after upbeat comments from leading operator Go-Ahead. Go-Ahead’s expectations of record results and an upbeat assessment of rail and bus markets raised its shares more than 14% or 207p to 1657p. This caused rivals - including FTSE 100 Index firm FirstGroup - to post sizeable gains. FirstGroup was the Footsie’s biggest riser, up 25p to 553p, while in the second tier Stagecoach added 18.25p to 221.25p. Other firms in the transport sector also made progress despite oil prices spiking to $119 a barrel late in the session, with strike threats in Scotland and an attack on a pipeline in Nigeria. Carrier British Airways faces a rocketing fuel bill but moved 8.5p up to 221.25p after gaining ground on a bullish update from German carrier Lufthansa.

Firms moving in the opposite direction included marketing and communications giant WPP after disappointing first quarter revenue growth. Shares declined 37.5p to 592.5p, propelling the firm to the top of the fallers board. Consumer goods giant Reckitt Benckiser gave back some of the impressive share gains seen Thursday on news of a 15% rise in first quarter profits and increase in full-year targets. Shares today were down 2% at 2925p.

New York - US markets were mixed on Friday as concerns over the continuing rise in oil prices and slumping consumer confidence were overshadowed by a late rally in financial shares causing both the Dow and S&P 500 to finish higher while the Nasdaq edged lower. The University of Michigan’s consumer sentiment index erased earlier gains when it was released Friday afternoon. April’s figure was revised down to 62.6 from 69.5 in March, a 26 year low reflecting the impact of higher fuel prices and falling house prices. But the market resumed its climb as higher crude and metal prices lifted commodities and banks extended their rally.

The Dow Jones gained 42.9 points to end at 12,891.9, the S&P 500 rose 9.05 points to finish at 1,397.85. The Nasdaq slipped 5.99 points to close at 2,422.93.

A report form UBS AG helped to push financial stocks higher early on after raising its recommendation on US bank shares to “neutral” from “underweight”, saying lenders will reveal most of their remaining write downs on credit related securities in their first quarter reports. As a result, Citigroup climbed $0.84 to $26.60 while Merrill Lynch & Co advanced $1.55 to $49.64.

Fannie Mae, the largest source of money for US mortgages, rallied after Morgan Stanley said earnings may top estimates next year. Shares finished 10% higher at $30.93. American Express surged 5.7% after reporting first quarter profit that beat estimates.

US light crude oil for June delivery rose $2.46 on supply concerns to finish at $118.42 a barrel. COMEX gold for June delivery added $0.30 to $889.70 an ounce.

Treasury prices went lower, raising the yield on the 10 year note to 3.87% from 3.82%.

Tokyo - The Nikkei closed 30.9 points higher at 13,894.4 this morning. Financials were higher as accelerating inflation boosted speculation lending rates will widen. Sumitomo Mitsui Financial Group jumped the most in six months while consumer lender Shinki Co soared to a three month high. Yahoo Japan Corp led declines among technology stocks after reporting it’s slowest ever profit growth.

Hong Kong - The Hang Seng is currently 94.8 points higher at 25,611.6, heading for its fifth daily gain out of six. Mainland Chinese banks lead gains after China Construction Bank Corp boosted expectations that industry profits will increase.

Economics

There is no major economic news today

Corporate

Stanelco said today its financial year had started well and is in line with expectations. Its bio plastics division has seen some “encouraging sales tractions” in a fast moving market driven by changing legal and consumer requirements, it said. The company, which had cash of £7.5m at end March, expects continued progress in its main businesses, and said it was confident about prospects for further commercialisation and development this year.

Whitbread reported a 26.3 percent rise in annual pre-tax profit and said the start of this financial year had been encouraging. Pre-tax profits, before exceptionals, were £210.3m for the year to February 28, compared with a projected £208m. Revenue on continuing operations rose 11.3 percent to £1.19bn compared to £1.25bn.

Stagecoach said it expected earnings per share before one off items for the year ending April 30 to be about 20 pence, and that its outlook remained positive, despite higher fuel costs. The firm also announced the first part of a £71m order for a fleet of 584 new, greener buses.

RBS will this week start the integration of ABN AMRO’s investment bank in a move likely to trigger the loss of about 7,000 jobs out of a combined total of 28,000, the FT said. The newspaper, without citing sources, said the bank was expected to start writing to staff below senior management level as early as Wednesday as part of a consultation process likely to take four to six weeks. RBS was not immediately available for comment.

Highland Gold Mining said today it recorded a profit of $18.1m in 2007, reversing a $94.9m loss in 2006. Highland said in a statement 2007 turnover was $112.1m, up from $92m a year earlier. It produced 156,474 ounces of gold and sold 150,427 ounces at an average price of $708 per ounce.

Continental Airlines has called off talks with United Airlines because of United’s weak financial condition and a feeling that merger would risk its own financial health, a source briefed on the matter said Sunday. The source also said Continental is in “advanced talks” with British Airways and American Airlines about a potential alliance, with plans to seek antitrust immunity. American did not immediately return a call seeking comment and Continental was not reachable for comment. UA CE Glenn Tilton, who has been a proponent of consolidation, said the company’s strategy is consistent. “Consolidation is underway ensuring you have the right partner is everything. We will pursue all options to ensure a strong, sustainable future for our airline”. Sources had said earlier this month that United was also in serious merger talks with US Airways.

Continental’s decision comes after Delta Air Lines and Northwest Airlines said nearly two weeks ago they planned to merge and become the world’s largest airline, seeking to counter skyrocketing fuel prices, a weak economy and growing competition from European carriers as trade barriers fall on trans-Atlantic travel. Continental said on Sunday in a letter to its employees it has chosen not to merge with any other airline at this time but will continue to consider an alliance with other carriers.

CE Larry Kellner said “We have significant cultural, operational and financial strengths compared to the rest of the industry, and we want to protect and enhance those strengths, which we believe would be placed at risk in a merger with another carrier in today’s environment”. Continental’s decision comes a few days after United’s shares plunged more than 40 percent in one day when it posted a loss of $537m in the first quarter. One source familiar with the matter said the development came as a surprise to United, which had been negotiating in expectation of reaching a deal by late this week.

Russian oil company TNK-BP’s deal to sell control of the giant Kovykta gas field to state gas monopoly Gazprom and retain some development rights should be closed by summer, a TNK-BP shareholder said on Friday. “I continue to believe that this deal will be closed. By summer it should definitely be closed”, one of the BP oil venture’s Russian co-owners, Viktor Vekselberg said in an interview.

He said it was right to put control of the field, whose volumes were partly designated for a regulated local market, into the hands of a state monopoly. He said the deal would proceed under terms agreed last summer. TNK-BP’s chief executive has said it would close by the end of April, but this week, a senior Gazprom official expressed disappointment with stalled progress. Vekselberg said “This huge deal, complicated, is the work of two sides, our and Gazprom. I think that maybe we did not work as effectively together as we would have liked, but this doesn’t put a question mark over it”.

Figures from Begbies Traynor reveal sharp rise in the number of companies on the critical list as casualties from the banking crisis mount ever higher. More than 3,000 companies had county court judgements awarded against them in the first quarter of 2008 with many also facing winding up petitions. This is a four fold increase in the first quarter of 2007 and 10 percent jump compared with the last quarter of 2007. Begbies Traynor estimates that 20 percent of these companies will face insolvency in the next 12 months and that there will be 13,492 insolvencies this year.

Posted: April 28th, 2008 under Asset Management.
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