FTSE 100	5319.2, +6.6	Dow	11397.56, +266.48
FTSE 250	8731.40, +14.7	Nasdaq	2319.62, +55.40
FTSE All Share	2703.16, +3.17	S&P 500	1263.20, +28.82
Nikkei	13367.79, +208.34	Hang Seng	22715.68, +457.68
Oil (Crude)	$122.19	Gold	$916.17
Base Rate	5%	10 Yr Gilt	4.905%
£/$	1.9944	£/€	1.2705

Markets

London - UK stocks ended higher on Tuesday as merger activity boosted British Airways while banks and oil stocks both weighed. The FTSE100 closed 6.6 points higher at 5319.2 after falling to 5261.4 earlier in the session.

British Airways led the rise, gaining 6 percent after it said it was in merger talks with Spains Iberia. A tie up would create the world’s third biggest airline, which could form the basis of a three way transatlantic tie-up and trigger a fresh wave of industry deals.

Oil stocks were the biggest drag on the index, as US crude fell to $121 a barrel. BG Group and Shell fell 1.4-3.1 percent. BP also reversed earlier gains to fall 2.5 percent despite reporting better than expected quarterly profits.

Banks also were also lower after Merrill Lynch’s $5.7bn third quarter write downs raised fresh concerns over the sector. Barclays, RBS, HBOS and Standard Chartered were between 1.7 and 5.1 percent lower. Also adding to the woes, Merrill Lynch said in a research report to clients that it was raising its additional possible write down estimate for European banks to $58bn from $22bn.

Vodafone rose 3.1 percent after shareholders voted overwhelmingly to support a £1bn share buyback the company announced last week after its stock crashed on a weaker than expected trading update.

Compass Group added 6.3 percent, a day after posting third quarter profit margins and revenues, excluding acquisitions, in line with the levels seen in the first half. Traders said the rebound was down to positive broker comments.

Vedanta Resources rose 2 percent as the company posted a 6.3 percent rise in first quarter core earnings as higher output outweighed weaker zinc prices and rising costs.

In economic news, approvals for British home loans in June hit their lowest since records began and retail sales fell at their fastest pace in at least a quarter century.

New York - US stocks rose on Tuesday as investors cheered strong financial reports, a rise in consumer confidence and oil falling to its lowest level since early May. The Dow Jones closed 266.48 points higher at 11397.56, the S&P500 added 28.82 points to close at 1263.20 and the Nasdaq added 55.40 points to finish at 2319.62. Stocks advanced steadily throughout the day as consumer confidence got a surprise boost in July. The markets opened with a quick advance after Merrill Lynch said late Monday it would take a $5.7bn write down and sell of $1.1bn in mortgage securities in the current quarter. The brokerage also said it plans to raise $8.5bn through the issuance of new stock. The stock rose on the news, but most other banks advanced even more. Wachovia led banks with a strong gain, Washington Mutual, Bank of America, JPMorgan and Wells Fargo also rebounded. Citigroup also managed a gain, even after Deutsche Bank analyst Mike Mayo forecast that the bank will take an added $8bn in write downs related to its collateralized debt obligations in its third quarter.

Amgen reported quarterly earnings late Monday that slipped 7.6 percent but still managed to beat analyst’s expectations.

US Steel posted quarterly earnings that more than doubled from year earlier levels. The result came in 45 percent higher than Wall Street expectations, sending shares much higher.

Valero Energy reported quarterly earnings that fell 65 percent below year ago levels on record oil prices and rising natural gas costs. The result still beat analyst’s expectations, and the stock rose.

In economic news, the Consumer confidence index rose nearly a point in July, after falling in the previous six months. Analysts had expected the index to fall again by 0.4 points. The study did note, however, that overall confidence is still very weak. May home prices dropped a record 15.8 percent from a year ago, according to the S&P/Case-Shiller Home Price index of 20 cities. It was the 22nd consecutive month of decline recorded by the index.

Oil prices fell $2.54 to close at $122.19 per barrel, the lowest settlement since May 6. Oil plummeted after OPEC President Chakib Khelil said oil was overpriced and could sink to $78 a barrel. Oil has fallen $25 since setting a record high of $147.27 on July 11.

The average price of gasoline fell 1.7 cents to $3.941 per gallon in the US declining for the 12th straight day. It was the lowest level since May 29.

In currency trading the US dollar spiked against global currencies, jumping to a one month high versus the euro.
COMEX gold for August delivery fell $11.20 to settle at $916.50 an ounce after fluctuating above and below the break even point for much of the day.

Treasury prices fell, sending the yield on the 10 year note up to 4.07 percent from 4.01 percent.

Tokyo­ - The Nikkei average rose 1.6 percent today with Matsushita Electric Industrial jumping on strong earnings results and financial shares gaining on easing US credit fears. But investors dumped Sony Corp after it posted a bigger than expected fall in quarterly profit and cut its outlook, hurt by sluggish mobile phone sales and price competition. The Nikkei closed 208.34 points higher at 13367.79.

Economics

US ADP employment (Jul) 13.15 bst

Monthly ADP readings have been higher than official private payrolls for the past eight months, with an average gap of over 100,000. In June, this gap was smaller, as ADP fell 79,000 versus a 91,000 decline for private payrolls. An 80,000 drop in ADP this month is expected.

Corporate

Lloyds TSB’s first half profit fell 70 percent from a year ago as it took a £585m hit from its exposure to risky assets and adverse volatility in its insurance arm. The bank said its statutory profit in the six months to the end of June was £599m, down from £1.99bn a year ago. Its first half underlying profit was £1.57bn, down 19 percent from a year ago. The average forecast of analysts polled for statutory profit was £773m and underlying earnings of £2.02bn. Lloyds said it would lift its half year dividend by 2 percent and said it was confident in its capital strength.

Mondi said today half year operating profit grew 8 percent to E263m, helped by its Europe and international units. Profits were boosted by low cost operations and cheap wood resource in Russia and South Africa, which delivered cost savings of E58m. Operational cash inflow of E310m was lower than the prior period due to working capital outflow and pre-tax profit fell 32 percent due to an accounting charge.

Qinetiq said today the year had started well and it was confident about its outlook for the full year. Ahead of its AGM, the company said trading since April had remained in line with its expectations, with continued strong trading in the US and a "satisfactory" start of the year in Europe, Middle East and Australasia.

Rexam posted a 61 percent leap in first half profit today and said it expected the second half to be in line with its expectations. Rexam said underlying pre-tax profit was £158m in the six months to the end of June compared with £98m in the same period last year. Underlying earnings per share were 17 pence from 11.7 pence.

Provident Financial posted a 34 percent rise in first half profit today with customer numbers growing 7 percent at its core consumer credit division in the period. Provident recorded pre-tax profit of £51.3m in the six months to end June as sales grew 11 percent to £324M.

Xstrata posted a 1.1 percent fall in first half mined copper output and a 6.1 percent fall in mined nickel production today. However, the company said it had record output for the first six months of the year in ferrochrome, platinum, semi-soft and coking coal and refined nickel. The firm said in a statement it expected "significantly" stronger second half performances across its portfolio.

Aviva reported a 12 percent rise in first half profit, as the strong euro helped offset the impact of market turmoil, and announced a long awaited deal to reallocate surplus assets held by two with profit funds. Operating profit on a European embedded value basis rose to £1.72bn from £1.54bn a year ago, when it was hit by the cost of heavy flooding in Britain. That was in line with an average forecast of £1.7bn, with estimates ranging from £1.63bn to £1.79bn.

Allied Irish Bank posted a smaller than expected 4 percent drop in first half earnings today and cut its full year outlook, saying it now expects profit to fall. The bank said adjusted earnings by market value fell to 104.9 cents in the six months to the end of June from 108.8 cents a year earlier.

Travis Perkins said today that the market in 2008 has become more challenging and it expects its markets to weaken further as the year progresses. The firm reported a pre-tax profit for the six months to June 20 of £124.5m, down from £128.6m the previous year.

Close Brothers Group said its business continued to be relatively resilient in the five months to June 30, adding it expected a broadly satisfactory outcome for 2008. The banks loan book grew 11 percent to £2.2bn as of June 20, compared with £2bn as of January 31. It expects funds under management will be around £8.1bn as of June 31, compared to £8.9bn as of the end of January.

The above details are provided for information only and are not intended to be construed a solicitation for the sale or purchase of any particular investment nor as specific investment advice.

Posted: July 30th, 2008 under Asset Management.
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