FTSE 100	5420.7, +101.5	Dow	11583.69, +186.13
FTSE 250	886.3, +154.90	Nasdaq	2329.72, +10.1
FTSE All Share	2754.15, +50.99	S&P 500	1284.26, +21.07
Nikkei	13376.91, +9.02	Hang Seng	22806.63, +116.03
Oil (Crude)	$126.77	Gold	$902.90
Base Rate	5%	10 Yr Gilt	4.855%
£/$	1.98	£/€	1.2681

Markets

London - Strong gains by insurers and some unexpected good news from the American economy helped the FTSE 100 Index gain more than 100 points yesterday. The blue-chip index closed at 5420.7 - a rise of 1.9% or 101.5 points.

There was little joy in the UK banking and house building sectors, with Lloyds TSB the session’s biggest faller after half-year profits dived 70% as a result of a bigger than expected exposure to the credit turmoil. Goldman Sachs cut its forecasts in the wake of the results, leaving Lloyds almost 5% lower at 306p. Halifax Bank of Scotland, which is due to announce figures tomorrow, closed 1.5p lower at 271.25p.

House builders dominated the fallers board in the FTSE 250 Index after Goldman also suggested the recent rally for stocks in the sector may have been overdone. Taylor Wimpey retreated 2.25p to 42.5p and Barratt Developments fell 5p to 100p.

An upbeat performance in the insurance sector came after Aviva’s results met expectations and Admiral said premiums were rising faster than claims. With chief executive Andrew Moss remaining optimistic about Aviva’s growth prospects in Asia, the stock climbed 9% to 507.5p. Admiral, a newcomer to the top flight, added to the upbeat mood when it reported a 16% rise in half-year profits and said it had seen signs of a pick-up in motor premiums following a long period of stagnation. Shares rose 89p to 914p. The boost from Admiral and Aviva meant Prudential rose 25.5p to 537p, RSA Insurance added 6.1p to 132.5p and Legal & General cheered 5p to 98.5p.

Miners also did well during the session after Xstrata forecast a strong second half performance, causing its shares to lift 212p to 3647p and Rio Tinto to gain 217p to 5354p.

New York - US markets posted strong gains again yesterday as investors set aside rallying oil prices to focus on an unexpected gain in jobs and government help for the financial and housing sector. The ADP employment report showed the US private sector added a seasonally adjusted 9,000 jobs during July, against expectations of a 60,000 job decline. The Federal Reserve boosted the financial sector after announcing that it is extending its emergency borrowing program to January 30th, it had previously been expected to end in mid-September. President Bush cheered the housing sector after signing a bill to offer affordable government-backed mortgages to homeowners at risk of foreclosure.

The Dow Jones jumped 186.13 points to close at 11,583.69, the S&P 500 climbed 21.06 points to finish at 1,284.26. The Nasdaq gained 10.1 points to end the day at 2,329.72.

Banks were among the top performers for the day, including Wachovia up 8.8%, Bank of America climbing 4.3% and Citigroup adding 2%. Investment banks also made strong gains with Lehman Brothers rising 8%, Morgan Stanley advancing 5.8% and Merrill Lynch finishing 2.5% higher.

Fannie Mae and Freddie Mac were not only boosted by the rescue bill signed by President Bush, but also a government decision to extend a ban on naked short selling of 17 large investment banks as well as the two mortgage companies. Fannie gained 5.3% while Freddie rose 3.7%

US light crude oil for September delivery jumped $4.58 to $126.77 a barrel after a weekly inventory report showed a decline in gasoline stockpiles. Exxon Mobil and Chevron were stronger as a result, rising 4.3% and 5.3% respectively.
COMEX gold for August delivery dropped $13.60 to settle at $902.90 an ounce.

Treasury prices were mixed yesterday, with the yield on the 10 year note remaining at 4.05%.

Tokyo - The Nikkei edged 9.02 points higher to close at 13,376.81 this morning. Takeda Pharmaceutical, Japan’s largest drug maker, gained after boosting its net income forecast by a quarter. Limiting gains, Nintendo Co plunged the most in six months after a disappointing profit forecast.

Hong Kong - The Hang Seng is currently 116.03 points higher at 22,806.63, heading for its first monthly gain in three. Cnooc Ltd rose the most in four weeks after oil prices surged. Moving lower, Orient Overseas Ltd, Hong Kong’s largest container liner, dropped the most in 11 months after the company said first half operating profit fell on higher fuel expenses.

Economics

US Initial jobless claims (week 26 July) 13.30bst

Last week’s initial claims rose sharply from 372,000 to 406,000. Although recent readings have been affected by seasonal volatility due to the timing of the annual auto factory shutdowns, the underlying trend appears to be genuinely weak. Claims are seen dropping back to 390,000 this week. Continuing claims for the previous week should climb to 3.16m up from 3.1m.

US GDP (Q2, advance )13.30 bst

GDP is seen coming in on the high side at 2.7 percent. This is due to a modest boost to consumption (1.9 percent) from the rebates, which otherwise might have fallen outright. Non-residential fixed investment is likely to rise 4 percent, boosted by a double digit gain in business structures, offsetting an outright decline in equipment and software investment. Meanwhile, inventories are likely to be cut by $30bn, deducting 0.4ppts from growth. Exports look very strong (10 percent) while imports may have plunged (-3 percent), allowing net exports to add a chunky 0.9 ppts to growth. The GDP price deflator has the potential to come in very low (1.2 percent), as imported prices have surged, and because imports are a negative in the GDP equation, this acts to reduce the GDP price index. Still, this is largely technical and the headline PCE deflator is likely to accelerate to 4.2 percent. The core PCE deflator should be more muted at 1.9 percent.

Corporate

Royal Dutch Shell today posted a 33% rise in net profit for the second quarter as high oil prices more than offset barrels lost from unrest in Nigeria and weaker refining conditions. The Anglo-Dutch oil giant posted a net profit of $11.6bn, or $1.87 per share, for the three months ended June 30, compared with $8.67bn, or $1.38 a share, for the same period last year. At 08:20am, Shell Class B shares were up 1.94%, or 35p, at 1,840p. The shares are down about 12% since the beginning of the year, on Nigeria disruptions. Second-quarter earnings, on a current cost of supplies basis, or CCS, were $7.90bn, compared to $7.56bn a year ago and the $8.22bn analysts had expected. The CCS figure excludes the impact of crude inventory changes. Revenue rose 55% in the second quarter to $131.4bn from $84.9bn in the year-earlier period. The quarterly figure is roughly equivalent to the 2007 gross domestic product of Algeria, which was $131.6bn. Shell was able to capture booming oil prices, which have been boosted by rising tensions between Iran and the West. The quarterly earnings were boosted by a net gain of $73m, as divestment gains more than offset losses on the valuation of oil and gas contracts. The gain compares with a net gain of $660m in the second quarter of 2007. Higher crude prices more than offset the continued disruptions in Nigeria, which have continued unabated in the third quarter. Shell today said it won’t be able to meet a significant chunk of its Nigerian oil-export obligations to customers for the next two months, following militant attacks on two of its facilities early on Monday. Total oil and natural gas production was down 1% to 3.05m barrels of oil equivalent a day, from an average of 3.09m barrels of oil equivalent a day in the same period a year earlier. The numbers exclude Canada’s oil sands production.

Unilever posted a 6.8 percent rise in second quarter underlying sales today and confirmed its outlook for 2008 growth ahead of its 3 to 5 percent target. Unilever reported the underlying sales rise for the April-June quarter compared with forecasts for a 5.4 to 7.2 increase and a 6.2 percent consensus. The first half rise was 7 percent after a first quarter gain of 7.2 percent. Quarterly earnings per shares reached 0.32 Euros, in line with analysts forecasts of 0.27 to 0.40 Euros and a consensus of 0.33 Euros, giving a first half 6 percent rise. CE Patrick Cescau said the group’s performance in the first half had been good in a challenging environment. He added "For this year we confirm our outlook for delivering growth ahead of our 3 to 5 percent target range, with an underlying improvement in operating margins".

Unilever’s underlying sales growth of 6.8 percent in the second quarter came as prices increased 7.4 percent, implying that volumes fell in the quarter.

Centrica said today its operating profit fell nearly 20 percent to £992m in the first half, but raised its dividend to 3.9 pence a share. The company said in a statement the results were good considering tough market conditions.

BSkyB added 92,000 net new customers in its fourth quarter, comfortably ahead of forecasts, and said there was still room to grow despite the economic uncertainty. Churn was 9.8 percent and the lowest level since 2005, while annualised average revenue per user increased to £427. Analysts have said BSkyB could find it harder to attract new customers if there is a significant spending slowdown, making the churn level all the more important. It added 200,00 broadband customers in the quarter, also ahead of analysts forecasts of 192,000 and 321,000 customers for the Sky+ digital recorder. CE Jeremy Darroch said "We have continued to grow strongly in a more difficult consumer environment. While there is much uncertainty around the consumer environment, there remains good headroom for profitable growth in our core sectors". The group adjusted full year revenue up 9 percent at £4.95bn and adjusted operating profit of £752m due to investment in broadband and telephony and an exceptional charge. Analysts had been expecting net additions of 84,000 in the quarter, with full year revenue of £4.99bn and adjusted operating profit of £754m.

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 31st, 2008 under Asset Management.
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