FTSE 100	4242.54, +316.16	Dow	8990.96, -74.16
FTSE 250	5989.11, +289.85	Nasdaq	1657.21, +7.74
FTSE All Share	2113.04, +149.08	S&P 500	930.09, -10.42
Nikkei	9029.76, -817.86	Hang Seng	14329.85, +1627.78
Oil (Crude)	$67.50	Gold	$754
Base Rate	4.5%	10 Yr Gilt	4.466%
£/$	1.658	£/€	1.2626

 

Markets

London - The FTSE 100 is currently 25.78 points higher at 4,268.32, boosted by continued global rate cuts. BHP Billiton and Rio Tinto climb 8% and 7.5% respectively as metals prices advanced. Royal Dutch Shell is 2% lower after saying third quarter crude and natural gas output fell 6.6%.
Insurance related stocks fill the top spots on the fallers board after RBS cut its recommendation on RSA Insurance Group to "sell" from "hold". RSA is 4.8% lower, Admiral Group plunges 16.3% and Standard Life drops 4.7%.

New York - US stocks gave up large gains in the final minutes of trading yesterday to leave both the Dow and S&P 500 in negative territory. The Dow plummeted more than 300 points in the last 12 minutes of trading after questions were raised about General Electric’s earnings outlook.

Stocks had rallied after the Federal Reserve announced, as expected, a 0.5% cut to interest rates to 1%, matching an all time low last seen in June 2004.

The Dow Jones slipped 74.16 points to close at 8,990.96, the S&P 500 fell 10.42 points to end at 930.09. The Nasdaq gained 7.74 points to finish at 1,657.21.

General Electric dropped 4% in the final moments of trading to finish 1.5% down on its start position. Investors pulled out of the stock after Dow Jones reported that Chief Executive Jeffrey Immelt said GE aims to keep 2009 profits at the same level as this year, even if revenue declines. However, after the closing bell Dow Jones corrected their story, saying Immelt had been speaking hypothetically about what he would ask his managers to do if revenues at their businesses fell.

Procter & Gamble fell 3.5% after reporting higher quarterly sales and earnings. However, the consumer products maker said that full year earnings may be weaker than previously forecast.
US light crude oil for December delivery jumped $4.77 to close at $67.50 a barrel. COMEX gold for December climbed $13.50 to settle at $754 an ounce delivery. Treasury prices fell, raising the yield on the 10 year note to 3.86% from 3.84%.

Tokyo - The Nikkei surged 817.86 points to close at 9,029.76 this morning. The index has now enjoyed its sharpest three day advance in at least 38 years. A gain in commodity prices and a weaker yen boosted the profit prospects for resource companies and car manufacturers. Inpex Corp, the nation’s largest oil explorer, jumped 10%. Honda Motor Co, which gets more than half its profit from North America, added 13% while rival Mazda Motor Corp rallied 25%.

Hong Kong - The Hang Seng soared 1,627.78 points this morning to 14,329.85 after China cut interest rates for the third time in two months and the city followed the US rate reduction. Aluminium Corp of China Ltd, the country’s largest producer of the metal, soared 22%. Cnooc Ltd, China’s biggest offshore oil producer, advanced 22% after crude prices gained.

Economics

US GDP (Q3, prelim) 12.30gmt

US GDP is expected to decline 1 percent with a hefty 2 percent decline in final sales (GDP less inventories). The fall is explained by an expected 3 percent decline in consumption, a 15 percent decline in housing investment and a 5 percent decline in business fixed investment. These declines should be offset somewhat by a 0.8ppt contribution from net exports, via strong export growth of 10 percent (probably the last decent quarter for a while) and slow import growth (3 percent). Government spending should also rise (2.5 percent), while inventories will also add, about 0.9 ppts to growth, as inventories will decline (-$25bn), but decline by less than last quarter (-$51bn). Looking ahead, Q4 GDP looks to be on track for an even worse result (-2.2 percent).

Corporate

WPP predicted 2009 would be a very tough year after reporting third quarter revenue growth broadly in line with expectations. WPP also said its headline operating margin was flat in the first nine months and said it would not now be easy to attain its margin target for 2008 of 15.5 percent. The warnings follows similar dire predictions from other advertising groups such as Omnicom and Publicis. The company said "The third quarter revised forecasts submitted by our operating companies, which include revenue forecasts for the fourth quarter, appear cautious. There is no doubt that the disintegration in the financial markets has had and will effect on consumer and corporate confidence. As a result 2009 will be a very tough year".
WPP posted like for like revenue growth of 3 percent and reported revenue growth of 16.2 percent to £1.72bn. Analysts had been expecting like for like revenue growth of 3.3 percent and reported revenues of £1.66bn.

WPP added "It is still likely that rates for like for like revenue growth, particularly by region, will vary significantly in 2009, as in 2008. Whatever the pattern, it is not likely that our budget will reflect the Armageddon currently predicted by the fall in stock prices". The group forecast that although GDP growth would be flat or even negative in western market, countries such as Brazil, Russia, India, China and the next 11 markets may grow at rates of up to 6 percent.

Royal Dutch Shell beat all forecasts with third quarter current cost of supply net profit up 71 percent at $10.9bn, as high oil prices and asset sales outweighed a 7 percent drop in oil and gas production. The company said it was well placed to continue paying dividends and investing, even at lower energy prices.

Shell benefited from a 54 percent rise in crude in the third quarter compared to the same period last year, but prices have since dropped to around $70/barrel from a record above $147, raising fears oil companies may not be able to continue raising their generous dividends. Shell said production of oil and gas fell 7 percent due to Hurricane outages in the Gulf of Mexico and the impact of production sharing contracts under which it receives less oil from projects when prices rise. Shell said the CCS result, which strips out realised gains or losses related to changes in the value of fuel inventories, included a gain of $2.06bn due to none operating items, mainly the sale of a German gas network, and non cash gains of $800m. Excluding the items, the CCS net profit was $8.04bn, ahead of an average forecast of $7.195bn.

Synergy Healthcare said today its first half revenues rose 30 percent to £133.1m and demand for its healthcare support services would remain robust despite economic headwinds. The company declared an interim dividend of 4.2p per share, a rise of 20 percent from 2007. Chairman Stephen Wilson said "Strong demand continues for the groups services, which are essential health related services required regardless of the macro-economic conditions. As such, we expect our businesses to be resilient in the face of the anticipated economic slowdown, and the board continues to expect steady sales growth during the second half of the year". Last month the company said margins for the first half would be squeezed by 1 percent to 13.5 percent because of higher energy costs and higher than expected start up costs for its new Decontamination Services unit.

Unilever posted an 8.3 percent rise in third quarter underlying sales today, at the top end of forecasts, and upgraded its 2008 outlook to see sales growth "well in excess" of its target. The quarterly sales growth at the company was towards the top of analysts forecasts of 5-8.6 percent growth and beat consensus of 6.7 percent. CE Patrick Cescau said "This year we now expect to deliver underlying sales growth well in excess of our long term target range of 3 to 5 percent together with an underlying improvement in operating margin for the year". The group had previously said it expected sales growth above the target. In the past it has struggled to match the sales growth of its key European rivals Nestle and Danone.

The combination of price rises and cost saving helped push quarterly underlying operating margins up 0.3 percentage points. But Unilever again relied heavily on price rises due to rising commodity prices with only 0.6 percentage points of the third quarter rise coming from higher volumes while Nestle saw 3.2 percent and Danone 2.6 percent volume growth in the quarter.
Unilever’s quarterly sales rise came after 7.2 and 6.8 percent growth in the first and second quarter, making a nine month rise of 7.4, as it closes the gap on Nestle at 8.9 percent, Danone 9.2 and Reckitt Benckiser at 10. Unilever saw quarterly earnings per share reach E0.59, compared to forecasts of E0.30-E0.68 and a consensus of E0.45. The group announced a first half dividend of E0.26 per Unilever NV share, and 2055 pence per Plc share.

Lloyds TSB today named the key figures who will form the management team following its proposed takeover of HBOS, with the list dominated by names from Lloyds’ existing team.
Key positions such as the head of UK retail banking and wholesale have been handed to the Lloyds’ executives currently in the roles, Helen Weir and Truett Tate. Lloyds also confirmed that its acting group finance director, Tim Tookey, will take on the role permanently with immediate effect and within the merged group. As previously announced, Chairman Victor Blank and Chief Executive Eric Daniels will head up the enlarged group. The outgoing chief executive of HBOS, Andy Hornby, will not be part of the new entity’s management.

The enlarged group will also include a new division, dubbed ‘Wealth & International’, led by HBOS’s Jo Dawson, the former head of its insurance and investment division. The other HBOS executive to join the group executive committee is Harry Bain, named as company secretary and general counsel.

Nine appointments were announced by Lloyds on Thursday, with the director of IT and operations to be announced in due course. Lloyds has said it expects to complete its takeover of HBOS and its raising of new capital by January, after giving shareholders a vote on both in the third week of November.

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: October 30th, 2008 under Asset Management.
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