FTSE 100	4547.53, +18.69	Dow	9070.72, +26.00
FTSE 250	7762.59, +31.43	Nasdaq	1967.76, -7.75
FTSE All Share	2317.95, +9.94	S&P 500	975.15, -4.47
Nikkei	10165.21, +51.97	Hang Seng	20063.81, -71.69
Oil (Crude)	$63.35	Gold	$929.70
Base Rate	0.5%	10 Yr Gilt	3.98%
£/$	1.6438	£/€	1.1684
1 month LIBOR	0.584	3 month LIBOR	0.898

 

Markets

London - UK stocks rose on Wednesday as gains from financial stocks, boosted by strong figures from the British arm of Banco Santander and positive broker comments, outweighed a weak mining sector. The FTSE100 closed 18.69 points higher at 4547.53. Banks were the best performing sector after the British arm of Santander, which includes Abbey, said profits rose by a third in the first half of the year as bad debts showed a second consecutive quarterly decline. HSBC, Lloyds Banking Group, RBS and Standard Chartered rose between 0.7 and 3.6 percent.

Life insurers were also higher. Aviva rose 3.3 percent after Deutsche Bank lifted its rating on the stock to buy in a review of the UK sector which saw possible consolidation on the horizon. Prudential, Standard Life, Old Mutual and Legal and General added 1.5-3.9 percent. Schroders rose 4.6 percent after Morgan Stanley raised its rating on the stock to overweight from underweight and upped its price target.

Energy stocks were mixed as crude prices fell below $64 a barrel after an unexpected rise in US crude inventories threw the focus on weak demand. BP added 0.2 percent, while Royal Dutch Shell added 0.5 percent ahead of its second quarter figures due today. BG Group fell 2.7 percent after it posted a 31 percent drop in its second quarter profits and said lower gas demand meant it would not meet its 2009 production target.

Weak metals prices weighed on the mining sector with Anglo American, Antofagasta, Fresnillo and Rio Tinto down between 0.7 and 4.4 percent. BHP Billiton fell 2.4 percent. The miner has agreed with unnamed customers to take a 33-44 percent price cut for contracted iron ore shipments, covering 23 percent of its total sales volumes. Rexam was the top blue chip faller, down 8.1 percent after the company confirmed a £334.4m rights issue but still traded above its theoretical rights price as it reported better than expected results.

The market shrugged off figures released by the Bank of England showing weaker than expected consumer credit data, as news that British mortgage approvals hit their highest since April 2008 boosted sentiment.

New York - US stocks closed lower on Wednesday after a weak durable goods orders report added to worries about the economy. News about Yahoo’s partnership with Microsoft also weighed on stocks. The DJIA closed 26 points lower at 9070.72, the Nasdaq fell 7.75 points to close at 1967.76 and the S&P500 closed 4.47 points lower at 975.15.

In economic news, US durable goods orders plunged 2.5 percent in June, a far bigger decline than economists were expecting. The drop revived some worries that the economy may not be stabilizing as quickly as investors have been betting. Orders for long lasting manufactured goods saw the biggest monthly decline since January, the Commerce Department reported. Orders rose a revised 1.3 percent in May. Economists surveyed thought orders would fall 0.6 percent. However, orders excluding transportation rose 1.1 percent versus forecasts for no change. Last month, the same measure rose 0.8 percent. The Federal Reserve released its Beige Book survey of economic conditions in its twelve districts. The report showed that economic activity remained weak, but for most districts, the pace of the decline has slowed.

In company news, it was announced Microsoft and Yahoo have finally completed a 10 year search deal that takes aim at Google’s dominance in the online market. Yahoo will use and promote Microsoft’s Bing search engine on its site. In exchange, the company will keep 88 percent of the revenue from all search ad sales for the first five years. Yahoo will also have the right to sell ads on some Microsoft sites. However, investors expressed some disappointment that Yahoo will not receive an upfront payment, sending its shares 12 percent lower. Microsoft attempted to buy Yahoo outright for $47.5bn last year, but was rebuffed by the company. Microsoft shares rose 1.4 percent. Time Warner reported weaker quarterly earnings that beat estimates on weaker revenue that missed estimates. The stock fell 1.8 percent. Sprint Nextel reported weaker quarterly sales and earnings as subscribers continued to decline. The stock fell 12 percent.

Treasury prices rose, lowering the yield on the 10 year note to 3.66 percent from 3.68 percent.

US light crude for September delivery fell $3.88 to settle at $63.35 a barrel on NYMEX. COMEX gold for December delivery fell $12 to settle at $929.70 an ounce.

Tokyo - The Nikkei average hit its highest close in nine months, lifted by a surge in Honda Motor and Nissan Motor on surprise quarterly profits, though caution after a Chinese stock tumbled weighed on gains. Sony Corp closed more than 6 percent higher before it announced its earnings results for the April-June quarter. After the close, it posted a smaller than expected operating loss as a stronger yen and weakness in its TV business countered the impact of cost cuts.

Sumitomo Metal Mining and shares of other raw materials and energy firms fell after commodity prices declined on concerns that China might be ready to hit the brakes on lending, a move that could curb demand and hinder a global economic recovery. Honda rose 8.7 percent to Y3,010 and Nissan soared 10 percent to Y694 after both made a surprise if small profit last quarter, though a sustained recovery appeared elusive with demand largely reliant on government stimulus. The news helped boost Toyota Motor Corp by 3.4 percent to Y3930. The Nikkei closed 51.97 points higher at 10165.21.

 

Economics

US Initial jobless claims (week 25 Jul) 13:30 BST/ 08:30 EDT

Aggressive seasonal factors that pushed initial claims lower in the first two weeks of July (intended to account for seasonal auto shutdowns) started to reverse in last week’s reading, with initial claims climbing to 554,000 from 524,000. Analysts expect a further rise to 570,000 this week, but we think the underlying trend will stay below 600,000, an improvement from May/June levels. The same seasonal distortion has also been weighing on continuing claims released with an extra week’s lag) for the past two weeks. Analysts expect continuing claims to rise to 6.40mn from 6.23mn this week.

Corporate

Rolls Royce posted a 9 percent rise in underlying first-half pre-tax profit that was towards the top end of market expectations and said it was on track to meet its full-year goals. The company said that underlying pre-tax profit rose to £445m from £410m a year ago.

Analysts had expected a figure of £402.3m with estimates ranging between £361m and £461m. Revenue in the period rose 27 percent to £5.1bn, helped by the weakness of the British pound. On an underlying basis sales rose 17 percent to £4.9bn.  The company said its order book had grown to £57.5bn from £55.5bn at the end of 2008. "Our performance in the first half has enabled us to confirm our guidance for the full year and to increase the interim payment to shareholders," Chief Executive John Rose said in a statement. Rolls-Royce had said in April that uncertainties remained in some of its markets but stuck to guidance given in February when the company predicted underlying revenue growth for 2009 but said pre-tax profit was likely to be broadly similar to 2008. Rolls-Royce, which split from the eponymous luxury car maker in 1971, said the global trading environment remained very difficult and that it expected recovery to be slow.

BAE Systems posted a sharp rise in earnings to nearly £1bn in the first half of the year, in line with forecasts, and said it continues to expect good growth for the full year. The company said underlying earnings before interest, tax and amortisation came in at £979m for the six months to end June, up from £820m a year ago. Operating profit slumped to £500m from £789m, which the company put down to exceptional items including the writedown of goodwill related to a recent acquisition. The half year dividend was raised to 6.4 pence from 5.8 pence. Britain will launch a major review of its defence projects next year, but BAE received a boost from the United States earlier this year when it proposed more funding for the F-35 joint strike fighter jet, which is partly built in the UK.

BT posted a better-than-expected 3 percent fall in first-quarter adjusted core earnings and said it was on track to deliver cost reductions after a "solid" start to the year. BT announced a restructuring and new spending and cost saving targets at its year-end results in May as it cut its dividend and announced 15,000 job cuts after two profit warnings at its multinational Global Services division. It reiterated the new outlook, and said it had already achieved a reduction in underlying operating costs and capital expenditure of £357m. However its pension deficit, widened to an IAS 19 net pension position of £5.8bn pounds net of tax, compared with a £2.9bn deficit at the end of March 2009. For the first quarter, BT reported adjusted earnings before interest, tax, depreciation and amortisation before specific items and staff leaving costs of £1.37bn for the three months to end June. That compared to analyst forecasts of £1.27bn.

BT said revenues rose 1 percent to £5.24bn, also ahead of forecasts at £5.02bn. "We have made a solid start to the year against a background of challenging trading conditions," Chief Executive Ian Livingston said. "BT Global Services is making progress although there is still much to do. The rest of the group continues to perform well generating EBITDA growth of 6 percent. "We are on track to deliver reductions in operating costs and capital expenditure of well over £1bn and to generate group free cash flow of over £1bn pounds this year." Free cash flow improved by £612m pounds during the quarter to an outflow of £122m, also ahead of expectations.

BSkyB added 124,000 net customers in the fourth quarter due to strong demand for its high definition service and said subscribers were joining at the fastest rate for five years. The percentage of customers leaving Sky was broadly level at 9.9 percent and the average amount each customer paid during the year was 464 pounds, a new high for the company. The strong finish to the year gave BSkyB full-year revenues up 7 percent to £5.3bn, in line with analyst expectations, with adjusted operating profit up 4 percent at £780m.

Royal Dutch Shell posted a 70 percent fall in net profit in the second quarter, as oil prices and refining margins tumbled, but foreign exchange gains helped the oil major beat forecasts. The company said second-quarter current cost of supply net income, which strips out unrealised gains or losses related to changes in the value of fuel inventories, was $2.34bn. Excluding one-off items, the result was $3.15bn, compared with an average forecast of $2.55bn. Chief Executive Peter Voser, who took office earlier this month, gave a sombre outlook for energy demand and prices, and promised to adapt to the tough environment by slashing costs. "We are not banking on a quick recovery," Voser said in a statement. Shell said it achieved $700m in cost savings in the first half of the year compared with the same period in 2008. Since July 1, the company has cut 20 percent of senior management positions and said there would be "substantial further staff reductions."  Royal Dutch Shell said its capital investment budget would fall 10 percent next year to $28bn. It did not give a reason, although industry costs are falling, after doubling since 2004. The main outperformance versus analysts’ forecasts was in Shell’s Corporate division, which benefited from foreign exchange gains of $379m, compared with a gain of $27m in the same period of 2008.

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Posted: July 30th, 2009 under Asset Management.
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