FTSE 100	4631.61, +84.08	Dow	9154.46, +83.74
FTSE 250	7934.63, +172.04	Nasdaq	1984.30, +16.54
FTSE All Share	2360.99, +43.04	S&P 500	986.75, +11.60
Nikkei	10356.83, +191.62	Hang Seng	20644.48, +410.4
Oil (Crude)	$66.72	Gold	$937.30
Base Rate	0.5%	10 Yr Gilt	3.92%
£/$	1.6559	£/€	1.1721
1 month LIBOR	0.583	3 month LIBOR	0.890

 

Markets

London - UK stocks closed at a seven month high on Thursday, as better than expected earnings from companies such as BT Group boosted sentiment, lifting miners, banks and telecoms firms. The FTSE100 closed up 84.08 points at 4631.61. BT Group closed 13 percent higher, as the company posted a smaller than expected 3 percent dip in first quarter adjusted core earnings and said it was on track to deliver cost cuts. Miners added the most points to the index, with Rio Tinto, BHP Billiton, Xstrata and Eurasian Natural Resources adding 5.5 to 7.8 percent. Antofagasta gained 7.8 percent after reporting a 6.6 percent dip in first half copper production, slightly better than expected. Lonmin was another strong performer, up 8.5 percent as Citigroup upgraded it’s to buy from hold.

Barclays also gained, with Barclays, HSBC, Lloyds Banking Group, RBS and Standard Chartered up between 0.8 and 4.4 percent. Energy stocks were also in demand with BP, Tullow Oil and Cairn Energy adding 1.9 percent. Royal Dutch Shell added 0.8 percent after a better than feared 70 percent fall in second quarter net profit. Wolseley added 10.4 percent, as Travis Perkins beat forecasts with a 27 percent fall in first half profits. Rolls Royce climbed 9.3 percent, after the company posted a 9 percent rise in underlying first half pre-tax profit, towards the top end of expectations.

AstraZeneca rose 1.5 percent after the company raised its full year earnings forecast and posted healthy second quarter results, helped by the absence of generics of heart drug Toprol XL and cancer treatment Casodex. Reed Elsevier fell 12.3 percent as the company ditched its 2009 earnings per share guidance and unveiled plans to issue new shares to pay down debt. BAE Systems fell 5.1 percent after it said its main pension deficit had ballooned some 30 percent to over £3bn during the first half. Pennon also fell, losing 2.7 percent after accompanying an in line trading update with plans to issue £120m in convertible bonds.

In economic news, UK house prices rose for a third month running in July, the Nationwide Building Society said, providing further evidence that property prices may have stabilised despite low turnover.

New York - US stocks rose hitting their highest levels in nearly 9 months, as investors eyed the latest batch of better than expected profits and forecasts and a report that suggested the labour market is starting to stabilize. The DJIA closed 83.74 points to close at 9154.46, the Nasdaq added 16.54 points to close at 1984.30 and the S&P500 added 11.60 points to close at 986.75.

Exxon Mobil reported a steep drop in second quarter income due to weaker demand and falling oil and gas prices. Weaker quarterly earnings missed estimates on weaker revenue that topped estimates. The stock fell 1 percent. Travelers also reported weaker profit that missed forecasts. But the financial company also boosted its full year earnings forecast. The stock fell 2 percent. Motorola posted higher quarterly earnings that topped forecasts, on weaker revenue that missed. The company shipped 14.8m phones in the quarter, nearly half what it shipped a year ago, but more than what analysts expected. The stock rose 9.4 percent.
General Electric gained nearly 7 percent. Goldman Sachs upgraded it to buy from neutral after legislators appeared to back down on the question of whether GE should separate itself from its troubled finance unit GE Capital.

In economic news, the number of Americans filing unemployment claims for a week or more slipped by more than expected. According to the Labour Department, continuing claims dipped to 6.2m last week, from a revised 6.25m the previous week, for the lowest level since mid-April and short of forecasts for 6.3m.
The continuing claims report overshadowed the regular weekly jobless claims report, which showed a bigger than expected rise to 584,000. However, that rise was largely related to seasonal issues related to auto plan shutdowns.

Chevron is due to report quarterly results today. The company is expected to report earnings of 90 cents per share, versus $2.90 a year earlier.
Treasury prices rose, lowering the yield on the 10 year note to 3.6 percent from 3.66 percent. US light crude oil for September rose $3.57 to settle at $66.72 a barrel on NYMEX. COMEX gold for December delivery rose $7.60 to settle at $937.30 an ounce.

Tokyo - The Nikkei average rose 1.9 percent to hit its highest close in 10 months, buoyed by growing investor confidence after a slew of solid earnings that saw Sony Corp post a smaller than expected loss. Mitsubishi Fudosan booked a 32 percent rise in quarterly profit, and analysts said the run of largely solid results and some positive surprises, such as Honda Motor Co beating expectations, are likely to help buoy the Nikkei well into next week. The Nikkei closed 191.62 points higher at 10356.83, the highest close since October 6.

Economics

US GDP (Q2, annualized) 13:30 BST/ 08:30 EDT

Analysts look for an upside surprise to Q2 GDP, where a rise of 0.7% is expected. Consumption is likely to fall 0.4%, residential investment is likely to fall 18%, and equipment/software spending is likely to fall 16%. However, net trade will add about 1.8ppts to growth, because imports (-19%) are expected to fall by much more than exports (-7%). Meanwhile, non-residential construction, in a bit of a surprise, could rise by about 10%, while government spending is expected to snap back to +3.5% (after last quarter’s fall), helped by some stimulus funds, but tempered by the state/local government fiscal crisis. As always, inventories are a wildcard, but unusually uncertain this time around, and could be a major upside or downside surprise. Analysts are assuming the inventory change is -USD90bn, about the same as last quarter, which would mean a zero contribution to GDP growth. Analysts expect the GDP price deflator to be -0.5%, as declines in non-residential investment prices, residential investment prices and sharply rising import prices (which act to reduce GDP prices) more than offsets moderate increases in PCE, government and export prices. Overall, look for an upside surprise to GDP growth, and a downside surprise to GDP inflation.

US Employment cost index (Q2) 13:30 BST/ 08:30 EDT

The employment cost index has decelerated notably over the past few quarters, rising just 0.3% in Q1, and analysts look for the same increase in Q2. The year-on-year rate could fall to 1.8%, from 2.1% in Q1, the slowest pace on record (going back to 1982). Growth in average hourly earnings has continued to slow (+0.3% in Q2), reflecting the considerable slack in labour markets. Analysts expect Q2 wages and salaries to rise 0.3%, while benefit costs growth should also be moderate at around 0.4%.

Corporate

Anglo American posted a sharp fall in first-half profit and said it had achieved $450m of its planned $2bn in cost savings. Anglo said underlying earnings per share for the six months to the end of June 22 said underlying earnings per share for the six months to the end of June fell 69 percent to 91 cents on 38 percent lower revenue of $11.1bn. This was higher than forecasts of 81 cents. CE Cynthia Carroll said "I am pleased that we are on track with our asset optimism and procurement programmes, generating combined benefits of over $450m in the first half, and we are now expecting to deliver over $1bn for the full year". Anglo said it was ahead of its target of shedding a total of 19,000 jobs by the end of the year and had already cut 15,405. Anglo said it was on track with its three strategic growth projects in iron ore, copper and nickel in Latin America. At one of the projects, the Los Bronces copper project in Chile, Anglo said it had made two new discoveries, which together boosted copper resources by about 50 percent. Anglo was wary about recovery in commodity markets, despite recent gains in exchange traded metals such as copper MCU3, which has rebounded by nearly 80 percent this year. Cynthia Carroll added "We expect demand to remain soft in the near term until OECD countries begin to recover materially. While we have seen some recovery in metals prices, macro economic indicators are mixed, and the economic outlook remains uncertain in the near term." The company still regarded its Tarmac road material business as non core, but said it did not expect to sell it in the current economic climate.

Homeserve said the year from April started off well, with continuing policy growth and high renewal rates across its three core membership businesses, and its view for the year remained unchanged, in the full year ended March 31, the company expects a one time gain of £8m tied to an insurance premium tax appeal in a UK High Court. Homeserve said it would also have related additional income of £2m a year. The company said "As in previous years, the phasing of profits and policy growth will be weighted towards the second half reflecting the seasonality of our marketing activity and associated renewals profile". Homeserve said it was well funded, with low debt levels, and had significant headroom on its banking facilities. The company had £34m of net debt as of March 31.

British Airways has cut operating costs by around 6.6 percent since last October as it fights to slim down during the downturn, while its debt-pile also fell slightly to £2.3bn. British Airways said its cost cutting talk was far from over.  "Trading conditions continue to be very challenging with no visible signs of improvement. Our work to reduce costs is beginning to bear fruit but with revenue still weak there is much more to be done," Chief Executive Willie Walsh said. The company reiterated that the first quarter operating losses had come in at £94m, on revenue down 12.2 percent at just under £2bn. The group said its full-year fuel bill is expected to be between £450m-£500m lower than last year.

Rentokil Initial beat forecasts with a 12 percent drop in second quarter profit, helped by cost cuts, and remained confident of returning to growth in the second half. Rentokil said it made a profit before tax and one off items of £33.5m in the three months to June 30, topping analysts’ forecasts of £31.8m the profit fall was at constant exchange rates. Including currency moves, the second quarter profit rose 13.6 percent. Revenue fell 3.2 percent to £626m, after a 1.2 percent drop in the first quarter. Rentokil revised its full year cost savings target to £70m from £50m. CE Alan Brown said "Notwithstanding the economic uncertainty, we remain confident in delivering profit growth in Q3 and Q4 compared to 2008".

Jardine Lloyds Thomson reported a 12 percent increase in its first half profit, and said it expected further growth in the months ahead despite a "challenging" economic climate. JLT said it had an underlying pre-tax profit of £59.7m in the six months to June 30, up from £53.4m in the six months to June 30, up from £5 3.4m in the same period last year. The increase came on the back of a "strong" trading performance, JLT said, with turnover up 16 percent. CE Dominic Burke said "While the general economic background continues to be challenging, we continue to expect the 2009 will be a year of further progress for JLT".

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, 2009 under Asset Management.
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