FTSE 100	5107.89, +70.68	Dow	9802.14, +30.23
FTSE 250	8992.75, +236.07	Nasdaq	2055.52, -1.8
FTSE All Share	2616.08, +40.07	S&P 500	1046.50, +1.09
Nikkei	9717.44, -126.87	Hang Seng	21479.08, -135.89
Oil (Crude)	$80.40	Gold	$1087.30
Base Rate	0.5%	10 Yr Gilt	3.79%
£/$	1.649	£/€	1.1123
1 month LIBOR	0.514	3 month LIBOR	0.601

 

Markets

London - The FTSE 100 jumped 70.68 points to close at 5,107.89 yesterday. Retailers were strong following better than expected figures from Marks & Spencer and Next, up 6% and 5.6% respectively. Aviva led gains by insurers, climbing 5.5%, as profitability improved in the company’s biggest life insurance and pensions market. Today the blue chip index is 44.82 points lower at 5,063.07. Investor’s attention turns to the interest rates announcements of the BoE and ECB. For the UK, the disappointingly weak 3Q GDP reading could hold sway. Invensys, Cable & Wireless and Vedanta Resources top the fallers’ board after releasing figures and trading updates.

New York - US indices were mixed yesterday, retreating from an intra day rally that saw the Dow as much as 156 points higher. By the close the Dow was 30.23 points higher than its starting point at 9,802.14, the S&P 500 added 1.09 to 1,046.50 while the Nasdaq fell 1.8 points to finish at 2,055.52. Economic news kicked off the rally with two reports suggesting the pace of job losses is slowing. Payroll services firm ADP said Wednesday that employers in the private sector cut 203,000 jobs from their payrolls in October after cutting 227,000 in September. While a separate report, from outplacement firm Challenger, Gray & Christmas, showed the number of planned layoffs slowed to 55,679 in October, down 16% from September. Following this, the Federal Reserve announced it would keep its rates at near zero for "an extended period". The closely watched policy statement was somewhat more upbeat than September’s, but was in line with recent data. Stocks continued to rise in the hour following the statement, but fell away as the session drew to a close.

Tokyo - The Nikkei dropped 126.87 points to close at 9,717.44 this morning as weak earnings reports dragged suggested an economic recovery will be weak. In deal news, Sanyo Electric slumped 20% after Panasonic Corp bid for the battery maker at a discount.

Hong Kong - The Hang Seng is currently 135.89 points lower at 21,479.08. Developers continue to lead the market lower on concern the government will enact measures to limit property price increases. The Hong Kong government is said to be "very concerned" about the "sharp" rise in property prices.

Economics

UK Bank of England rate announcement 12:00 GMT

In August the MPC increased the scope of the Asset Purchase Facility to GBP175bn, arguing that this was required to meet its 2% inflation target. This growth forecast, contained within that month’s Inflation Report, looked for an inventory bounce in the second half of this year, but cautioned that recovery would be constrained by ongoing problems in the housing and financial markets, acting as a drag on consumer demand into next year. In fact, the data of the past three months have suggested that neither of these factors has emerged. Q3 GDP was considerably weaker than expected, with the underlying data suggesting businesses are still aggressively de-stocking. The inventory bounce is not yet materializing. Meanwhile, house prices are rising again, helped by a lack of foreclosures, and the recent speeches and comments from the Committee suggest that some members at least are concerned about extraordinary monetary policy stimulus giving rise to new asset-price bubbles. The MPC is caught between trying to ensure that an old bubble deflates in an orderly fashion and trying to ensure new bubbles do not emerge. Following the weakness of Q3 GDP, many now expect the MPC to extend QE beyond GBP175bn at this meeting. It may be that the Committee wishes to send a signal that it will continue monetary stimulus until necessary, in order to bolster confidence. But inflation rates will rise sharply over the coming months, which makes ‘printing money’ harder to explain to the man on street during the key wage negotiation period. So in our view, any increase is likely to be GBP25bn or less and focused on supporting corporate credit markets, rather than the purchase of gilts.

US Initial jobless claims (week 31 Oct) 13:30 GMT/ 08:30 EST

We expect initial jobless claims at 525,000.

US Non-farm productivity (Q3, preliminary) 13:30 GMT/ 08:30 EST

Nonfarm business output rose 4% in Q3. Assuming a 3% drop in hours worked, analysts look for nonfarm productivity to rise 7%. Unit labour costs should decline for the third straight quarter, and analysts expect a fall of 3.9% 

Corporate

Telecom carrier Cable & Wireless said today it will push ahead with plans to demerge amid early signs of improving conditions in financial markets, as it reported a 30% jump in first-half earnings driven by its Worldwide division. "The board believes that a demerger is the right structure to drive further growth and value for shareholders by enabling both businesses to pursue their strategies independently, and it is keen to push ahead as quickly as possible," Chairman Richard Lapthorne said in a statement. Cable & Wireless will publish further information about the demerger before the end of the month, which will include indicative timing, the company said. Earnings before interest, tax, depreciation and amortization before exceptional items–the key figure tracked by U.K. investors–rose 30% to GBP463 million for the six months ended Sept. 30, from GBP357 million a year earlier, just beating market expectations for pre-items EBITDA of GBP460 million.

Technology and engineering group Invensys today said its full-year performance will show an improvement, after it reported that first-half pre-tax profit was flat. Chief executive Ulf Henriksson said the company’s Operations Management business will have a significant improvement in performance while the Rail operations will produce another robust result. Its Controls business is expected to produce a good improvement in a more stable market. The company, which has been restructuring its operations for more than five years now, said it’s starting to see some early signs of stabilization and possible modest recovery. "The benefits from our growth and productivity initiatives, restructuring and overhead reductions will underpin our performance in the second half," it said. First-half pre-tax profit to Sept. 30 remained unchanged at GBP88 million while operating profit was down 15% to GBP102 million. Orders were also down 7% to GBP1.079 billion, compared with GBP1.156 billion in the same period last year. The company declared an interim dividend of 1 pence per share. The company resumed dividend payments earlier this year after not paying any since 2003.

Hedge-fund operator Man Group today said the funds it manages were broadly unchanged at the end of October from $44 billion at Sept. 30, as the asset manager continues trying to rebuild its shrunken business. The September figure represented a rise in funds under management from $43.3 billion at June 30. The increase, although modest, has encouraged analysts and investors that the company had turned a corner from the heavy investor redemptions and poor fund performance that had slashed assets from their peak of $79.5 billion in June 2008. Like other hedge-fund firms, Man Group’s prospects have improved as the financial crisis has receded, with both sales of its funds and the funds’ performance improving. Its share price has also bounced back from a 150-pence low in March, closing Wednesday at 325 pence. "The outlook for returns from hedge-fund investing continues to be strong, and the diversification benefits for portfolio construction remain important to investors worldwide," Man Group said in a statement. The company reported $302 million in pre-tax profit for the six months ended Sept. 30, down 51% from $622 million.

RSA Insurance Group today posted a 4% rise in net written premiums for the first nine months of the year, as growth in its international operations made up for a fall in its U.K. business. The general insurer also said economic conditions remain challenging. RSA said net premiums in the three quarters to Sept. 30 were at GBP5.03 billion, up from GBP4.85 billion in the same period a year earlier. At the end of September, its capital surplus was at GBP1.7 billion, unchanged from end-June. In recent weeks, newspaper reports said RSA was looking into buying the distressed businesses of American International Group Inc. and Fortis NV, with plans for a $1 billion rights issue. More recent reports said RSA has shelved plans to raise funds for acquisitions.

Unilever beat expectations with its third-quarter sales performance Thursday as volumes grew strongly for the second quarter running, and margins edged higher. The maker of Ben & Jerry’s ice cream and household products such as Dove, Lynx and Cif posted a 2% drop in sales to EUR10.2 billion for its third quarter, after a 1% rise in the previous quarter. Net profit dropped to EUR1.05 billion from EUR1.64 billion a year ago, when a number of disposals boosted the bottom line. Stripping out acquisitions, disposals and currency movements, second-quarter sales grew 3.4%, after a 4.1% rise in the previous quarter and ahead of analysts’ estimates of 2.7% growth. This measure of sales is closely watched because it’s a directly comparable measure of how the company’s products are selling. The sales rise was wholly a result of a 3.6% rise in volumes rather than any price rises, after a 2% volume rise in the previous three months. New Chief Executive Paul Polman identified volume growth as his key focus for the group when he joined earlier this year. The company said all regions and categories showed positive volumes.

Vedanta Resources today reported a 46.2% fall in first half net profit but restarted work on a $2.15 billion power project as market conditions improve and India’s economy shows strong signs of continuing growth. Vedanta and its subsidiaries so far this year have raised $3.35 billion in the capital and equity markets to fund a series of growth projects and acquisitions.  Net profit attributable to equity shareholders was $188.2 million during the period, compared with $350 million during the same period a year earlier. The market had expected net profit of $158 million, according to a company survey of eight analysts. Revenue fell 25% to $2.98 billion from $3.97 billion. The company said it plans to pay an interim dividend of 17.5 cents, compared with 16.5 cents a year earlier. "In a period when many of our peers were cutting back production and investments in growth, I am pleased to report continuing investment and volume growth across all commodities," Chairman Anil Agarwal said in a statement.

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

Posted: November 5th, 2009 under Asset Management.
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