FTSE 100	5253.15, -30.16	Dow	10270.55, -26.3
FTSE 250	9417.81, -62.96	Nasdaq	20341.64, -380.44
FTSE All Share	2695.83, -15.22	S&P 500	1097.28, -6.04
Nikkei	10355.98, -48.35	Hang Seng	20341.64, -380.44
Oil (Crude)	$76.98, -$0.25	Gold	$1112, -$6
Base Rate	0.5%	10 Yr Gilt	3.91%
£/$	1.587	£/€	1.1468
1 month LIBOR	0.522	3 month LIBOR	0.616

Markets

London - The FTSE 100 lost 30.16 points to close at 5,253.15 yesterday. BAE dropped 2% after Lockheed Martin said Europe’s biggest arms company may share the loss of fees on their jet-fighter program. Lonmin led mining companies lower as metals retreated. On the upside, Standard Life jumped 3.5% after saying fourth quarter revenue increased. This morning the FTSE is 23.42 points lower at 5,229.73.Miners drag the index lower as metals continue to retreat, while Vodafone tops the risers after third quarter revenue exceeded expectations. All eyes will be on the Bank of England announcement, due at midday, although the central bank is not expected to raise interest rates from the current record low level until October at the earliest.

New York - US stocks retreated yesterday following disappointing corporate and economic data. President Obama also helped stocks lower after reiterating his plans to overhaul the health care system and impose stricter regulatory reforms on Wall Street. The Dow Jones fell 26.3 points to 10,270.55, the S&P 500 lost 6.04 points to 1,097.28 while the Nasdaq edged 0.85 points higher to 2,190.91.

In economic news, the Institute for Supply Management’s index showed the US services sector grew less than expected in January. This overshadowed a report from payroll services firm ADP that said employers in the private sector cut 22,000 jobs in January following a revised loss of 61,000 jobs in December. Among stocks the healthcare sector was one of the worst affected sectors following Obama’s reform plans and Pfizer’s quarterly figures. The drug maker reported higher quarterly earnings that missed estimates, while also forecasting 2010 earnings that came in short of expectations.

Tokyo - The Nikkei fell 48.35 points to close at 10,355.98 this morning. Toyota continues to drag the market lower as it considers expanding its car recall of millions of vehicles for sticking accelerator pedals.

Hong Kong - The Hang Seng tumbled 380.44 points to 20,341.64. Commodity producers fall in line with metal prices and mainland banks dropped on news Bank of Communications may need to raise funds.

Economics

UK Bank of England rate announcement (Feb) 12:00 GMT

The quantitative easing programme was extended to GBP200bn in November. These funds will have been exhausted by the end of January and so the MPC needs to consider at this meeting whether to extend the programme. Analysts think it is more likely to choose to ‘pause’, shifting to ‘wait-and-see’ mode. While GDP was weaker than initially expected, the MPC appear to be leaning away from these initial estimates. The governor noted in his recent speech that ‘the MPC is acutely aware that initial data releases are often revised.’ The other indicators, such as business surveys, employment and the housing market suggest that the economy is growing at a more robust pace. In addition, with an election looming, the MPC will want to highlight its independence from the political cycle. The chancellor chose to increase government spending in the Pre-Budget Report rather than consolidate the deficit, ignoring advice from the ratings agencies and the governor himself. With inflation well above target, expanding gilt purchases and a further increase in public borrowing in the pre-election Budget could call in to question the MPC’s commitment to meeting its inflation target.

US Non-farm productivity (Q4, prelim.) 13:30 GMT/ 08:30 EST

Payroll hours worked ‘only’ fell 0.4% in Q4, which will probably result in slower productivity growth in Q4 than we have seen in the previous two quarters. Analysts will have a better read after Q4 GDP is released (not available at the time of writing), but at this point analysts expect a productivity increase of 4.1%, with unit labour costs falling 0.8%.

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

Initial claims have been discouraging recently, averaging 474,000 over the past two weeks, after earlier readings in the first half of the month averaged 438,500. Analysts look for a decline to 450,000 this week.  

Corporate

Aviva, the U.K.’s second-biggest insurer by market capitalization, Thursday posted a 14% fall in life and pensions new business sales in the fourth quarter but said it started the New Year "in a strong position." Despite the fall in year-on-year figures, the fourth-quarter sale of GBP7.94 billion represents a strong 21% increase from the third quarter, helped by bank assurance operations in Europe. Aviva also strengthened its capital position, with surplus capital at GBP4.5 billion at end-December, up from GBP2 billion in 2008. The company said that total new business sales last year were GBP32 billion, down 11% from GBP36.24 billion in 2008. This is calculated on a present value of new business premiums (PVNBP) basis, where 100% of single premiums are added to the expected present value of new regular premiums. The result was higher than the GBP31.3 billion average forecast from 11 analysts polled by Aviva.

Centrica retail arm British Gas said Thursday it had cut its standard gas prices by an average 7%. The price cut, which will benefit 8 million households, takes effect immediately and makes British Gas, on average, the cheapest supplier of standard gas and electricity in the U.K. The change will save the average gas customer GBP55 a year, the company said in a statement. This is the third time British Gas has cut prices in the past 12 months–cutting a total of GBP187 off the average annual dual fuel bill.  
Royal Dutch Shell today promised further cost cuts and job losses after it posted a 28.7% fall in adjusted profit for the fourth quarter, as lower oil and gas production and a big loss in refining offset higher crude oil prices. Chief Executive Peter Voser said Shell’s refining and marketing division is enduring tough times. "We are not assuming that there will be a quick recovery, and the outlook for 2010 is uncertain," "We are taking steps to improve our performance," and Shell reduced costs by an additional $1 billion in the fourth quarter, bringing total 2009 cost reductions to $2 billion he said. "For 2010, we are targeting a further underlying cost reduction of at least $1 billion, and a reduction of some 1,000 employees," he said. The Anglo-Dutch energy company said the clean current cost of supplies, a keenly-watched figure that strips out gains or losses from inventories and other non-operating items, was $2.77 billion in the three months ended December 31 2009, compared with $3.89 billion in the fourth quarter of 2008.  This was below expectations of $3.01 billion

Anglo-Dutch consumer goods group Unilever today posted a 1.8% rise in fourth-quarter sales, driven by strong volume growth, but said it expects competition to intensify in 2010. The maker of Ben & Jerry’s ice cream, Dove soap and Lynx deodorant said underlying sales–which strip out acquisitions, disposals and currency movements–grew 1.8% in the fourth quarter, compared with a 3.4% rise in the previous three months and in line with analyst’s forecasts. 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 5% increase in volumes, which followed a 3.6% volume rise in the previous three months. Prices in the fourth quarter actually fell 3.1%. "We expect continued pressure on consumer spending power and heightened levels of competitive activity in 2010," said Chief Executive Paul Polman. "We will continue to focus on volume growth as the main driver of long-term value creation, whilst delivering steady and sustainable year-on-year improvement in operating margin and strong cash flow." Polman took the helm of the group in January last year, pledging to make volume growth his key priority. Prior to his arrival, Unilever had been criticized for allowing volumes to slip as it aggressively raised prices. The company increased prices by over 9% in the fourth quarter of 2008, partly to offset higher commodity costs. Still, it was criticized by some analysts and industry experts for raising prices too much just as many of its markets were tipping into recession. Unilever’s operating margin was up one percentage point in the period, compared with expectations of a 1.1 percentage point rise. Margins are benefiting from a sharp drop in commodity prices in the past year.

Vodafone Group, the world’s largest mobile operator by sales, Thursday raised its free cash flow target as third-quarter revenue growth exceeded expectations and service revenue in Europe showed some signs of stabilization. Shares in the company rose sharply in early trading on the improved outlook, which Chief Executive Vittorio Colao attributed in part to strong data revenue amid rising demand for smartphones. The company’s revenue also gained from a currency effect as the euro strengthened against sterling. The group raised its free cash-flow range by GBP500 million to between GBP6.5 billion and GBP7 billion. Vodafone sharpened the range of its full year adjusted operating profit view to between GBP11.4 billion and GBP11.8 billion, from previously guidance in a range of between GBP11 billion and GBP11.8 billion.

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: February 4th, 2010 under Asset Management.
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