FTSE 100	5342.92, +27.83	Dow	10374.16, +91.75
FTSE 250	9359.18, -28.67	Nasdaq	2235.90, +22.46
FTSE All Share	2732.42, +11.24	S&P 500	1105.24, +10.64
Nikkei	10101.96, -96.87	Hang Seng	20399.57, -68.17
Oil (Crude)	$80.00, +$1.14	Gold	$1097.20, -$6
Base Rate	0.5%	10 Yr Gilt	4.06%
£/$	1.531	£/€	1.1351
1 month LIBOR	0.539	3 month LIBOR	0.643

 

Markets

London - The FTSE 100 rose 27.83 points to close at 5,342.92 yesterday, with stocks buoyed by the comments from the Bernanke. Elsewhere, Carnival jumped more than 3% after the company said record bookings prompted one of its brands to raise prices by as much as 5%. This morning the blue chip index slips 7.29 points to 5,335.63. Stocks are kept in negative territory following the announcement by Moody’s. The ratings agency have said that unless Greece meets the objectives of its fiscal deficit reduction within months, it will cut its sovereign debt rating. If Moody’s cut its credit rating to the same level as the other major ratings companies, Greek government bonds would no longer be eligible as collateral at the European Central Bank, making it more difficult for the nation to borrow. Royal Bank of Scotland tops the risers after reporting a narrower than expected full year loss.

New York - US stocks advanced yesterday after being reassured that interest rates would be kept low for the foreseeable future. Federal Reserve Chairman Ben Bernanke, who was testifying in front of the House Financial Services Committee, said that while the economic recovery is moving along, the job market remains weak. Therefore the Fed is unlikely to lift the fed funds rate anytime soon. The Dow Jones rose 91.75 points to 10,374.16, the S&P 500 gained 10.64 points to 1,105.24 and the Nasdaq added 22.46 points to 2,235.90. Financial stocks were among the big winners, including Bank of America, up 2.5%, and JPMorgan Chase adding 2.4%. In contrast, housing related stocks were lower after a report showed sales of new homes tumbled to the lowest level on record in January. Analysts had expected a rise to an annual rate of 354,000, instead sales fell 11% to 309,000.

Tokyo - Asian markets fell this morning after the euro weakened to a one year low against the yen and Moody’s Investors Service said it may downgrade Greece’s credit rating. The Nikkei fell 96.87 points to 10,101.96.

Hong Kong - The Hang Seng loses 68.17 points to 20,399.57. Developers limited declines in Hong Kong on optimism borrowing costs will not increase after the US Federal Reserve said interest rates would remain near record lows.

Economics

UK CBI distributive trades (Feb) 11:00 GMT

In January there was a sizeable dip in demand. This was most likely due to the snow, so analysts expect a rebound in February.

US Durable goods orders (Jan) 13:30 GMT/ 08:30 EST

The durable goods data have shown a number of encouraging trends in recent months, posting sizeable increases in November and December on an ex-transport basis with areas such as machinery and metals leading the way. With the level of durable goods orders still well down from year earlier levels, further upside exists and analysts look for durable goods to rise by 0.9% in January.

US Initial jobless claims (wk. 20 Feb) 13:30 GMT/ 08:30 EST

Last week’s initial claims showed a surprisingly large increase to 473,000. Analysts look for a decline to 450,000 this week, although interpreting weather related distortions will continue to be a source of debate. 

Corporate

British American Tobacco said today the worst of the global recession is over as it posted a 10% rise in full-year profit, with favourable exchange rates, price rises and acquisitions offsetting declining volumes. The London-based tobacco company said net profit rose 10% to GBP2.71 billion in the year to Dec. 31, from GBP2.46 billion a year earlier. Revenue increased to GBP14.21 billion from GBP12.12 billion while earnings per share were 153 pence, up from 128.8 pence and in line with market expectations. "There is still some uncertainty", said Michael Prideaux, BAT’s corporate and regulatory affairs director, in an interview with
Dow Jones Newswires, "but generally we think the worst is over." While volume rose 1% to 724 billion cigarettes in the year, this was wholly a result of acquisitions in Denmark, Turkey and Indonesia. Stripping out these acquisitions, volumes fell 3%, compared with a 2% decline in the fist six months of the year. Chief Executive Paul Adams said in an interview with Cantos that volumes had improved in the fourth quarter to a 2.4% decline, after a 6% decline in the previous three months. He expects a further drop in 2010, of between 1.5% and 2%, and said the company has good pricing momentum and the opportunity to grow its global drive brands "at or slightly above the level of growth" achieved in 2009. Those brands–which include Dunhill, Pall Mall, Kent and Lucky Strike–grew volumes by 4% in the year. BAT’s Prideaux said the weakness of sterling had added around 10% to the company’s operating profit but this would become less of a factor in 2010. Price increases and improvements to the mix of products, meanwhile, accounted for between 8% and 8.5% of sales. Price increases are essential in mature markets, where volumes are either in long-term decline or at best flat.  

Centrica said the company swung to net profit in 2009 compared with 2008 as record performance at its residential arm British Gas and a lower tax bill helped offset weaker wholesale gas prices and lower production. The company, which is the U.K.’s top gas and electricity supplier in terms of customers, said in a statement that it sees trading in line with expectations for 2010 as strong downstream performance offsets the impact of low gas prices on its upstream businesses. In 2009, Centrica was buoyed by residential unit British Gas, where operating profits more than doubled to a record GBP595 million from GBP376 million a year earlier due to higher service levels and price reductions, which led to customer growth. The U.K. utility, which now has the lowest prices of any U.K. supplier, expects customer growth to continue into 2010. "Centrica’s underlying operating performance in 2009 demonstrated resilience in a year of sustained economic downturn and weak commodity prices, with the reduction in upstream earnings being more than offset by a greater downstream contribution," said Centrica Chief Executive Sam Laidlaw. Separately, Centrica said that through its subsidiary Centrica Resources, had signed an agreement with Suncor Energy (SU) to buy Suncor’s Trinidad and Tobago portfolio of gas assets for $380 million in cash. The acquisition gives Centrica its first producing liquefied natural gas position and development opportunities for future long-term LNG supplies. Centrica posted net profit of GBP844 million for the full-year ending Dec. 31, 2009, versus a net loss of GBP137 million for the same period in 2008.

Royal Bank of Scotland Group on today reported a narrower full-year net loss and said bad-debt charges might have peaked, posting results that were better than analysts had forecast for the U.K. bank. The 84%-government owned bank, however, said challenges remain for 2010, with much depending "on the shape and pace of economic recovery and the way it feeds through to business activity, interest rates and credit impairments." Net loss for the year ended Dec. 31 was GBP3.61 billion, compared with GBP24.3 billion loss a year ago, when it recorded GBP16.2 billion in write-downs, mostly from its acquisition of ABN Amro in October 2007 and on credit investments. Bad-debt charges were largely responsible for the 2009 loss. "Signs that impairments might have peaked appear to have been borne out in the fourth quarter, and there are indications that the pace of downwards credit rating migration for corporates is slowing," RBS said. Impairment charges were GBP13.9 billion for the year ended Dec. 31, up from GBP7.43 billion a year ago. On a quarterly basis, RBS posted a GBP765 billion net loss for the three months ended Dec. 31, compared with a GBP1.8 billion net loss for the third quarter. However, analysts are paying more attention to consecutive quarterly figures–as opposed to year-earlier comparisons–for clues on improvements in the operating environment, especially related to bad-debt charges. Those charges fell in the fourth quarter to GBP3.1 billion from GBP3.28 billion in the third, the bank said. RBS received the largest government bailout in the world–GBP45.5 billion–after it fell into disarray when the financial crisis intensified and revealed deep problems in the ABN Amro businesses it got in an ill-timed acquisition, late in 2007. In exchange for the government aid, RBS will now have to shed businesses over the next four years, as the European Union seeks to make sure the bank isn’t at a competitive advantage over peers that stayed independent. Last week, the bank said it will sell the European and Asian parts of 51%-owned RBS Sempra Commodities to JPMorgan Chase & Co. It has also started the sale process of its global merchant services payment unit and a network of more than 300 retail branches.

RSA Insurance Group posted a 20% decline in 2009 operating profit due in part to lower investment returns and said it is confident of delivering excellent results this year although economic uncertainties remain. Operating profit on a statutory basis for 2009 was GBP695 million, lower than the GBP867 million in 2008. The result was lower than average analyst expectations of GBP729 million. Chief Executive Officer Andy Haste said: "We delivered another strong performance and have driven the group forward through targeted organic growth and acquisitions in emerging markets and international. We’ve continued to take the right action on rate and expenses and delivered a positive underwriting result in all regions." "As we move into 2010, economic uncertainties remain. However, we are confident of our ability to continue to deliver excellent results," Haste said. Net profit was GBP418 million, 27% lower than the GBP574 million a year earlier. RSA said its investment result last year fell 12% to GBP523 million from GBP594 million. The lower result from investments took the shine off the higher results in RSA’s core business–net written premiums rose 4% to GBP6.74 billion from GBP6.46 billion in 2008. RSA said it maintained its strong capital position, with the end-December capital surplus at GBP1.7 billion, the same level at the end of 2008. The company is recommending a full-year dividend of 8.25 pence a share, up from 7.71 pence a share previously.

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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: February 25th, 2010 under Asset Management.
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