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London Market Reports
Good start for Footsie

Market Movers
FTSE 100 5,450.29 +0.41%
techMARK 1,696.82 +0.28%
FTSE 250 10,240.16 +0.35%

London has started the week in confident fashion, still buoyed by Friday's better than expected US jobs data.

British Airways is going well on chief executive Willie Walsh's ambitious plans to buy rivals. Walsh has held talks with executives of merger partner Iberia about BA’s role as a consolidator in the airline industry and though no names were mentioned analysts suggest Qantas, Cathay Pacific, American, LAN and South African are all possible targets.

Cable & Wireless Worldwide is the best performer on a weekend report Singapore Telecom is eyeing up the telephony group.

BP is another good riser. The leaking Gulf of Mexico well is now secured according to a US report, while it has resurrected plans to sell its stake in Prudhoe Bay in Alaska to help pay for the costs of cleaning up the spill.

GlaxoSmithKline is facing a call to withdraw its diabetes drug Avandia in Britain because of heart risk concerns. UK regulator, the Medicines and Healthcare products Regulatory Agency (MHRA), says the risks of Avandia, known generically as rosiglitazone, outweighed its benefits and that "it no longer has a place on the UK market".

No-frills airline easyJet’s load factor in August 2010 was 92.3%, up from 91.8% in August of last year. The number of passengers carried increased by 8.4% to 5.2m from 4.8m a year earlier.

Fenner, the industrial conveyor belt maker, expects results for the year to 31 August 2010 to be at the top end of market expectations. The trading environment for its conveyor belting operations in the mining sector remains strong, while the Advanced Engineered Products division has returned to historic margin run rates with improvements across the spectrum of operations, the company said.

Media conglomerate United Business Media (UBM) is stepping up its activities in China with the acquisition of Shanghai-based UM Paper.


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UK Event Calendar for today
The recent flotation of loss-making grocery delivery firm Ocado has been described as one of the least successful in recent memory, but shares have perked up in the last week ahead of next Tuesday's interim results.

The revival was sparked by some broker comment at the end of August. Goldman Sachs reckons the shares are worth 200p and HSBC would be a buyer all the way up to 190p. Cazenove plumped for a price target of 180p while USB thinks fair value is achieved at 167p, 13p below the price at which the shares floated.

The question posed back in July by analyst Amisha Chohan at HB Markets, in a note entitled ‘Is this valuation off its trolley?’ still seems pertinent, however: ‘How can a business delivering pre-tax losses of £25 million on revenues of £427 million be valued between £800 million to £1.2 billion?’

Elsewhere in the grocery sector Wm. Morrison releases interim figures on Thursday, the first results to be released since Dalton Philips first sat down in the chief executive’s chair back in late March.

“Philips is expected to present his initial thoughts on the business, rather than a full-blown strategic review. Specific targets and timeframes are more likely to set with full year results in March,” predicted Charles Stanley analyst Sam Hart.

“We expect his approach to be evolutionary, given that Morrison already appears to be on the right strategic path and that he was specifically recruited to apply his operational expertise. Key decisions, however, will have to be made on whether to expand more aggressively into non-food, launch an on-line offer and develop a convenience format. The group is conspicuous by its absence from these three areas, which are generally perceived as the industry’s main growth channels,” the broker added.

Charles Stanley is forecasting an interim pre-tax profit of £415m, up from £359m last year, and earnings before interest, tax and amortisation of £435m, up from £382m. Revenue is tipped to improve to £8,150m from £7,458m.

“Like-for-like sales (ex-fuel and VAT) are forecast to be up by 0.9% during the first half, with growth in the second quarter likely to have been similar to the 0.8% reported for the first quarter. The subdued like-for-like performance will reflect a sharp fall in food price inflation (close to zero) and a tough consumer environment. Operating margin is likely to be broadly flat at 5.1%, held back by an increased mix contribution from low margin petrol,” Hart said.

On the economic front Thursday’s interest rate decision by the Bank of England’s Monetary Policy Committee (MPC) is expected to be the usual non-event. The key interest rate has been stuck at 0.50% for 17 months in a row and it would be a major surprise were that streak not to be extended to 18 months.

Notwithstanding the current hike in wheat prices there is evidence that inflationary pressures are receding while recent surveys covering construction, manufacturing and services activity in August have not painted a picture of an economy enjoying a robust recovery. Consequently, most economists think the interest rate will remain unchanged for the rest of the year.

The US market will be closed on Monday for the Labour Day holiday.

Monday September 06

INTERIMS
Brady, Goals Soccer Centres, Hellenic Carriers, Hydrogen Group, OAO Severstal GDR (Reg S), Staffline Group, Straight, Symphony Environmental Technologies, Titan Europe, Verona Pharma, Zhaikmunai GDR (Reg S)

INTERIM DIVIDEND PAYMENT DATE
Fenner, St. Modwen Properties

GMS
Investec Structured Products Calculus VCT, Kopane Diamond Developments, Pinnacle Staffing Group, Salamander Energy

FINALS
Craneware, Kofax, Murgitroyd Group, WFCA

ANNUAL REPORT
Triple Plate Junction

EGMS
Ark Therapeutics, Soco International

AGMS
Ecofin Water & Power Opportunities, Marwyn Value Investors Ltd., Marwyn Value Investors Ltd. 'B' Shares, The Clapham House Group

UK ECONOMIC ANNOUNCEMENTS
New Car Registrations (09:30)

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Sentix Investor Confidence Survey (EU) (09:30)
MPC meeting (JPN)

FINAL DIVIDEND PAYMENT DATE
BT Group, Solid State



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Forex Market Reports
Risk rises after jobs report

The dollar fell against most major currencies on Friday as much better than expected US jobs figures for August spurred risk appetite.

Payrolls fell just 54,000 last month compared with expectations that over 100,000 positions had been lost, the Labor Department said. The jobless rate rose to 9.6% from 9.5%.

Increased risk lifted the euro and the Australian dollar. The upbeat picture of the US jobs market eased worries about a double dip recession.

However risk appetite was watered down slightly after a separate report showed the US non-manufacturing sector grew slower than expected in August while employment in the sector fell.

The yen and Swiss franc were lower after the surprisingly strong jobs figures. Caution about Japanese intervention to halt the yen’s rise also put off potential buyers of the Japanese currency.

Sterling weakened against the euro on Friday after disappointing economic data. The UK services sector grew at its slowest pace in 16 months in August, as businesses scaled back activity on fears the UK could be in for a period of sluggish growth or a double dip recession.

The data follows weak data on the UK housing, manufacturing and construction sectors.

Commodities Market Reports

Oil, gold settle lower

Oil prices moved lower on Friday despite better than expected US jobs figures for August. Crude for October delivery fell 42 cents to $74.60 a barrel on the New York Mercantile Exchange.

Crude fell as doubts about the rate of the economic recovery overshadowed gains on Wall Street and a much stronger than expected snapshot on the US jobs market.

Payrolls fell just 54,000 last month compared with expectations that over 100,000 positions had been lost, the Labor Department said. The jobless rate rose to 9.6% from 9.5%.

On Thursday crude oil futures rose above $75 a barrel, supported by solid economic figures and increased risk appetite.

However oil prices ran out of steam by the end of the week, but off session lows. There will be no floor trading on the Nymex Monday because of the US Labor Day holiday.

Gold closed lower on Friday but managed to reduce losses on the day and rose of 1.1% on the week. Gold for December fell $2.30 at $1251.10 an ounce.


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US Market Reports
Dow ahead this year after jobs data

Wall Street made good gains after US jobs figures for August came in much stronger than expected, sending the Dow above its starting level at the beginning of 2010.

Dow Jones finished up 127 points higher at 10,447. The S&P 500 added 11 at 1,104 and Nasdaq was 33 higher at 2,233. The Dow closed 2009 at 10,428.

Payrolls fell just 54,000 last month compared with expectations that over 100,000 positions had disappeared. The jobless rate inched up to 9.6% from 9.5%.

Although it was still the third consecutive month of losses, July’s ugly 131,000 decline was revised to 54,000 and June’s 221,000 slump was trimmed to 175,000.

News from the service sector was not as good. The Institute for Supply Management's (ISM) services index fell to 51.5 in August, compared with the expected figure of 53.5 and 54.3 the previous month.

Caterpillar and Boeing and JP Morgan Chase were among the top blue chip performers.

In company news, tax preparation giant H&R Block rose sharply as losses narrowed and sales fell less than expected during the first quarter. A net loss from continuing operations of $114.8, or 36 cents a share, was better than the 41 cents share loss predicted. Revenue was down to $274.5m, more than the $268.5m pencilled in by experts.

Campbell Soup increased fourth quarter net income to a better than expected $113m, or 33 cents a share, from $69m, or 20 cents, a year ago. Revenue was down 1% to $1.52bn and the firm predicted adjusted 2011 earnings of $2.59-2.64 a share for the year compared with the $2.64 analysts are looking for.

There are also gains for fibre-optic equipment maker Finisar as its numbers trumped estimates. Earnings tumbled 26% to during the first three months of its financial year, though profit excluding one-offs of 31 cents a share was up sharply and way ahead of the 23 cents analysts were looking for. Revenue was up 62% to $207.9m.

S&P 500 - Risers
Monster Worldwide Inc. (MWW) $12.33 +7.03%
Janus Capital Group Inc. (JNS) $10.12 +6.64%
Genworth Financial Inc. (GNW) $12.03 +5.99%
H&R Block Inc. (HRB) $13.30 +5.81%

S&P 500 - Fallers
Campbell Soup Co. (CPB) $36.21 -2.97%
Family Dollar Stores Inc. (FDO) $42.51 -2.28%
First Horizon National Corp. (FHN) $10.59 -1.12%
Newmont Mining Corp. (NEM) $60.87 -1.07%

Dow Jones I.A - Risers
JP Morgan Chase & Co. (JPM) $39.17 +2.65%
Cisco Systems Inc. (CSCO) $21.04 +2.53%
American Express Co. (AXP) $41.80 +2.25%
Caterpillar Inc. (CAT) $70.08 +2.25%


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Monday newspaper round-up:
British Airways, Income tax, Prudential...

Willie Walsh has identified 12 airlines as potential acquisition targets once he completes the merger of British Airways and Iberia this year.

The BA chief executive said that he had held discussions with executives of the Spanish flag carrier about future acquisitions, as he seeks to lead a wave of consolidation in the industry. Mr Walsh refused to give details of his list and said that no discussions had been held with potential targets, but analysts speculated that he could be interested in carriers such as Qantas, Cathay Pacific, American, LAN and South African, the Times reports.

More than 10m people may have paid too much income tax and will be owed money by the Government due to errors in the HM Revenue and Customs (HMRC) tax code system. But the full scale of the problem is laid bare today. HMRC records show that in addition to the 4.3 m cases it admitted to last week, “legacy” errors may have resulted in another 5.8m people overpaying income tax before March 2008, the Telegraph reports.

George Osborne will scrap the pre-Budget report this year in a break with Gordon Brown’s era and a signal of a return to more normal economic policymaking. The chancellor’s decision to ditch what had become a second annual Budget will save resources at the Treasury; in its place a slimmed-down autumn statement, with new forecasts, towards the end of the year, the FT reports.

Britain’s manufacturers will report their strongest orders for at least 15 years, according to a closely watched survey. The quarterly utlook from the EEF, the engineering lobby group, will show today that indicators of both orders and output are at their highest levels since the survey began in 1995. More manufacturers are taking on workers than at any other time in the same period, according to the EEF, the Times reports.

A group of institutional shareholders is threatening to issue a joint letter demanding the resignation of Harvey McGrath as chairman of Prudential. The shareholders, who claim their frustrations are not being addressed following the Pru's failed $35bn bid for AIA Group, are preparing to renew their assault on the chairman over the next few weeks, the Telegraph reports.

Britain's six biggest banks have commissioned a report to profile the creditworthiness of their business customers in a bid to break the deadlock with the Government over lending levels. The banks, which include the Royal Bank of Scotland and Barclays, have agreed to pay pH, a subsidiary of Experian, the research company, to analyse the credit profiles of small businesses that are being refused funding, the Telegraph reports.

Santander, the Spanish banking group, is set to launch a recruitment drive that could see it hire 6,000 people as it presses ahead with UK expansion. The bank, which has come under fire for poor customer service, plans to hire 600 people over the coming months to improve performance, the FT reports.

Metro Bank may raise more capital to accelerate its branch openings in Britain. The new bank created by the American billionaire Vernon Hill could raise £30m or more on top of the £75m it had in the bank when it opened its doors in July, observers believe. The level of interest so far has dwarfed expectations, the Times reports.

The world economy is recovering moderately but still faces challenges such as the need for medium-term fiscal consolidation, the IMF's deputy managing director, John Lipsky, said yesterday. Mr Lipsky said that delegates at the G20 meeting of deputy finance and central bank chiefs in South Korea "are mainly confident that there is a moderate recovery underway globally", reports the Independent.

Britain’s biggest care homes operator is trying to drive down its £200m annual rental bill by striking a better deal with landlords. The move comes as Southern Cross carries out a two-month strategic review into whether it can remain independent. News that Southern Cross has written to landlords and local councils to try to squeeze better terms out of them may raise the hopes of Towerbrook Capital Partners, a private equity firm that made approach for the business ten days ago. Southern Cross spurned its advances, the Times reports.

PricewaterhouseCoopers will reveal a 4% increase in full-year revenues to £2.3bn today as it continues to defy the slowdown in demand for professional services. Britain’s biggest accountant said its ambitious expansion plans were paying off as it extended its lead over its Big Four rivals, the Times reports.

The confidence of Britain's bosses in the economic recovery could be waning after new figures reveal a decline in the number of job vacancies last month. Industries including engineering, manufacturing, financial services, training and IT all suffered a drop in the number of jobs available in August compared with July, according to the Reed Jobs Index, the Telegraph reports.

The Government must radically simplify the latest corporate pensions rules or risk damaging job creation in the UK, the British Chambers of Commerce (BCC) warned. The trade body says laws introduced by Labour and passed at the beginning of 2010 amount to a "complex web of regulations" that bear little resemblance to the proposals put forward four years ago. David Frost, director general of the BCC, said against the backdrop of on-going changes to employment law, small and medium-sized businesses would be put off hiring new staff unless the Government made the new legislation easier to follow, the Telegraph reports.