09 September 2010

THE ECONOMIC MONITOR U.K.
Free Edition

INSIDE THE REPORT

MARKETS AT A GLANCE

Stock recommendations and price targets from top brokerage firms Important Events Scheduled on 10 September

The FTSE 100 rose 1.2%, or 64.42 points, to close at 5,494.16 points. By 1205 GMT, sterling was down 0.5 percent on the day at $1.5396, having slipped to the day's low of $1.5376. At 1320 GMT, the December gilt future was down 54 ticks at 123.25, in line with the equivalent Bund. At 1411 GMT, London Brent crude gained 38 cents to $78.55. Spot gold was bid at $1,254.40 an ounce at 1437 GMT from $1,254.50 late in New York on Wednesday.

Corporate Events
 

JD Wetherspoon final results Ascent Resources,Dods, Deltex Medical Group, TEG Group, Phorm interim results Cascal first quarter results Ecommerce Alliance second quarter results

Breaking News

STOCK INDICES
INDEX FTSE 100* FTSE 250* FTSE 350* FTSE Tech Mark 100* FTSE AIM 100* FTSE All Share* FTSE Eurofirst 300* DAX* LAST 5494.16 10309.51 2893.67 1893.40 3333.35 2829.56 1081.20 6221.52 3722.15 2581.53 CHNG 64.42 92.80 29.16 20.77 50.66 27.80 9.20 57.08 44.94 25.61 % CHNG 1.19 0.91 1.02 1.11 1.54 0.99 0.86 0.93 1.22 1.00

Vodafone under tax threat Anglo Irish to be split New finance director for GSK Morrisons to open smaller shops KNOC won't pay more for Dana IG Group cautious despite higher revenues Economic growth seems uneven: Clegg July goods trade deficit Food inflation rises BOE may expand its bond purchase policy No change in QE; Interest rate at 0.5 percent: BoE U.K. to review its exile laws Tax office gets cautious on wrong records

CAC 40* Stoxx Europe 50 * CLOSING VALUES

CURRENCIES
INDEX Euro (EUR/USD) U.K. Pound (GBP/USD) Japanese Yen (USD/JPY) LAST 1.2724 1.5443 83.83 PRIOR 1.2715 1.5464 83.92

All prices are at 11:45 AM EDT

FUTURES
LAST Crude Oil Natural Gas Gold, Dec. Copper (¢), Dec Wheat (¢), Dec. 75.55 3.714 1248.7 344.6 726.75 CHANGE 0.88 -0.10 -8.80 -5.45 15.75

All prices are at 11:35 AM EDT

THE ECONOMIC MONITOR - U.K.
STOCK RECOMMENDATIONS BY BROKERAGE HOUSES
BROKERAGE/COMPANY Collins Stewart British Petroleum UBS Land Securities Group Aveva Group Barclays Lloyds Banking Group Standard Chartered RBS Ashtead Group Citigroup J Sainsbury Investec Arm Holdings Numis Redrow KBC Peel Hunt Therapeutics Group Evolution Securities Eros International Panmure Cape Seymour Pierce HMV Group Goldman Sachs Soco International Recommends neutral from earlier buy Neutral Recommends sell from buy Sell Raises target price to 430p from 350p Buy Raises target price to 320p from 280p Buy Raises price target to 9p from 14p Buy Raises to hold from reduce Hold Raises price target to 360p from 340p Buy Raises to hold from sell Hold Raises price target to 172p from 110p Buy Raises to equal weight from underweight Raises price target to 1800P from 1610P -Equal weight Removes from European key calls list Recommends sell from neutral -Sell Raises price target to 475p from 450p Buy ACTIONS RATING

Disclaimer: The views and investment tips expressed by investment experts are their own, and not that of IBTimes or its management. We advise users to check with certified experts before taking any investment decisions.

MARKET BRIEFING

Banks lead the rise in Britain’s top share index with Barclays and RBS among the best performers. Lloyds was boosted by the sale of its debt holding in housebuilder Crest Nicholson. Miners such as Xstrata and Vedanta recovered even though metals prices are weak. The FTSE 100 rose 1.2%, or 64.42 points, to close at 5,494.16 points. European shares climbed to their highest in more than four months, with sentiment improving after encouraging U.S. economic data and banks surging on hopes the Basel requirements will not be as tough as feared. Sterling slipped against the dollar, tracking euro losses versus the U.S. currency earlier in the day while a weak reading of the U.K. trade sector helped to keep investors negative on the pound. The Bank of England's decision to hold interest rates at record low levels had limited impact on the U.K. currency, as many in the market expect the central bank will hold off from raising rates from 0.5 percent until at least the second quarter of 2011. By 1205 GMT, sterling was down 0.5 percent on the day at $1.5396, having slipped to the day's low of $1.5376. The pound edged towards a six-week low of $1.5296 hit earlier in the week. The euro rose 0.4 percent to the day's high of 82.67 pence. British gilt futures fell half a point after a bigger-than-expected fall in U.S. unemployment and a renewed appetite for risky assets from investors put pressure on government bonds globally. Unexpectedly weak British trade data and a widely expected decision by the Bank of England to leave interest rates at 0.5 percent brought no market reaction during a session in which gilts drew direction from outside the U.K. At 1320 GMT, the December gilt future was down 54 ticks at 123.25, in line with the equivalent Bund. The yield on 10-year gilts was up 4 basis points at 3.04 percent, and the spread versus Bunds edged higher to touch 71 basis points, it’s widest since Sept. 2. U.S. crude oil futures prices extended gains after a government oil inventory report showed crude stocks fell last week, against a forecast for stocks to be up. Crude prices initially were little changed after the report from the U.S. Energy Information Administration showed crude stocks fell 1.85 million barrels last week. On the New York Mercantile Exchange, October crude rose $1.15, or 1.54 percent, to $75.82 a barrel by 1535 GMT, trading from $74.60 to $75.96. At 1411 GMT, London Brent crude gained 38 cents to $78.55. Gold was little changed within sight of its recent all-time highs, recovering from an earlier drop on upbeat U.S. labour data as investors remained unconvinced of the resilience of the world's largest economy. Gold has risen by some 15 percent in 2010 as economic uncertainty has unleashed a wave of investment in perceived safe-haven assets. Spot gold was bid at $1,254.40 an ounce at 1437 GMT from $1,254.50 late in New York on Wednesday and less than 1 percent below June's record high at $1,264.90 an ounce. Earlier it fell to $1,250.30 an ounce. U.S. gold futures for December delivery were last down $1.5 at $1,256.00 an ounce.

THE ECONOMIC MONITOR - U.K.
COMPANY NEWS COMPANY NEWS (contd…)

Vodafone under tax threat
Vodafone now plans to appeal the Bombay High Court decision that it is liable for tax on its 2007 acquisition of a 67% stake in Hutchison Essar. The new appeal will be heard in the Indian Supreme Court. The company had appealed against the Indian tax department that it could levy tax on the company's $11.2 billion acquisition. There could be as much as $2.6 billion in tax payable on this deal. Vodafone argued that the deal happened on foreign soil but the court said this argument can’t be accepted.

Robust demand boosts Renishaw
Precision engineer Renishaw said trading in the first two months of the new financial year has been very positive due to the strong demand from Japan and the rest of Asia. Group revenue in July and August has been around £20 million per month and the order book currently stands at around £25 million. The group saw robust demand for its metrology products across all its main geographies.

ECONOMY NEWS

Economic growth seems uneven: Clegg
Nick Clegg, deputy prime minister said that uneven economic progress is likely. He also warned against talking down the economy. Large spending cuts likely to be announced next month is to make the economy stable, he added. "Of course, we appreciate we are dealing with a longterm problem about how you rebalance the British economy... away from an over-reliance on financial services, away from an over-reliance on public sector employment in parts of the country," he added. "That won't be something we can do overnight."

Anglo Irish to be split
Anglo Irish Bank is being split up by the Irish government. The Irish government hopes that this plan will end the uncertainty surrounding the future of Anglo Irish and help to boost confidence in the Irish financial markets. One part of the nationalised bank will hold deposits (funding bank) and the other will run down its loan portfolio (asset recovery bank). Anglo Irish will not be issuing any new loans.

New finance director for GSK
Simon Dingermans of Goldman Sachs to replace Julian Heslop as finance director of GlaxoSmithKline form next year. Heslop has announced his intention to retire at the end of March 2011. GSK chief executive Andrew Witty says that Dingermans will help the pharma company to grow organically and via bolt-on acquisitions. Dingermans will join the board as chief finance officer designate and he will also be responsible for delivering cost savings.

U.K. trade deficit at its record high
Britain's July goods trade deficit hit all time high with the rest of the world after imports of chemicals and oil surged and exports fell, released data showed. The goods trade gap widened to 8.667 billion pounds in July from 7.532 billion in June, the Office for National Statistics said. The total trade deficit including services was at its highest in five years, letting down any further expectation of exports to drive growth as the government and consumers rein in spending. Imports rose 3.1 percent on the month, driven by an increase in imports due to maintenance work on North Sea oil rigs, while exports fell 0.9 percent, led again by chemicals and oil.

FSA fines Goldman Sachs
Goldman Sachs got a fine of £17.5 million by the FSA for failing to disclose to the U.K. regulator the details of a U.S. fraud investigation into its sale of mortgage-backed products. Goldman was accused of failing to tell investors that Paulson, the hedge fund that had selected some of the mortgages, had backed them to default.

Food inflation rises as wheat prices soar
Soaring wheat prices have already started hitting hard on consumers as a survey by BRC the research group Neilsen claimed that food inflation rose to 3.8% in August from 2.5% in July. Rising wheat prices was attributed to hot weather in Russia and other countries. Stephen Robertson, director general of the BRC pointed the commodity prices to be highest since 2008. He further said that though wheat prices have rose recently but still it peak was in 2008. The rise in food prices contrasts with non-food inflation, which slowed to 0.5% in August from 1% in July.

Morrisons to open smaller shops
Supermarket Morrisons posted profits broadly in line with expectations for the six months. Pre-tax profits totalled £412 million, down from £449 million. Revenues climbed to £8.1bn from £7.5bn, a rise of 9%. Like for like sales were up by 0.9%. Morrisons said that it will begin a trial period of operating convenience stores in the first half of 2011. It is also assessing a move into online grocery retailing.

BOE may expand its bond purchase policy
Bank of England Governor Mervyn King may have to look for new bond purchases as Britain’s rebound from recession. Bank of England policy makers are keen on expanding the bond-purchase policy over the past two months, as officials says that it has aided growth by shaving 1 percentage point off government bond yields. Even Clarke forecasts that the bank’s nine-member Monetary Policy Committee will agree to a “second wave” of stimulus in February. Ross Walker at Royal Bank of Scotland Group says that there are 40 percent chances of it happening in early 2011.

KNOC won't pay more for Dana
KNOC will not be raising its hostile £18 a share bid for Dana Petroleum despite yesterday’s fierce defence by the Aberdeen-based firm. Korea’s state-run oil company said that the £1.87 billion offer still represents “compelling value”.

IG Group cautious despite higher revenues
Spread-betting firm IG Group saw higher revenues in the three months to August 31. Revenues were up to £79mln from £68mln in the same period the previous year. IG said that volumes were strong in the first half of the period but that volumes were subdued in the second half of that period and warned that future trends remain difficult to predict.

No change in QE; Interest rate at 0.5 percent: BoE
The Bank of England confirmed that it maintains interest rates at 0.5 percent for the 18th month in a row and announced no new quantitative easing purchases. The inflation in July was at 3.1 percent, more than the bank's target of 2 percent due to temporary factors, since the future growth would likely to weaken, increasing interest rates is inappropriate for now, said BoE. This statement showed no impact on financial markets. Despite the strongest growth in nine years in the second quarter, Bank has said growth is likely to fall due to government spending cuts and weak overseas demand. Minutes to this meeting will be published on September 22, many economists expect it to show a repeat of Augusts' discussion.

THE ECONOMIC MONITOR - U.K.
REGULATORY NEWS NEXT TRADING DAY (contd…)
corresponding period a year ago. Analysts expect the company half yearly revenue will be at £6.78 million, which was £5.65 million a year ago. TEG Group will report its interim results with a profit of £1.3 per share, up from a previous loss of £1.66 per share. Company’s full year revenue is expected to rise to £23.8 million from previous £14.1 million. Company’s full year net debt is expected at £5.35 million. Phorm, an advertising company is expected to declare its interim results. The company is expected to post a full year loss at £1.599 per share from a previous loss of £1.829 per share. The full year revenue will be at £2.07 million.

U.K. to review its exile laws
Britain said that it will review its exile laws after criticism that treaty arrangements with other nations, especially United States, make it too easy to transfer suspects for trial there. The rules governing arrest warrants allotted by European Union countries would examine whether they are rational, Home Secretary (interior minister) Theresa May said. Rights activists and other critics says that the treaty is unfair as according to the treaty with Washington it is simpler to extradite people from Britain to the United States than vice versa. The review will also look at the breadth of the Home Secretary's discretion will be conducted by a small panel of experts, comes after a number of highprofile cases, including that of Gary McKinnon.

Tax office gets cautious on wrong records
Approximately nine million employment files, which are held by HM Revenue & Customs, might be wrong, internal review revealed. Government fears incorrect amount of tax payment by people as out of 45 million record held, one in five may contain mistakes. The tax office had started sending letters to tens of thousands of workers telling them they’ve been on the wrong tax code since 2008, and had been asked to check their codes and tax bills. Almost 1.5m Britons face having to cough up around £1,500 to cover a shortfall in tax paid. HMRC claims that all the problems have been rectified.

ECONOMIC CALENDAR
DATE FRI 09/10 LST 1400 1400 1400 1400 1400 1400 INDICATOR PPI Core Output mm PPI Core Output yy PPI Input Prices mm PPI Input Prices yy PPI output prices mm PPI output prices yy No major indicators CPI mm CPI yy RPI mm RPI yy RPI - X(retail prices) mm RPIX yy RICS housing survey F’CAST 0.1% 0.4.6% 0.10% 8.90% 0.1% 4.8% N/A -------PRIOR 0.2% 0.4.7% -1.00% 10.8% 0.1% 5% N/A -0.2 % 3.10 % -0.2 % 4.8% -0.3 % 4.80 % -8

NEXT TRADING DAY

MON 09/13 TUE 09/14

N/A 1400 1400 1400

ECONOMIC EVENTS
No major economic events scheduled.

1400 1400 1400 0431

CORPORATE EVENTS
JD Wetherspoon will release its final results, analysts expect the company to report a full year profit of £34.66 per share, up from £30.46 per share in the previous year. Company’s full year revenue is expected at £1,003.77 million as compared to £952.65 million a year ago. Net debt is expected at £393.53 million and capital expenditure at £65.94 million. Ascent Resources, an oil and gas exploration company is expected to declare its interim results. Analysts expect the company to report a full year profit of £0.6 per share as compared to a previous loss £0.56 per share. Company’s full year revenue is expected to rise to £7.9 million from £1.03 million in the previous year. Net debt and capital expenditure for full year is expected at £1.35 million and £0.58 million respectively. Cascal, engaged in water utilities is expected to declare its first quarter results. Analysts expect the company’s full year profit to fall slightly to £0.6 per share from previous £0.75 per share. Full year revenue is expected to rise to £195.9 million from £175.71 million a year ago. Ecommerce Alliance, a wireless telecommunication service company will report its second quarter results. The company is expected to post full year revenue of £27.49 million, a steep fall from £86.30 million in the previous year. Dods, a publishing company is expected to report its interim results and expects its full year profit at £1 per share as compared with £1.4 per share in the previous year. Full year revenue is expected to be slightly down from £18.10 million as compared to £27.2 million a year ago. Deltex Medical Group is expected to report its interim results at a profit of £0.643 per share, down from £1.367 per share for the

CORPORATE RESULTS
DATE - 10/September/2010
COMPANY NAME DTZ Holdings Northgate William Ransom & Son Holidaybreak JD Wetherspoon Deltex Medical Group TEG Group Dods (Group) Regal Petroleum Neovia Financial ECOMMERCE ALLIANCE Ascent Resources SThree Energetix Group EVENT Interim Management Statement Interim Management Statement Preliminary 2010 Pre Close Trading Update Preliminary 2009 Interim 2010 Interim 2010 Interim 2010 Interim 2010 Q2 2010 Q2 2010 Interim 2010 Q3 Interim Management Statement Interim 2010

THE ECONOMIC MONITOR - U.K.
ECONOMIC INDICATOR WATCH
U.K. producer prices for the month of Aug, 2010 will be released at 0930/0830/0430 Local/GMT/ET Core PPI Monthly Forecast +0.1%; Prior +0.2% Core PPI Yearly Forecast +4.6%; Prior +4.7% The output price index excluding excise duties rose 4.9 percent in the year to July. The index rose 0.2 per cent between June and July. The output price index excluding food, beverages, tobacco and petroleum rose 4.7 per cent in the year to July. The index rose 0.2 per cent between June and July Input PPI Monthly Forecast +0.1%; Prior -1.0% Input PPI Yearly Forecast +8.9%; Prior +10.8% The overall input index rose 10.8 per cent in the year to July, compared with a rise of 10.7 per cent in the year to June. The input index for all manufacturing fell 1.0 percent between June and July compared with a fall of 1.1 per cent between June and July 2009. The monthly fall in the input index between June and July mainly reflected falls in the price of crude oil, home produced food products, and imported metals. These falls were partially offset by an increase in the price of fuels (inc CCL). Output PPI Monthly Forecast +0.1%; Prior +0.1% Output PPI Yearly Forecast +4.8%; Prior +5% The overall output price index rose 5.0 percent in the year to July, compared with a rise of 5.1 percent in the year to June. The index rose by 0.1 per cent between June and July 2010, compared with a rise of 0.2 per cent between June and July 2009. The rise in the index of 0.1 per cent between June and July was mainly due to price rises in food products, other manufactured products, and textile and clothing products. These rises were partially offset by a fall in the price of petroleum products. B. A. Retailers were dragging the index lower. Supermarket Morrisons fell back even though it posted profits broadly in line with expectations for the six months to August 1. Homebase and Argos owner Home Retail Group disappointed the market with its prediction that unless Christmas is a cracker this year profits are likely to be in the bottom half of the range of analysts’ estimates. B&Q owner Kingfisher was down in sympathy. Index moved sharply higher with the two powerhouse sectors of the banks and miners started to make notable gains. Barclays and Royal Bank of Scotland were ahead, while Vedanta and Lonmin led the miners. Shares in ARM Holdings were higher after the chipmaker unveiled its new processor, the Cortex A15 MPCore. Barclays led the banking sector higher. Home Retail was the heaviest faller after the Argos and Homebase owner said that unless Christmas is a cracker this year profits are likely to be in the bottom half of the range of analysts’ estimates. FTSE 100 up 63 at 5,493.

MARKET PERFORMANCE

FTSE 100

C.

This report is produced by International Business Times For questions or comments reach us at researchanalysis@ibtimes.com For more information about our products visit www.ibtimes.com © IBTimes 2010. All rights reserved.

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