13 September 2010

THE ECONOMIC MONITOR U.K.
Free Edition
MARKETS AT A GLANCE

INSIDE THE REPORT

Stock recommendations and price targets from top brokerage firms Important Events Scheduled on 14 September

The FTSE 100 closed up 1.16% or 63.89 points at 5565.89. The FTSEurofirst 300 of top European shares rose 0.66 percent to end at 1,088.20 points. By 1507 GMT, sterling rose 0.5 percent to $1.5423, paring gains after rallying to a session high at $1.5488. By 1219 GMT, the December gilt future was down 26 ticks at 122.24, outperforming the equivalent Bund by around 14 ticks. London Brent rose $1.12 to $79.28. Spot gold prices were at $1,245.75 an ounce by 1445 GMT, against $1,245 in New York on Friday.

Corporate Events

Hargreaves Services, Ashmore Group, Town Center Securities, EMIS Group yearly results KBC Advanced Technologies, Asia Digital Holdings, Cello Group, Globo, Hightex, Hilton Food interim results

 

Breaking News

Bank stocks rise on Basel norms BDO warns U.K. on double dip Astra cancer drug on trial August inflation to fall : Survey Ed Miliband could replace David in labour race Unions protest as Coalition says overcuts needed Rich states to pay Africa on resources deals Chinese investors face deal AB Foods expects profits Lloyds optimistic on income growth Province Equity may sell Phones4U: Paper Omega chairman invests insurance underwriter BAE plans to sell U.S. aero assets Nokia's mobile unit chief resigns obstacles on Prudential

STOCK INDICES
INDEX FTSE 100* FTSE 250* FTSE 350* FTSE Tech Mark 100* FTSE AIM 100* FTSE All Share* FTSE Eurofirst 300* DAX* CAC 40* Stoxx Europe 50 * CLOSING VALUES LAST 5565.53 10508.33 2937.49 1932.56 3422.39 2871.26 1.088.20 6261.68 3767.15 2588.92 CHNG 63.89 106.55 33.19 24.22 53.4 31.01 7.18 46.91 41.33 15.89 % CHNG 1.16 1.02 1.14 1.27 1.59 1.09 0.66 0.75 1.11 0.62

CURRENCIES
INDEX Euro (EUR/USD) U.K. Pound (GBP/USD) LAST 1.2862 1.5428 83.73 PRIOR 1.2711 1.5357 84.2

Japanese Yen (USD/JPY)

All prices are at 11:12 AM EDT

FUTURES
LAST Crude Oil Natural Gas Gold, Dec. Copper (¢), Dec Wheat (¢), Dec. 77.77 3.948 1247.6 348.3 751.5 CHANGE 1.32 0.065 1.10 7.65 14.75

All prices are at 11:01 AM EDT

THE ECONOMIC MONITOR - U.K.
STOCK RECOMMENDATIONS BY BROKERAGE HOUSES

BROKERAGE/COMPANY

ACTIONS

RATING

Panmure Associated British Foods Weir Group Northgate Associated British Foods Nomura Reckitt Benckiser Banca Akros Vodafone Group Evolution Securities Genus Hikma Pharmaceuticals JD Wetherspoon Kentz Corporation Centamin Egypt Numis Igas Energy Centamin Egypt Talvivaara Mining Bofa Merrill IG Group Holdings De La Rue Altium Individual Restaurant Company Barclays Rightmove Citigroup Avis Europe JP Morgan Home retail Group Adecco RBS Premier Farnell Raises price target to 310p from 275p Buy Raises price target to 210p from 230p Underweight Underweight Recommends price target of 262p Buy -Equal– weight Recommends to buy from hold Buy Raises price target to 570p from 500p Recommends to buy from neutral Buy Buy Recommends price target of 94p Cuts to hold from add Raises to hold from reduce Buy Hold Hold -Recommends price target of 760p -Raises price target to 320p from 300p Cuts to neutral from Buy Buy -Hold Buy Neutral Cuts to hold from accumulate Hold Raises price target by 14 percent to 3740p Buy Cuts to hold from buy Raises price target to 1700p from 1490p Cuts to sell from hold Cuts to hold from Buy Hold Buy Sell Hold

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.

THE ECONOMIC MONITOR - U.K.
MARKET BRIEFING

Britain's top share index ended higher as banks surged on relief that new capital rules were not more demanding, and miners rose with metals prices as Chinese data prompted optimism. Chinese industrial production jumped a better than expected 13.9% year-on-year in August, calming fears about the global slowdown. Among the miners Kazakhmys, Antofagasta and Vedanta topped the list. Banks were among the top risers after a less stringent than feared Basle III decision by the European banking body but none of them are in the top performers. New capital requirements, known as Basel III, will demand banks hold top-quality capital totaling 7 percent, against the present requirement of 2 percent, of their risk-bearing assets but a long lead-in time eased fears that lenders will have to rush to raise capital. The FTSE 100 closed up 1.14% or 62.95 points at 5564.59. The FTSEurofirst 300 of top European shares rose 0.66 percent to end at 1,088.20 points, the highest close in more than four months. Sterling rose against a broadly weaker dollar as upbeat Chinese data and an agreement on new banking rules boosted appetite for risk but it lagged the euro, which is likely to gain more from strong Chinese growth. Data at the weekend showed Chinese factories ramped up production in August and money growth topped expectations, indicating the economy remained buoyant despite government efforts to clamp down on bank lending and property speculation. But the pound's gains were hampered by caution about the U.K. economic outlook. By 1507 GMT, sterling rose 0.5 percent to $1.5423, paring gains after rallying to a session high at $1.5488. Charts were pointing to sterling weakness in the medium-term. The euro outperformed against sterling to trade 1.0 percent higher on the day at 83.40 pence. British gilt futures fell, weighed down by an equity rally after new bank capital rules were agreed at the weekend, but prices were volatile in the absence of any other news to provide direction. Government bonds had come under heavy selling pressure early in the day as equity markets rallied in relief that global regulators were giving lenders a long time to comply with the new Basel III rules on bank capital. By 1219 GMT, the December gilt future was down 26 ticks at 122.24, outperforming the equivalent Bund by around 14 ticks. In the cash market, the yield on 10-year gilts was almost 3 basis points higher at 3.156 percent, tightening the spread against Bunds by around 4 basis points to 70 basis points. Oil rose to a one-month high, spurred by an extended shutdown of a major Canada-U.S. crude pipeline and strong Chinese demand growth and industrial output. U.S. crude for October climbed to $78.04 a barrel, the highest price since Aug. 11, and was up $1.40 at $77.85 by 1411 GMT. London Brent rose $1.12 to $79.28. Enbridge's Line 6A pipeline carrying Canadian crude oil to U.S. refineries and the crucial Cushing, Oklahoma oil hub, remained shut as workers continued digging around a leaky section of pipe in Romeoville, Illinois. Data from the world's second-largest oil user also boosted prices. Reflecting accelerating industrial activity, China's implied oil demand rose by 7.4 percent in August from a year earlier. Gold steadied, partly shrugging off the weight of positive investor sentiment stemming from a deal on global banking rules, upbeat Chinese data and a rally in risk-linked assets. Other industrial commodities such as crude oil, platinum group metals and copper all benefitted from the perception that the outlook for global growth had brightened somewhat. The agreement among global regulators on bank capital rules (Basel III) requires the sector to raise hundreds of billions of euros, but over a longer timeframe than originally expected, which boosted financial shares. Spot gold prices were at $1,245.75 an ounce by 1445 GMT, against $1,245 in New York on Friday. Yet prices remain within around 1.5 percent of the all-time highs set in late June at $1,264.90 when investor nervousness was heightened. U.S. December gold futures rose $1.6 ounce to $1,248.10.

MARKET PERFORMANCE

FTSE 100
A. Banks and miners were among the top risers in a buoyant FTSE 100. RBS led banks higher, with the sector reacting positively to the new Basel III rules on banking reserves that were announced last night. Lloyds was also strong. In the mining sector, Xstrata, Kazakhmys, Rio Tinto, Anglo American and Antofagasta were in demand as metals prices move ahead. FTSE 100 up 36 at 5,538. The FTSE 100 was up 60 at 5,562. Miners remained the force behind today's gains, offsetting weakness among utilities. Defensive stocks like United Utilities, Severn Trent, Scottish & Southern Energy and Centrica were down. Index was still around four-month highs after the U.S. got off to a good start. U.S. exposed building supplies group Wolseley was now the top riser here. FTSE 100 is up 66 at 5,569.

B.

C.

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

Chinese investors face obstacles on Prudential deal
Potential Chinese bid for Britain's Prudential faces numerous hurdles and would proceed only if an initial public offering from Asian rival AIA proves too expensive, bankers and analysts said. The company shares jumped as much as 4.5 percent on Monday. The investors included Go Guangchang, chairman of China's Fosun International, and Fred Hu, previously chairman of Goldman Sachs in China. The biggest hindrance for any takeover would be offloading Prudential's U.S. and U.K. divisions at an attractive price, analysts predict. But sources revealed that Clive Cowdery's Resolution was the only obvious buyer for the U.K. business.

Nokia's mobile unit chief resigns
Anssi Vanjoki, the head of Nokia's mobile solutions unit is resigning, while outsider Stephen Elop will be replacing him as chief executive of the world's biggest cellphone maker. Vanjoki had joined Nokia in 1991 and has to serve six-month notice period presently before resigning. Nokia has also stated its intention on hiring Elop, a Canadian Microsoft executive with Silicon Valley credentials, to replace embattled CEO Olli-Pekka Kallasvuo and renew its drive to compete with Apple. Nokia's chairman, Jorma Ollila also showed his intention to step down after helping with the CEO management change.

AB Foods expects profits to soar
AB Foods expects its forthcoming results to be better than last year as retail business Primark continues to power ahead, while sugar profits have recovered. Like-for-like sales growth of 6% is expected for the full year driven by a very strong performance in continental Europe and continued good growth in the U.K. The company also said that inflation, higher cotton prices, freight costs, the increase in VAT, implemented in Spain in July could put pressure on margins next year.

ECONOMY NEWS

Bank stocks rise on Basel norms
Bank stocks soared in Europe and Asia as regulators gave firms more time than analysts expected to obey with firmer capital requirements meant for preventing future financial crises. Regulators reached a consensus that more than doubles capital requirements for the world’s banks, while giving them as long as eight years to comply in full at a meeting held in Basel, Switzerland. U.S., U.K. and Switzerland pushed for a maximum of five years, while Germany had sought to give firms a decade to make the transition.

Lloyds optimistic on income growth
Lloyds Banking Group is assured of its capital strength, and expects its income growth this year to be on good track, one of its directors announced. Truett Tate told in a conference organized by investment bank Keefe, Bruyette & Co that the company expects to deliver good yearly income growth and the bank also expects its capital ratios "to strengthen materially over the medium term."

BDO warns U.K. on double dip
The research by BDO, the accountants and business advisers, said long-term economic prospects are not showing signs of improvement. BDO's optimism index, which covers more than 11,000 respondents from companies employing about 5 million people dropped to 93.1 in August from 95.5 in July, reaching lowest since the recession. The index reflects how businesses expect trading to develop two quarters ahead. BDO Partner Peter Hemington said: "What's so disappointing is that businesses seem to be convincing themselves that things are going to get really tough in 2011 and are deferring new hires and investment decisions as a result. Much of this comes from the hype around the government's spending cuts."

Province Equity may sell Phones4U: Paper
Phones4U, a British mobile phone retailer is mulling to be put up for sale by its U.S. private equity owner Providence Equity, as reported by the Sunday Times. Sources revealed that the discussions are at an early stage. Analysts estimate the business, which has 476 stores, to be worth between 700 million pounds ($1.1 billion) and 800 million, the paper said. Both the companies were immediately unavailable for any comments.

Omega chairman invests in insurance underwriter
Omega Insurance Holdings chairman John Coldman is planning to invest nearly £1m in the Bermuda-based insurance underwriter, together with its Chief executive Richard Pexton. The share price has been consistently declining for nearly two years. Coldman bought 1.125m shares as his first shares at 88p a share, while Pexton bought 225,000 shares at 88p a share – a total investment of £198,000. That takes his stake to 232,997 shares.

Astra cancer drug on trial
AstraZeneca has agreed British charity deal to take an experimental cancer drug into early clinical trials and then the company can decide whether to proceed after trial. The experimental compound, called AZD-3965, is one of a new class of cancer metabolism drugs and targets the monocarboxylate transporter 1 (MCT-1) which is essential in cell metabolism. This drug will be the sixth anti-cancer drug in the charity's clinical development partnerships project -- a deal allowing drug companies to preserve the rights to a potential treatment while the charity carries out early tests.

BAE plans to sell U.S. aero assets
BAE Systems plans to sell as much as $2 billion worth of U.S. aircraft and vehicle controls, it may help the company focus on defense services and raise cash for potential purchases. Wells Fargo. and JPMorgan Chase. has been hired by the company to find out option for the socalled platform solutions business, including a possible sale, the company. The unit include hybrid propulsion systems for buses and trucks as well as flight controls used by Airbus and Boeing.

August inflation to fall: Survey
August U.K. inflation possibly fall to 3% limit for first time in six months, economists say. Consumer prices which is expected to be published by the Office for National Statistics in London on Sept. 14 is expected to increase 3 percent from a year earlier, compared to 3.1 percent in July. The Bank of England maintained emergency stimulus for the economy this week as the biggest public-spending squeeze since World War II threatened to undermine the recovery.

THE ECONOMIC MONITOR - U.K.
ECONOMY NEWS (contd…) ECONOMIC INDICATOR WATCH

Ed Miliband could replace David in labour race: Poll
David Miliband, Former foreign secretary slips behind in Labour race by his younger brother Ed in the leadership race, a poll indicated. David Miliband, seen as the preferred candidate of former prime minister Tony Blair, held the most first-choice support, with 36 percent of the vote, four points ahead of his brother on 32,but under the party's election rules the winning candidate must receive at least 50 percent of the vote. The YouGov survey of 1,700 Labour and union members said Ed Miliband could replace his elder brother as the winner once lowerranking candidates were eliminated and their supporters' second choice votes were redistributed. The voting is scheduled to get complete on September 22, while winner declaration on September 25.

U.K. CPI Monthly (Aug)
Forecast 0.3%; Prior -0.2%
Consumer Price Index performance for the month of August will be released at 1400 (LST), the CPI fell by 0.2 per cent between June and July this year compared with no change over the same period a year ago. These 1-month changes are both within the normal range for a June to July period; since 1996, the monthly movement between these two months has varied between a fall of 0.8 percent and an increase of 0.1 per cent. Source: Office for National Statistics

U.K. CPI Yearly (Aug)
Forecast 2.9%; Prior 3.10%
CPI annual inflation stands at 3.1 per cent, down from 3.2 per cent in June. The change in the CPI 12-month rate is calculated by comparing the price changes between the latest two months and the same two months a year ago. The 1-month movement 0.2 percentage points lower this year and this led to a decrease of 0.1 percentage points (the 0.1 percentage point difference is due to rounding) in the CPI 12-month rate, from 3.2 per cent in June to 3.1 per cent in July. Yearly CPI Core Inflation in July, which excludes the cost of food, tobacco, alcohol and energy prices, slowed to 2.6% from 3.1% in June. Economists forecasted a reading of 3%, whereas monthly core CPI inflation fell to 0.4% in July.

REGULATORY NEWS

Unions protest as Coalition says overcuts needed
Britain's coalition government defended any intention to cut the welfare bill as trade union leaders asked the public to join millions of workers in a campaign to halt Prime Minister David Cameron’s budget cuts which is said to be the biggest squeeze in spending since World War II. Government cautioned saying that any if spending are not reduced it would intensely damage the economy as it recovers from the worst recession since World War Two. But the labour party opposed saying that the pace and scale of the recommended cuts could severely hamper economic recovery.

U.K. Retail Price Index Monthly (Aug)
Forecast 0.3%; Prior -0.2%
The RPI 12-month rate between June and July has therefore decreased by 0.2 percentage points compared with a fall in the CPI 12-month rate of 0.1 percentage points. Source: Office for National Statistics

Rich states to pay Africa on resources deals
A panel set up by former British Prime Minister Tony Blair announced that prosperous countries should pay African governments to get advice on negotiating the best contracts for exploiting their natural resources In order to boost Africa to adapt to climate change, the Commission for Africa, which includes serving and former African leaders and financial figures among its 17 members, also called on donor governments to provide an extra $10 billion-$20 billion a year. It added saying that despite average annual growth rates for Africa of six percent for much of the past decade, most Africans had yet to feel the benefits of economic growth.

U.K. Retail Price Index Yearly (Aug)
Forecast 4.6%; Prior 4.8%
In the year to July, the all items RPI rose by 4.8 per cent, down from 5.0 per cent in June. The slightly larger decrease in the RPI 12-month rate is mainly due to insurance. Insurance has a far higher weight in the RPI than the CPI so the downward effect from this component had a much larger impact on the RPI. The different methods used to measure the price of new cars in the CPI and RPI also resulted in a larger downward contribution to the RPI (compared with the CPI) from the purchase of vehicles.

DCLG U.K. House Price Index (July)
Department of Communities and Local Government will release the performance of the U.K. House Price Index for the month of July, 2010 at 0930 (LST) U.K. house prices were 9.9 per cent higher than in June 2009 and were unchanged from May 2010 (seasonally adjusted). The mix-adjusted average house price in the U.K. stood at £210,775 in June (not seasonally adjusted). UK house prices rose by 0.8 per cent in the quarter to June 2010 compared to an increase of 2.8 per cent in the March quarter (seasonally adjusted).

THE ECONOMIC MONITOR - U.K.
NEXT TRADING DAY NEXT TRADING DAY (contd...)
Hightex will announce its interim results. Analysts expect the company to declare full year profit of £0.438 per share, slightly up from £0.175 per share in the previous year. Capital expenditure is expected to be at £0.26 million, while revenue is expected to rise to £25.91 million, as compared to £17.75 million in the previous year. Hilton Food to declare semiannual results at a pre-tax profit of £12.20 per share, up from £11.53 per share for the same period a year ago. Company’s full year profit is expected to rise to £21.375 per share, up from £18.733 per share a year ago. Full year revenue is expected to rise to £868.6 million, from £793.07 million, while net debt is expected to fall slightly to £20.52 million as compared to £23.08 million a year ago. Capital expenditure is expected at £26.3 million for the current year.

Economic events

No major economic events scheduled.

Corporate Events
Hargreaves Services is expected to declare its final results with a profit of £87.155 per share, up from £73.933 per share a year ago. Net debt and capital expenditure is also expected to rise to £80.57 million and £24.83 million respectively. However, company’s full year revenue is expected to fall to £442.13 million, from £536.06 million in the previous year. The principal activities of the Company are the provision of haulage services, waste transportation, mineral import, mining and processing, together with coke manufacture and related activities. Ashmore Group is expected to releases its full-year results while its investors will be curious to scrutinize the impact that jittery market sentiment has had on its assets under management. The company stated that assets under management had increased 7 per cent by the end of June to $35.3bn, attributed to strong net inflows of $2.9bn in a period where competitors had suffered outflows. Analysts expect that a general lack of enthusiasm for emerging-market fixed income investments may prove a hindrance on some of this momentum, but improving management fees are expected to lift profits. Rising concern over European sovereign debt may likely impact the performance fees, however, which amount to about 30 per cent of Ashmore’s revenues, but this is likely to be mitigated by its diversity of investment styles. Analysts expect company’s full year profit at £20.17 per share, up from £14.92 per share. Company’s full year revenue is expected to rise to £276.12 million as compared to £208.2 million a year ago. Capital expenditure is expected at £3 million. Town Center Securities, a real estate company is expected to declare its final results at a profit of £13.40 per share, up from £12.2 per share in the previous year. Company’s full year revenue is expected to show slight fall to £22.15 million as compared to £22.2 million a year ago. Net debt is expected to fall from £174.9 million in the previous year to £4 million in the current year. EMIS Group will announce its yearly results. Company’s full year revenue is expected at £58.6 million, while its profit is expected at £18.6 per share. In August 2010, the Company acquired 78.9% interest in Rx Systems Limited. KBC Advanced Technologies, engaged in the provision of consultancy, and software to the hydrocarbon and energy industries worldwide is expected to declare its interim results. Analysts expect the company full year profit (pre amortization) to be at £5.967 per share and revenue at £53.9 million. Full year capital expenditure is expected at £0.55 million. Asia Digital Holdings will announce its interim results on 14 September, 2010. Company’s full year profit and revenue is expected to be at £0.02 per share and £24.88 million respectively. CBG Group is expected to announce its interim results, the yearly profit of the company is estimated at £6.8 per share, up from £4.6 per share a year ago. Company’s full year revenue is expected to rise slightly to £9 million, from £8.9 million in the previous year. Cello Group to declare its interim results, its full year revenue is estimated at £61.85 million, slightly up from £61 million a year ago. Company’s full year profit is expected at £7.5 per share as compared to £6.7 per share a year ago. Net debt is expected to fall to £8.8 million. Globo is expected to state its interim results; the full year profit will be at £3.362 per share, up from £1.7 per share a year ago. The full year revenue is expected to jump to £24.87 million from £18.75 million in the previous year. Net debt is expected to fall to £4.95 million.

CORPORATE RESULTS
DATE - 14/September/2010
COMPANY NAME Surgical Innovations Group Town Centre Securities Debenhams KBC Advanced Technologies Asia Digital Holdings Deltex Medical Group Dods (Group) Cello Group Energetix Group Ashmore Group Hilton Food Group EVENT Interim 2010 Preliminary 2010 Full Year Trading Update Interim 2010 Interim 2010 Interim 2010 Interim 2010 DODS Earnings Release Interim 2010 Preliminary 2010 Interim 2010

ECONOMIC CALENDAR
DATE TUE 09/14 LST 1400 1400 1400 1400 1400 1400 WED 09/15 1400 14:00 1400 THU 09/16 1400 1400 1530 INDICATOR CPI mm CPI yy RPI mm RPI yy RPI - X (retail prices) mm RPIX yy Avg wk earnings 3mth yy Claimant count unem chng ILO unemployment rate Retail sales mm Retails sales yy CBI trends F’CAST 0.3% 2.9% 0.3% 4.6% 0.3% 4.6% 1.7% -3.0k 7.8% 0.3% 2% -13 PRIOR -0.2 % 3.10 % -0.2 % 4.8% -0.3 % 4.80 % 1.3% -3.8k 7.8% 1.1% 1.3% -14

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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