22 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 Forecasts on Economic Indicators Important Events Scheduled on 23 September

The FTSE 100 ended down 24.28 points or 0.4 percent at 5,551.91, after falling 0.5 percent on Tuesday. By 1002 GMT, sterling traded 0.4 percent higher on the day at $1.5670. December gilt futures hit a two-week high of 124.24. By 1152 GMT, the contract was 145 ticks higher at 124.03, outperforming the December Bund contract by 35 ticks. ICE Brent for November fell 80 cents to $77.62. Spot gold was bid at $1,293.75 an ounce at 1357 GMT.

Economic Events

Society of Motor Manufacturers and Traders (SMMT) will release the data on U.K. monthly automotive production for August British Banking Association will release the statistical report on British Banking

Corporate Events

STOCK INDICES
INDEX FTSE 100* FTSE 250* FTSE 350* FTSE Tech Mark 100* FTSE AIM 100* LAST 5551.91 10448.33 2929.05 1923.43 3550.57 2865.02 1067.53 6208.33 3735.05 2514.44 CHNG -24.28 -96.74 -14.70 -19.37 11.86 -14.30 -14.94 -67.65 -49.35 -38.27 % CHNG -0.44 -0.92 -0.50 -1.00 0.34 -0.50 -1.38 -1.08 -1.30 -1.50

Songbird Estates, Inditherm, Westminster Group interim results Group NBT final results

Breaking News

Imperial cigarette volumes in line with expectations Xstrata secures credit facility, plans to raise funds House of Fraser sales growth soars Deutsche Bahn to run new ICE3 in London First Group appoints O'Toole as next CEO Severstal to list its gold unit in London - source BoE votes 8-1 to halt rates CBI predicts U.K. 2011 GDP to fall Bonds soar on speculation Clegg urges Democrat Party for support Britons need to save for retirement: Aviva

FTSE All Share* FTSE Eurofirst 300* DAX* CAC 40* Stoxx Europe 50 * CLOSING VALUES

CURRENCIES
INDEX Euro (EUR/USD) LAST 1.3378 1.5618 84.37 PRIOR 1.3235 1.5616 85.10

U.K. Pound (GBP/USD) Japanese Yen (USD/JPY)

All prices are at 11:29 AM EDT

FUTURES
LAST Crude Oil Natural Gas Gold, Dec. Copper (¢), Dec Wheat (¢), Dec. 74.48 4.093 1291.50 356.90 724.25 CHANGE -0.49 0.026 17.20 8.80 6.25

All prices are at 11:19 AM EDT

THE ECONOMIC MONITOR - U.K.
STOCK RECOMMENDATIONS BY BROKERAGE HOUSES
BROKERAGE/ Goldman Sachs Magnit Premier Oil Shire Jefferies Admiral Group Altium Burst Media Wilmington Deutsche Bank Carillion Investec Carrs Milling Raises target price to 670p from 590p Buy A. Shares in Imperial Tobacco were higher after the cigarette maker said it is on track to meet forecasts. Miners were also strong, with gold miners African Barrick and Randgold Resources setting the pace after the precious metal hit another record. But index was lower overall, with insurer Aviva at the bottom of the pile. FTSE 100 down 31 at 5,545. Miner Xstrata was now the best performer in the FTSE 100, helped by stronger commodity prices on the back of the weaker U.S. dollar. The only non-miner among the top 10 gainers was Imperial Tobacco. The Lambert & Butler maker said it is still on track to meet forecasts for the year, though growth in tobacco revenues has slowed slightly over the last six months. Pumps maker Weir fell, just a couple of days after it made it into the FTSE 100. RBS has changed its stance on the company’s shares from “buy” to “hold”, even though it has raised its target price from 1412p to 1567p. FTSE 100 down 20 at 5,556. Index was in positive territory now after a good start on Wall Street. Miners in demand as metal prices advance, moving in the opposite direction to the dollar. Miner Xstrata was the top riser. Raises price target to 420p from 393p -Cuts target price to 5p from 6p Raises target price to 179p from 162p Hold Buy Cuts to hold from buy Hold Cuts to neutral from buy Cuts to neutral from buy Adds to conviction buy list Neutral Neutral -ACTIONS RATING

MARKET PERFORMANCE

FTSE 100

Evolution Securities Gulf Keystone Robert Wiseman UBS Wellstream Xchanging Barclays J Sainsbury Tesco Raises to equal weight from Raises to overweight from equal weight Equal weight Overweight C. Raises price target to 800p from 500p Cut price target to 145p from 185p Neutral Neutral Cuts to neutral from add Cuts price target to 350p from 265p Neutral Neutral B.

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

The U.K. indexes declined on the growing speculation that the Bank of England may be forced to widen bond purchase and increase the asset purchase program as worries over the economic recovery in the U.S. and lack of action taken by the Federal Reserve hit sentiment, offsetting gains in miners. Banks, which tend to be sensitive to even slight shifts in risk appetite, were the biggest drag on the index, with Lloyds Banking Group off 1.4 percent and HSBC 1.0 percent weaker. The Confederation of British Industry lifted growth outlook for 2010. Mining companies rallied as copper and precious metals edged higher. The FTSE 100 ended down 24.28 points or 0.4 percent at 5,551.91, after falling 0.5 percent on Tuesday. Sterling hit its weakest level against a currency basket in two months, dragged lower after it hit a near four-month trough against the euro. Tradeweighted sterling fell as low as 80.5, its lowest since late July, according to data kept by the Bank of England. In earlier trade, the euro had rallied to its highest level versus the pound since late May. While sterling rose against the dollar as the U.S. currency faced broad selling pressure after the U.S. Federal Reserve suggested more monetary easing may be in the pipeline. By 1002 GMT, sterling traded 0.4 percent higher on the day at $1.5670, having climbed as high as $1.5716. Gilts jumped, pushing yields back towards last month's record lows, after Bank of England minutes showed a greater willingness to consider further monetary stimulus. The minutes had resonance; coming hours after the Federal Reserve expressed concerns about slow growth and low inflation and said it was ready to provide more support to the U.S. economy. The yield on 10-year gilts fell 16 basis points to a two-week low of 2.95 percent, moving within sight of Augusts' all-time low of 2.79 percent and on track for its biggest one-day slide in more than a year. December gilt futures hit a two-week high of 124.24, vaulting through key chart resistance at 124.19, the 62 percent retracement of the Aug-Sept sell-off. By 1152 GMT, the contract was 145 ticks higher at 124.03, outperforming the December Bund contract by 35 ticks. In the cash market, the gap between 10-year gilt and Bund yields narrowed to its lowest since the start of this year at 61 basis points. Oil fell below $75 a barrel, reversing earlier gains after government inventory data showed a rise in crude and oil product stocks. Still sluggish oil use in the United States was highlighted by Energy Information Agency (EIA) data showing a rise in oil stocks, despite an outage on a pipeline carrying Canadian crude to the U.S. These figures confirmed industry data from the American Petroleum Institute (API) which painted a similar picture, leading oil prices lower on Tuesday. U.S. crude for November, the front-month contract after October went off the board on Tuesday, fell 57 cents to $74.40 by 1514 GMT, well off an earlier high of $76.00. ICE Brent for November fell 80 cents to $77.62. Gold hit record highs for a fifth consecutive session after the Federal Reserve signaled it stood ready to inject fresh cash into the economy, knocking the dollar and whetting investor appetite for bullion. Spot gold hit a new record of $1,296.10 an ounce and was bid at $1,293.75 an ounce at 1357 GMT, showing a 0.6 percent gain on the day. U.S. gold futures rose $21.00 an ounce to $1,295.30, having hit a contract high at $1,298.00.

THE ECONOMIC MONITOR - U.K.
COMPANY NEWS ECONOMY NEWS

Imperial cigarette volumes in line with expectations
Imperial Tobacco announced that its cigarette volume were in line with its own expectation as it stood at 4.3 percent fall seen at its 9month as the company’s cigarette volumes fell 4.3 percent in July. The world's No.4 cigarette groups said that its global key cigarette brands sustained to perform well with Davidoff and West volumes growing and Gauloises Blondes' performance refining in the second half. The company will report its annual results for the year to end-September on Nov 2, 2010.

BoE votes 8-1 to halt rates
The Bank of England Monetary Policy Committee (MPC) voted 8-1 in favour of keeping the BoE's key lending rate at 0.50 percent after their meeting on September 8-9, freezing its borrowing costs at an alltime low for an 18th month running. For the continuous fourth months, Andrew Sentance voted to support a quarter-point hike to lift borrowing costs to 0.75 percent. He stated that the recovery in domestic demand over the past year indicates that the recovery will have adequate momentum to endure the planned fiscal tightening.

Xstrata secures credit facility, plans to raise funds
Xstrata, Anglo-Swiss miner secured a $4 billion revolving credit facility, which is expected to replace its existing $5.5 billion arrangement that was outstanding to mature October 2011. The new facility which was launched at $3 billion, increased significantly after being oversubscribed and will equally split into a three and five year tranche. The company is planning to raise over $5 billion into new mines and to focus on organic growth rather than acquisitions after, its first-half earnings per share on higher metals prices doubled.

CBI predicts U.K. 2011 GDP to fall
The U.K. economy growth forecasted for next year is predicted to be slower as the biggest public spending squeeze since World War II is awaited, the Confederation of British Industry said. The U.K.’s biggest business lobby also said that the Bank of England won’t raise interest rates until the second quarter. The group expects the GDP to rise next year by 2 percent, down from a forecast in June of 2.5 percent. It also raised its 2010 growth forecast to 1.6 percent from 1.3 percent.

Bonds soar on speculation
The news of Federal Reserve prepared to do more to support the economy, soared U.K. government bonds, speculating that the Bank of England will ease monetary policy. Ten-year gilt yields dropped the most in more than a year after the Fed signaled it may restart purchases of government debt with new money, a policy known as quantitative easing.

House of Fraser sales growth soars
House of Fraser, British department store group reported a 22 percent rise in first-half core earnings on attributed to growing brand presence and increasing online sales. The company’s earnings before interest, tax, depreciation and amortization (EBITDA) stood at 13 million pounds ($20.4 million) in the 26 weeks, while sales at stores open at least a year jumped 8.4 percent, and were up 10 percent in the first seven weeks of the second half. The company also said that it was all set to reduce its net debt/EBITDA ratio towards 2 times by January 2011.

Clegg urges Democrat Party for support
Nick Clegg, British Deputy Prime Minister insisted his Liberal Democrat Party this week to stand along with the coalition government with the Conservatives for a full five years. Lib Dems, the junior partner in a Conservative-led coalition will likely be pushed back to the margins of British politics if they don’t put their point strongly. "Expectations of a massive punch-up here were overblown," said Andrew Hawkins of pollsters ComRes.

Deutsche Bahn to run new ICE3 in London
Deutsche Bahn is planning to run new ICE3 trains through the tunnel by 2013 in competition with Eurostar Group in London by 2013, as it signs deal with High Speed 1 Ltd. This will connect London with the Channel Tunnel, paving the way for direct rail services between the U.K. and Germany. The company is also looking for authorization from the French and British governments to run passenger trains through the 30 -mile subsea link operated by Groupe Eurotunnel.

CORPORATE RESULTS
DATE - 23/September/2010
COMPANY NAME EVENT Interim 2010 Interim 2010 Interim 2010 Interim 2010 Interim 2010 Interim 2010 Interim 2010 Final Results Final Results Trading Announcement Trading Announcement Trading Announcement

First Group appoints O'Toole as next CEO
Chief Executive Moir Lockhead, of FirstGroup would retire next March after 21 years at the helm, as Tim O'Toole will replace him later this year, the company said. Lockhead had led the group to transform into one of Europe's largest bus and rail operators from an employee and management buyout of Grampian Regional Transport in 1989. O'Toole, who was Managing Director of London Underground earlier had joined FirstGroup's board last year and has held the roles of Chief Operating Officer and Deputy Chief Executive.

GoIndustry-DoveBid Inditherm S&U Scisys Songbird Estates Treveria Westminster Group Gleeson (M J) Group Group NBT Luminar Group Mitchells & Butlers United Utilities Group

Severstal to list its gold unit in London - source
Severstal , Russia's largest steel producer looks to list its gold unit in London in the fourth-quarter as this would help fund the unit's future expansion and take the business at $4 billion (2.6 billion pound) plus, a person familiar with the matter said. He also said that the listing is being handled by sole sponsor Morgan Stanley, joined by joint global cocoordinator Credit Suisse, and joint bookrunner Troika Dialog. But all

THE ECONOMIC MONITOR - U.K.
REGULATORY NEWS NEXT TRADING DAY (contd…)

Britons need to save for retirement: Aviva
According to a study by Aviva, the U.K.’s second-biggest insurer, Britons must save $16,100 a year for a safe pension. Britons, which is facing the sharpest challenge in Europe to save for retirement after the financial crisis eroded the value of funds, has to save on average 12,300 euros ($16,100) a year, more than people in any other European country, to receive 70 percent of their working income in retirement, according to the survey. Germans need to save 11,600 Euros a year to reach that level and the Irish should save 9,100 Euros, according to the research.

Corporate Events
Songbird Estates, engaged in the management of its investment in its main subsidiary, Canary Wharf Group, which specializes in integrated property development, investment and management focusing particularly on the Estate, will report interim results. The company is expected to report full year profit of £9.83 per share, up from £3.66 reported a year ago. Analysts expect the company to report a full year revenue of £414.20 million, higher from £408.70 million reported a year ago. Inditherm, engaged in designing, manufacturing and installing heating solutions using its low-voltage, carbon-based conductive polymer technology (CPT) will report interim results. The company is expected to report full year profit of £0.90 per share. Analysts expect the company to report a full year revenue of £1.50 million. Westminster Group, is engaged in designing, supplying and providing ongoing support for advanced technology security, safety, fire and defense solutions to a variety of government and related agencies, nongovernmental and blue chip commercial organizations, will declare interim results. The company is expected to post a full year profit of £2.80 per share, up from £0.81 reported a year ago. Analysts expect the company to report a full year revenue of £9.47 million higher from £7.95 million reported a year ago. Group NBT, engaged in the provision of domain name, Web hosting, brand protection and other Internet-related services will declare its final results. The company is expected to report full year profit of £23.18 per share, up from £17.465 reported a year ago. Analysts expect the company to report a full year revenue of £44.69 million higher from £41.50 million reported a year ago.

Sanofi drug fails in late-stage trial
Sanofi-Aventis, the French drugmaker which was planning to buy Genzyme to enhance its drug portfolio could suffer difficulties as the experimental medicine for limb ischemia failed in a late-stage trial. The company said that its treatment NV1FGF, which was earlier known as Temusi, could not meet its expectation in early Phase III trial designed to demonstrate superiority over placebo in preventing major amputation or death. Full report of the unsuccessful clinical trial will be presented at the American Heart Association annual meeting on Nov. 16, 2010.

Vince Cable criticises unregulated capitalism
Britain's business secretary attacked unregulated capitalism and exposed plans to assess the way companies are governed and how takeovers work, upsetting business leaders. Vince Cable said in a Liberal Democrat party's conference "Capitalism takes no prisoners and kills competition where it can. "Markets are often irrational or rigged. So I am shining a harsh light into the murky world of corporate behaviour," he added.

ECONOMIC INDICATOR WATCH
No major indicators scheduled for the release.

NEXT TRADING DAY

Economic Events
The Society of Motor Manufacturers and Traders (SMMT) will release the data on U.K. monthly automotive production for the month of Aug at 0930/0830/0430 LST/GMT/ET. The Car production was down 8.9% for the month in July but rose 41.7% year-to-date. Commercial vehicle output grew 10.7% in July and 43.2% in first seven months. Engine production fell 3.4% but was up 28.7% over the January to July period. The British Banking Association (BBA), the leading U.K. banking and financial services trade association will release the statistical report on British Banking for the month of August at 930/0830/0430 Local/ GMT/ET .The annual growth in the banks’ net mortgage lending for the month of July is 4.1%, substantially ahead of the 0.9% for the whole mortgage market in June. Subdued spending has led to reduced consumer demand for credit (particularly for personal loans) which contracted by 2.2% over the year. Personal deposits have risen 4.8% over the past year. Lending to non-financial companies has contracted by 5.2% over the past year as reduced lending in some sectors was offset by improvements elsewhere.

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