London shares down midday; Wall Street seen lower ahead of key inflation data

London shares down midday; Wall Street seen lower ahead of key inflation data

	Published : Tue, 17 Apr 2007 12:40 By : Agencies Print this Story

LONDON (Thomson Financial) - UK blue-chips were down midday with Wall Street expected to open lower as US investors cautiously await the government's consumer inflation data release following the UK's own higher-than-expected inflation reading, dealers said.

At 12.12 pm, the FTSE 100 index was down 49.2 points at 6,467.0 while the broader indices followed suit.

Volume was average, with 1.13 bln shares changing hands in 215,542 deals.

Looking ahead to the US, stocks point towards a lower open, with spread bettors IG Index forecasting the Dow Jones to open 36 points down after jumping 108.40 to 12,720.50 yesterday.

Investors cautiously await a raft of economic data, with retail inflation in March seen rising 0.7 pct, as measured by the Labor Department's Consumer Price Index. Excluding volatile food and energy prices, 'core retail inflation' is seen rising 0.2 pct in March.

US housing starts are seen falling to 1.485 mln units in March, following February's 1.525 mln units. Building permits, which are a gauge of future starts, are also seen continuing to fall.

Also, US investors will be watching for first-quarter results from various companies, notably technology heavyweights Intel and International Business Machines.

In London shares were hit in morning trade after the Office for National Statistics said the annual CPI inflation rate rose to 3.1 pct from 2.8 pct in February and against analysts' forecast of 2.9 pct.

Meanwhile among the top London fallers, Hammerson shares fell foul to a Citigroup downgrade to 'hold' from 'buy', sending the shares 56 pence lower at 1,598, as the broker said the property development firm's shares are fully valued.

Retail group Marks & Spencer saw their shares slip 11 to 719 after HSBC initiated coverage with a 'neutral' stance and a 752 pence target price.

In a research note published this morning, HSBC said Marks & Spencer is nearing the end of a very successful range overhaul, and is now shifting the onus on growth to less certain areas, including new categories.

Among those reporting results, Experian Group was 16-1/2 lower at 585-1/2 after the company's second-half trading update failed to meet consensus expectations, with Merrill Lynch noting the UK performance disappointed slightly.

The group said total sales from continuing operations in the six months to March 31 2007 were 16 pct up year-on-year, but Merrill said organic revenue growth was 8 pct in the second half versus the broker's forecast of 9 pct, and the UK's organic growth was lower than expected.

Elsewhere, the mining sector weighed amid profit-taking as base metal prices slipped off recent highs, with BHP Billiton down 15 at 1,165, Xstrata 35 lower at 2,757 and Rio Tinto 43 weaker at 3,137, despite the latter being upgraded to 'overweight' at HSBC with an increased price target of 3,650 pence from 3,000.

On the upside, only a handful of stocks managed gains, with Tesco among them following a forecast-busting set of full-year results and news of plans to return 3 bln stg to shareholders this year.

The supermarket giant posted underlying pretax profit for the year to February 24 up 13.2 pct to 2.55 bln stg against a consensus forecast of 2.49 bln stg.

Merrill Lynch responded by repeating its 'buy' stance and target price of 480 pence, while Cazenove stuck with its 'outperform' recommendation and called today's 'another good set of results'.

Tesco shares added 4-1/2 at 460-1/2.

International Power was a top performer, up 3-1/4 at 417-1/4, amid vague talk that the UK utility is being eyed by French peer Suez.

International Power has long been mooted as a takeover target, but speculation that it could fall victim to a bid has intensified amid ongoing consolidation moves in its European peers.

Suez, meanwhile, has already agreed to merge with state-owned Gaz de France, but the completion of the deal will largely depend on the outcome of the French presidential elections.

Turning to mid-caps, Debenhams shares slumped over 12 pct, down 21 at 153 after warning that it now expects profit for its year to end-August 2007 to be below current market expectations.

The group, which rejoined the stock market last May after two-and-a-half years in private hands, said its sales from March 4 (the beginning of its second half) to April 15 increased 2.9 pct versus the prior year, but fell 6.9 pct on a like-for-like basis, which strips out the impact of new and closed space.

In response, Citigroup reiterated its 'hold' advice and said as a result it expects consensus August 2007 pretax profit estimates to be cut by no less than 18 pct to around 150 mln stg.

Sticking with the retailers, Burberry Group eased 8-1/2 at 700-1/2 after its second-half results landed in line with estimates, but Merrill Lynch reiterated its 'neutral' stance on valuation grounds, saying margins are unlikely to rise significantly in the near term, impacted by currencies.

In other earnings news, housebuilder Bellway fell back 57 at 1,619 after it unveiled pretax profits for the first half of the year up by 14.8 pct to 100.8 mln stg.

In response, Dresdner Kleinwort reiterated its 'sell' recommendation and noted that, while the results were slightly above expectations, the company has a challenging second half ahead.

Mouchel Parkman was also among the mid-cap casualties, 18 weaker at 450-1/2 on profit taking after it reported pretax profits for the first half of the year up 17 pct to 13.6 mln stg, up from 11.6 mln stg.

Altium reacted by maintaining its 'hold' stance and saying Mouchel's rating is beginning to look stretched in the absence of organic upgrades.

Elsewhere, EMI Group dipped 6-1/4 at 213-3/4 ahead of tomorrow's trading update and after the Financial Times reported today that the group's share of the UK record album market has fallen below 6 pct.

In a note to clients, Bear Stearns said that following the group's second profit warning since the start of the year -- issued in February -- it expects the recorded music business will report sales falling 17 pct year-on-year, and pretax profit before exceptionals of 40 mln stg.

On the upside, Venture Production jumped 25-1/2 at 722 after it announced it was paying an inaugural dividend of 50 pence a share, including a 40 pence special pay-out, as it reported a more than doubling of annual profits, thanks to strong oil prices and volumes.

Net profit for 2006 rose 162 pct to 81.6 mln stg, broadly in line with the consensus forecast of 81.9 mln stg. Pretax profit grew 217 pct to 176.7 mln stg, while revenue increased 120 pct to 360.3 mln stg.

Also on the upside, upbeat broker comment helped Biffa and Shanks Group, both up as Goldman Sachs issued bullish commentary on the pair and raised the possibility of them being involved in sector consolidation.

Shanks added 9-3/4 at 261-1/2 and Biffa was 15-1/4 higher at 334-1/4.

tf.TFN-Europe_newsdesk@thomson.com

jb1/bsd

The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.