London shares flat midday, DJIA seen flat ahead of Tuesday's rate decision

London shares flat midday, DJIA seen flat ahead of Tuesday's rate decision

	Published : Mon, 29 Jan 2007 13:21 By : Agencies Print this Story

LONDON (AFX) - Leading shares were little changed by midday with investors uncertain to the direction of the market's next move following last weeks bout of profit taking, with US futures pointing to a mixed open on Wall Street ahead tomorrow's interest rate decision, dealers said.

At 12.00 pm, the FTSE 100 index was up 4.7 points at 6,234.2 having fluctuated within a 30 point range during the morning session. The broader indices were mixed.

Volume was low, with 884 mln shares changing hands in 143,190 deals.

Looking ahead to Wall Street, US shares are expected to open mixed ahead of earnings reports from Verizon Communications and Schering-Plough today, and tomorrow's FOMC interest rate decision.

The Federal Reserve is expected to keep its federal funds rate target at 5.25 pct, where it has been since June. Analysts expect the FOMC statement will be examined closely for clues as to when the Fed might change its current 'mildly restrictive' wording.

According to IG Index the DJIA is expected to open around 5 points lower at 12,482.

Back in the UK, Prudential ticked higher after the UK's second-biggest life insurer, said it has agreed to sell Egg, its loss-making online banking business, to US financial services giant Citigroup Inc for 575 mln stg cash

It also reported full-year new business sales rose 16 pct to 2.47 bln stg annual premium equivalent (APE). The result was marginally ahead of a consensus analyst forecast of 2.404 bln stg.

UK new business sales rose only 1 pct to 900 mln stg, compared with

analysts' forecasts of 862 mln stg. The Pru's shares gained 9 to 711-1/2.

Elsewhere, upbeat broker comment lifted Yell to the top of the FTSE 100 risers by lunch time, up 10 pence to 609.

Merrill Lynch upgraded the directories group to 'buy' from 'neutral' with a raised target of 670 pence on valuation.

British Airways recovered following last week's wobble, up 7-1/2 pence to 535, helped by a bullish note on the airline sector by UBS.

The broker lifted its target price on BA to 650 pence, from 600, and repeated its 'buy' recommendation, citing the recent slide in oil prices. Midcap peer EasyJet also benefited, up 10 pence to 634.

WPP shares were also firmer, with positive broker comment spurring gains of 9 pence to 745-1/2. Merrill Lynch upgraded its price target on the advertising group to 810 pence, from 690p, and reiterated its 'buy' advice, noting WPP should be a core holding for media investors, providing relatively safe EPS growth and a good hedge on fragmentation in the media sector.

Furthermore, it added concerns over full-year organic growth may impact the stock early in 2007, but speculation over 2008 growth should be supportive to performance later in the year.

On the downside, telecom stocks figured heavily after a profit warning from Deutsche Telekom over the weekend.

The German telecommunications giant cut its 2007 adjusted EBITDA forecast to 19 bln eur from a previous 19.7-20.2 bln eur, due to strong domestic competition and currency fluctuations.

Merrill Lynch said 'compared to consensus a year ago, this represents a total reduction in underlying EBITDA of 13 pct for 2007'.

BT Group shed 2-3/4 pence to 301-3/4 in reaction, Vodafone lost 1-1/2 pence to 148, and Cable & Wireless eased 0-3/4 pence to 166.

Dealers market utility stocks lower as ongoing concerns about gas prices hit sentiment.

Drax continued to be the main casualty, slipping back 17 pence at 682-1/2.

Scottish & Southern Energy shed 13 pence to 1,506, while International Power gave up 2-1/2 pence to 362-1/2.

Spanish press reports suggested Gas Natural is set to withdraw from the bidding war for the Spanish utility Endesa also hit consolidation hopes in the sector.

Meanwhile, SABmiller was also weaker, down 15 pence to 1,167, after Goldman Sachs downgraded its recommendation on the drinks giant to 'neutral', from 'buy', and lowered its target to 1,220 pence, from 1,240.

The broker told clients it has removed the brewer from its 'Pan-Europe Buy List' as its historical multiple discount relative to peers InBev and Heineken has now evaporated.

Weekend press reports also weighed down property stocks after the Sunday Express reported house prices might have been slowing even before January's interest-rate hike, figures from Bank of England and Nationwide Building Society are expected to reveal this week.

This saw shares in Persimmon give up 4 pence to 1,410, while Land Securities lost 7 pence to 2,182, and Liberty International shed 3 pence to 1,291.

Mid-cap peers also registered losses, with Shaftesbury down 17-1/2 pence at 747-1.2, and Bellway shedding 24 pence to 1,430.

AstraZeneca shares were under the cosh, down 21 pence at 2,783, ahead of its full year numbers due out on Thursday, while peer GlaxoSmithKline gave up 6 pence to 1,381 ahead of its full year figures next week and on concerns its antidepressant Seroxat is not selling as well as hoped.

On the second line, FKI rallied 5 pence to 113 following an analyst tip in Barrons.

Elsewhere, Mitchells & Butlers ticked 7 higher to 686-3/4 with Numis increasing its price target to 671 pence from 630 and reiterating its 'hold' rating.

Numis pointed out that there is a theory on Mitchells & Butlers that Robert Tchenguiz may use his holding to pressure the group into converting to Real Estate Investment Trust (REIT) status.

Finally on the downside, CSR eased 17-1/2 to 680-1/2 amid concerns of

increased competition after US group Atheros Communications Inc announced it

will enter the bluetooth market.

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