London shares outlook - higher after Fed keeps rates on hold, softens stance

London shares outlook - higher after Fed keeps rates on hold, softens stance

	Published : Thu, 22 Mar 2007 08:18 By : Agencies Print this Story

LONDON (AFX) - Leading blue chips were expected to open sharply higher this morning after US equities surged yesterday as investors reacted positively to the Fed's decision to leave US rates on hold, while the dovish tone of the accompanying statement suggested to some rates may be heading lower, dealers said.

According to IG Index, the FTSE 100 is expected to open up around 67 points higher at 6,323, having closed up 36.5 points yesterday following the UK Budget.

Last night on Wall Street, US stocks rallied sharply after an economic assessment by the Federal Reserve ignited investor hopes that the central bank has warmed to the idea of lowering short-term interest rates.

Largely thanks to yesterday's triple-digit gains, the Dow Jones industrials have surged 337 points this week, the best three-day performance for the blue chip average since November 2004.

By the close the Dow soared 159.42, or 1.30 pct, to 12,447.52, after having been flat until the Fed announcement. It was the index's biggest one-day point gain since July 24.

Broader stock indicators also posted strong gains. The Standard & Poor's 500 index jumped 24.10, or 1.71 pct, to 1,435.04, and the Nasdaq composite index advanced 47.71, or 1.98 pct, to 2,455.92.

Over in Asia, Asian markets rallied on the back of the strong showing on Wall Street with the Nikkei 225 Index closing up 256.0 points at 17,419.2, while Hong Kong's Hang Seng ended its morning session up 237.70 points at 19,754.11.

Looking at commodities, oil prices rose as the market digested news of higher-than-expected falls in US gasoline stocks.

New York's main oil futures contract, light sweet crude for delivery in May, was up 43 cents at 60.04 usd a barrel from 59.61 usd in late US trades overnight.

Back in London this morning, UK retail sales will be nervously awaited but are expected to have rebounded in February after unexpectedly falling sharply in January, rising by 0.8 pct on the month following a 1.8 pct slide the previous month.

Meanwhile, the latest industrial trends survey from the Confederation of British Industry is expected to show the UK manufacturing sector continuing to perform well during March, helped by the recovery in the euro zone economy.

On the earnings front, UK insurer Standard Life is expected to report a 27 pct increase in full-year profits later today, helped by strong sales of pension products.

Standard Life, the UK's sixth-biggest insurer, will unveil a pretax operating profit for the year to end-Dec 2006 of 503 mln stg on a European Embedded Value basis, up from 395 mln the previous year, according to a consensus of 14 analyst forecasts supplied by the company.

The former mutual will also confirm that robust sales of self-invested personal pension plans, introduced last year, helped boost profit from business written in 2006 to 229 mln stg, up from just 33 mln the previous year, according to the consensus estimates.

Analysts and investors will be focusing on any update on the number of customers surrendering their policies early.

Elsewhere, investors in Next will focus on current trading and any news on store refits and space expansion plans when the fashion retailer reports full year results today.

The Leicester-based group, which trades from over 400 UK stores, is expected to report on sales for the first seven weeks of its new year. And analysts anticipate an improvement in retail sales from the first half performance, given recent mild weather and new young fashion trends.

Next raised its profit guidance in a Jan 4 trading statement, flagging a year to Jan 27 2007 pretax profit of 463-473 mln stg, up from 449 mln last time.

Also on the agenda, Premier Oil is set to release full year results and UBS expects the company to deliver net income of 65 mln usd and operating cash flow of 264 mln usd.

It said that more significantly, however, the market will be looking for updates on the numerous high impact wells that Premier is currently drilling.

In particular it expects updates on Espinafre in Guinea Bissau which, if successful, could be worth 90p to its NAV estimate.

In other news this morning, the Wall Street Journal reports that bank regulators in the US, Britain and the Netherlands will need to determine who would oversee a combined ABN Amro Holding and Barclays.

The newspaper reported that the issue is particularly sensitive because ABN Amro has faced investigations in the US over transferring money into the US for Iran and Libya -- including a new legal complaint from former employees alleging that top management was more involved in the transactions than the bank has said.

It said that US law-enforcement officials have an ongoing money-laundering probe of ABN, according to a person familiar with the situation.

British Airways could come in for a rough ride if, as expected, the EU agrees to adopt the planned Open Skies agreement with the US sometime today.

JP Morgan sees the deal as one-sided, with Heathrow access being given to all US airlines. And it expects Delta, Northwest and Continental to enter the London airport.

It anticipates that the US entrants would put downwards pressure on business class fares, in the region of 5-10 pct.

Meanwhile the Times reports that Cadbury Schweppes is eyeing a sale of its US beverages arm to private equity firms following strong interest from groups including Kohlberg Kravis Roberts, Bain Capital and Texas Pacific Group.

The newspaper reported that Cadbury has been flooded with takeover approaches for the business since it said last week that it planned to seek a demerger after Nelson Peltz, the activist investor, had snapped up 3 pct of the company and put pressure on management to break itself up to create more value.

In other news, Standard Chartered may benefit from news that the Chinese Banking Regulator Commission said today that it will continue to open up the 5.1 trillion usd industry to foreign banks and provide a more favorable environment for them.

Shares in Pearson could get a lift after German peer Bertelsmann, Europe's largest media company, was reported in the FT to be joining forces with private equity groups, to consider a bid for college text book publisher Thomson Learning, which Thomson Corp is spinning off for a reported 5 bln usd.

Finally, further interims are scheduled from Bulgarian Property Developments

and Quadrise Fuels International, with additional finals from Acertec, Alliance Pharma, Churchill China, Dignity, EG Solutions, European Goldfields, Hardy Underwriting Group, Hikma Pharmaceutical, Medsea Estates Group, Motivcom,

Prostrakan Group, M&C Saatchi, Songbird Estates, Styles & Wood Group, Surface Technology and Tikit Group.

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