London shares remain under pressure midday; miners slip back; Wall St seen flat

London shares remain under pressure midday; miners slip back; Wall St seen flat

	Published : Fri, 12 Jan 2007 14:08 By : Agencies Print this Story

LONDON (AFX) - UK blue chips remained under pressure at midday, reversing earlier gains, with a modest recovery in oil prices and a raft of positive comment broker failing to offset losses among mining stocks, while Wall Street is seen opening lower ahead of crucial economic data, dealers said.

At 12.02 am, the FTSE 100 index was down 9.5 points at 6,222.6, having hit a session high of 6,247.6, while the broader indices were mixed.

Volume was lower than average with 1.13 bln shares trading hands in 177,794 deals.

Looking ahead to Wall Street, investors are focusing on key data, including December import prices and retail sales.

Import prices are seen rising in December by 1.0 pct after rising by 0.2 pct in the prior month as the price of oil climbs again; while retail sales are seen rising 0.7 pct in December after rising 1.0 pct in the prior month, while sales excluding autos are seen rising 0.5 pct in the month

Finally, business inventories are seen rising 0.4 pct in November, matching October's gain.

According to spread bettors IG Index, the DJIA is seen opening 14 points lower at 12,501.

In London, mining issues reversed earlier gains with Antofagasta down 8 at 465, Anglo American 38 pence lighter at 2,430, Xstrata off 22 at 2,377, Rio Tinto easing 20 to 2,629 while BHP Billiton ditched 4-1/2 pence at 925-1/2.

Still with commodities, lower oil prices weighed on UK heavyweights, sending BP shares 3-1/2 pence lower to 533-1/2, Royal Dutch Shell down 8 pence to 1,707 and Cairn Energy 27 pence weaker at 1,662.

Elsewhere, housebuilders and the construction sector were still under the cosh, with investors still unnerved by yesterday's surprise interest rate increase.

Liberty International shares were the worst-hit casualty, collapsing by 33 pence to 1,301, while Persimmon shed 27 pence at 1,430; with Hammerson down 18 pence at 1,486, Hanson giving up 7-1/2 pence to 777-1/2 and Slough Estates shedding 6 pence at 766-1/2.

Increased borrowing costs also dragged down mortgage lenders Alliance & Leicester, down 13 at 1,142, and Bradford & Bingley lower by 1-3/4 at 473-3/4.

Elsewhere, British Airways failed to benefit from the weak oil prices, losing 6-1/2 pence at 551-1/2 following a report in The Times claiming the UK national carrier is facing strike action over two unrelated disputes between staff and management.

Around 11,000 members of the Transport & General Workers Union will today finish balloting on strike action after the introduction of new working practices, said the paper.

There is also unrest over the company's attempts to plug its 2.1 bln stg pension deficit. A pension deal was struck last week, but two of BA's four unions have warned that they may not recommend it to members, added the report.

Among broker changes, Scottish & Southern Energy fell 6 pence to 1,485, hit by a recommendation downgrade to 'equal weight' from 'overweight' by Morgan Stanley.

The broker also cut the utility group's target price to 1,450 pence from 1,500, citing valuation and slowing profit momentum.

And Alliance Boots shares were still limping after yesterday's mixed trading update, lagging 13-1/2 pence at 797-1/2.

But over on the bright side, an upgrade to 'hold' from 'sell' at ABN Amro propelled Drax Group shares to the top of the gainers board, adding 20 pence at 733.

ABN Amro upped the stock, but removed it from its A-list, while cutting the target price to 659 pence from 667, while separately, Morgan Stanley also lowered its price target for the energy company to 700 pence from 720.

ABN Amro said that on the basis of recent declines in UK future prices for electricity and gas, it has cut its output and achieved price assumptions for Drax.

An upgrade to 'equal-weight' from 'underweight' also pushed BAT shares higher, up 7 pence at 1,523, with an increased target price of 1,485 pence, up from 1,340 previously, mainly on valuation grounds.

AstraZeneca was also among the main gainers, up 41 pence at 2,877, after Bear Stearns lifted the stock to 'outperform' from 'peer perform' with a price target of 3,300 pence, noting that after a sell-off during the last three months triggered by the negative SAINT II drug trials, it believes AstraZeneca shares now look cheap on its estimates.

Peer Glaxo was up 10 pence at 1,374 in sympathy.

In second place among the bluechips, Intercontinental Hotels soared on speculation of a private equity bid, up 26 pence at 1,217.

The leisure firm has been the subject of bid speculation since May last year, with talk of an 'imminent' offer from Permira, Starwood Capital or a 'Middle Eastern consortium' providing regular excitement.

Elsewhere, Home Retail Group improved 8 to 417 on news that Argos, the catalogue retailer owned by the group, is close to signing a joint venture deal that will see it open stores in India, according to a report in the Telegraph.

Home Retail Group has approached a number of potential partners in India, but is now in exclusive negotiations with K Raheja, which owns department stores and hypermarkets, said the paper.

The report cited an article in trade magazine Retail Week.

The company also improved ahead of its Q3 trading update next Wednesday, which will be preceded by fellow retailer Tesco, better by 1 at 419-1/2, which issues a Christmas trading update on Tuesday. This will see the retail reporting season getting into full swing.

As such, a handful of high street favourites enjoyed gains, Marks & Spencer climbed 6 pence to 689-1/2 while Morrison was 1-1/2 pence better at 287-1/2.

Other retailing peers, including Next and DSG International also enjoyed gains, up 23 pence at 1,960 and 1-1/2 pence at 198-1/2 respectively.

Elsewhere, among the drinks sector, Diageo and SABMiller both benefited from a positive sector review by Citigroup, improved 8 at 1,000-1/2 and 7 at 1,178 respectively.

The broker said that SABMiller's emerging market exposure should continue to reward investors with its global footprint. Combined with strengths in operational management the stock offers an attractive investment. Citi maintained its 'buy' recommendation and increased its price target to 1,320 pence from 1,170.

Meanwhile, Diageo saw its target hiked to 1,040 pence from 900, yet remained a 'hold'. Citigroup suggested that the stock offers investors solid prospective growth, relatively low risk and is under pinned by share buybacks.

On second tier, Aquarius Platinum shares rallied, up 50 pence to 1,130 after Deutsche Bank upgraded the group to 'buy' from 'hold' and nearly doubled its target to 1,475 pence from 795, while raising ts earnings forecasts to reflect upgrades to its precious metal and nickel prices.

Carphone Warehouse took on 10-1/4 pence at 333 as the UK mobile phone retailer said fiscal full-year results would likely match the City's expectations after a robust performance in the all-important Christmas period.

In reaction, Merrill said that the company achieved a quality retail performance against tough trading conditions, and without the benefit of a strong exclusive product along the lines of last year's Pink Razr.

Finally, Morgan Sindall added 9 pence at 1,278 on the back of a contract win for its joint venture worth 336 mln stg in total. Morgan Sindall said this morning that its share of the UK motorway contract is worth up to 90 mln stg.

On the second line, EMI Group slumped more than 6.2 pct, down 16-1/2 pence at 24, after the music publisher announced a boardroom shake-up and cost-cutting plan as it warned its full-year profit would be below expectations, blaming a weaker than expected second half and trading over the Christmas period.

The news prompted Bridgewell Securities to cut its stance to 'underweight' from 'neutral' and to lower its 2007 EPS forecast to 10.5 pence from 14.8.

'Yet again the company has embarked on a restructuring programme, despite reassurances over the autumn that the business was strong,' it said, in a note to clients.

The news pulled HMV lower, down 2 at 139-1/4, with the stock also dented by a downgrade to are duce' from 'add' at Evolution Securities.

Meanwhile, Charter's trading update this morning failed to inspire, sending the shares to the top of the losers board, down 56-1/2 pence at 852 after the international engineering company said its trading since September has been in line with its expectations.

In response, Panmure Gordon cut its rating to 'hold' with a 1,010 price target.

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