Prudential Leads London Lower

Ivaylo
19 Oct, 2006
New York City

The FTSE 100 succumbed to weakness in the banking sector and oil stocks despite strength in pharmaceutical shares. Banks led decliners as takeover talk subsided and credit quality fears emerged. News from Prudential showed that the credit quality trends have worsened a little, so it might affect sentiment on UK banks. Pharmaceuticals were the main advancers after Swiss companies Serono and Novartis reported stronger-than-expected earnings results. By mid morning, the FTSE 100 lost 0.2%.

[R]9:30AM The FTSE 100 slips on Thursday as banks and oil stocks declined.[/R]
The FTSE 100 in London lost 0.2% to 6,136.5 by mid-morning on Thursday.

In focus

The market dipped when Prudential blamed an expected second half loss at its internet bank Egg on a 20% rise in individual voluntary arrangements in the third quarter, which Prudential said it had not anticipated when it increased its ownership of the bank a year ago.

Advancers

Pharma stocks advanced after strong figures from Novartis of Swizertland. AstraZeneca rose 1.5% and GlaxoSmithKline gained 1%. News of four acquisitions in fast growing emerging markets impressed investors in advertising group WPP. And its shares were 0.9% higher.

Reckitt Benckiser gained 1.4% after the consumer goods company was upgraded by Panmure Gordon. The mid-cap, Informa, jumped 9.85 as the business information publisher confirmed a story in that it had received an early approach from Springer Science & Business Media. Prudential was higher, up 0.9%, as its new business sales rose 11%.

Decliners

Banks led the decline. Alliance & Leicester fell 1.8% , Bradford & Bingley dropped 1.5%, Northern Rock slipped 0.9% and HSBC eased 0.8%.

Telecoms stock declined on concerns about margin pressure at Nokia. Vodafone fell 0.6%. Oil stocks were also lower despite expectations of a productionreduction from the OPEC. BP was off 1% and Royal Dutch fell 0.6%.

Imperial Tobacco dropped 0.4% after Goldman Sachs downgraded their rating on the cigarette company from buy to neutral.

[R]7:30AM Asian markets end mixed, Japan falls on chip-makers.[/R]
Asian maarkets were mostly lower on Thursday. The Nikkei 225 Stock Average shed 0.6% to 16551.36, following a 0.25% increase the previous day. Sony declined 0.4%. as it revised its guidance down, due to the fallout from its laptop battery recalls just after the market closed. Advantest dipped 4.4%, pulled down by an overnight slump on the tech-heavy Philadelphia Semiconductor Sector Index in the US. Nissan shares fell as much as 1.5% after the company said it has begun recalling more than 130,000 vehicles to repair an ignition key defect.

Hang Seng Index in Hong Kong fell 0.34% to 17986.97. The China Enterprises Index ended little changed at 7,440.32. Shares of Cathay Pacific Airways advanced 2.3%, buoyed by softening crude-oil prices.

The Kospi in South Korea ended flat at 1354.06, Taiwan shares fell 0.3% to 6995.83. The Straits Times index in Singapore bucked the trend, gaining 0.64% to 2659.37. Australia S&P/ASX 200 swung from early gains to end down 0.5%. Shares of Woodside Petroleum shed 2.6% after the company reported a 28% jump in production for the third quarter from a year earlier but warned its may struggle to meet full-year production targets.

[R]6:30AM Earnings and U.S.-inspired profit-taking lower stocks in Europe.[/R]
European markets were lower by mid-morning on Thursday. The U.K. FTSE 100 index sank 0.5% to 6,123.30, the French CAC-40 index was 0.5% lower at 5,336.49, and the German DAX Xetra 30 index declined 0.4% to 6,157.06.

Advancers

Metrovacesa, the Spanish property group led the advancers. Amid bid speculation, the shares were up 3.8%, extending a gain of 8.7% on Wednesday. The increase over the past month has been over 50%.
Shares in Atos surged 19% amid talk of a potential buyout by Blackstone. Ericsson was up 1.1%, reversing pre-open losses, as the mobile network equipment maker produced earnings that shaded analyst expectations.

Fiat, Italian car maker was up 2.6% after it hit a four and a half year high on Wednesday. Akzo Nobel bounced back, up 2.7% after taking a plunge on Wednesday when the Dutch pharmaceutical group warned of a delay to the launch of its anti-schizophrenia drug, asenapine.

Some financial stocks also faired well. Banco Popular gained of 2.1%, after its third quarter earnings just beat expectations, despite the fact that Goldman Sachs downgraded the bank to sell from neutral.

Decliners

Shares in SAP dropped 2.4% after the company reported a cautious outlook despite beating quarterly forecasts. German semiconductor company Infineon fell 1.8% as its US rival AMD noted compressed profit margins. Safran declined 1.6%, reversing a 5.7% gain on Wednesday.

The food and beverage sector were one of the biggest decliners in early trading, after Nestle shares shed 1.4% after a recent strong performance.

Oil and gold

Oil prices gained Thursday as traders awaited the outcome of a meeting of the OPEC to discuss a possible reduction in production to prop up prices. Light, sweet crude oil for November delivery rose 29 cents to $57.94 a barrel in on the NYME. Brent crude for December delivery on London ICE Futures exchange rose 34 cents to $59.92 a barrel.

Gold opened Thursday at a bid price of $588.80 a troy ounce, down from $592.80 late Wednesday.

Currencies

The euro recouped Thursday against the U.S. dollar ahead of new U.S. economic data that could offer more direction. The euro bought $1.2555 in morning European trading, up from $1.2533 in New York late Wednesday. The British pound rose to $1.8719 from $1.8675. The dollar declined to 118.53 Japanese yen from 118.92 yen.

[R]5:00AM Gold and silver were little changed as traders awaited OPEC decision.[/R]
December gold declined 90 cents at $592.60 a troy ounce on the NYME, while December silver added 4 cents to $11.82. December palladium recorded the biggest gain of the precious metals on a relative basis, advancing $12.90 at $332.50 an ounce. The contract peaked at $337.40, its strongest level since Sept. 11. January platinum gained $10.10 to end at $1,093.10 an ounce. The most-active December copper contract was unchanged at $3.4960 per pound.

November light, sweet crude oil slipped $1.28 to close at $57.65 a barrel. November heating oil settled down 3.79 cents at $1.6959 a gallon. November unleaded gasoline fell 0.7 cent to $1.4703 a gallon. November natural gas rose 36.5 cents to end at $6.807 a million British thermal units.

On the New York Board of Trade, December Arabica coffee closed 0.20 cent lower at $1.0225 a pound, with March down 0.15 cent at $1.0625. Futures on raw sugar in foreign ports for March sank 0.99 cent to finish at 11.59 cents a pound