London Declines on Lloyds, Rolls Royce

Ivaylo
23 Feb, 2007
New York City

Weakness in the banking sector dragged the FTSE lower on Friday as results from Lloyds TSB failed to impress investors. Lloyds fell despite posting another strong performance in 2006. Firmer metal prices sent mining companies higher, while oil shares gained due to the crude price rising above $61 a barrel. By mid-day, the FTSE 100 had recovered some of its poise and was trading 10 points lower at 6370.2.

[R]9:30AM FTSE 100 edges lower as Lloyds TSB and Rolls Royce drag stocks down.[/R]
The UK market was lower on Friday. By mid-day, the FTSE 100 had recovered some of its poise and was trading 10 points lower at 6370.2.

Advancers

Mining companies gained, following higher metals prices on commodities markets. Xstrata was 2.2% higher, Anglo American rose 1.3% and Rio Tinto gained 1.1%.

Oil stocks also advanced as the crude price breached $61 a barrel on a continued threat of conflict with Iran over its nuclear ambitions. BP rose 1.7% and Royal Dutch Shell was 0.6% higher.

Advertising company WPP added 1.3% as it announced its annual profits and revenues topped forecasts. Earnings before interest, taxation, depreciation and amortisation came in at just over 1 billion pounds for the first time.

Drax Group, the power generator, rose 2.6% on private equity bid talk, while Tate & Lyle added 0.1% as reports circulate it could be close to a deal to sell its European starch division.

Decliners

Lloyds TSB declined despite posting another strong performance in 2006. It saw growth in all its divisions and said it envisaged double-digit profit growth in the future. Profit before tax increased 11% to 4.24 billion pounds on interest and similar income that rose to 14.3 billion pounds from 12.5 billion pounds last year. Lloyds insurer and re-insurer Advent Capital dipped although it swung back into profit for the full year. Shares were 1.6% lower.

Shares in Rolls-Royce fell after broker UBS cut its recommendation on the stock to reduce from neutral. The broker cited concern about increased competition from rival Pratt & Whitney.

[R]8:30AM Asian markets ended mostly higher on Friday with Japan up, HK down.[/R]
Asian markets finished mostly higher on Friday. Japanese Nikkei Index finished 0.4% higher at 18,188. Shares closed higher on buying on the increase in commodity prices, although Sanyo Electric plummeted 21% on a report that it is being probed for grossly misrepresenting losses in its past earnings results. Higher prices for base commodities supported trading house Mitsubishi Corp. to end 3% up. Utility stocks advanced after a recent sell-off in the sector began to make their dividend yields look more reasonable. Kansai Electric Power jumped 2.3%.

Bucking the uptrend, the Hong Kong Hang Seng Index closed 0.5% lower at 20,712. Profit-taking weighed on stocks after recent increases, but Huiyuan Juice rallied 68% on its debut. Large-cap HSBC declined for a fourth day, down 0.4% despite the company saying the head of its North American operations Bobby Mehta has stepped down.

South Korean Kospi Index advanced 0.3% to 1,470. Gains were led by brokerages and builders. Brokerage stocks advanced on increasing trading volume and expectation of annual dividend payouts, which are due to be paid starting March. Samsung Securities gained 4.4% and Woori Investment & Securities added 3.9%.

Australian S&P/ASX 200 increased 0.3% to close at 6,036. Takeover talks sent the market to another record high, while upbeat profits from leading companies also helped demand. Coles soared 8.6%. Other large-caps in demand included QBE Insurance, which advanced 3%. Bolnisi Gold surged 6.5% on recent gains in gold prices and other gold stocks. Markets in China and Taiwan were closed for the Lunar New Year holiday.

[R]6:30AM Europe was flat on Friday on weakness in banking stocks.[/R]
European markets were trading flat on Friday. By mid-morning, Frankfurt Xetra Dax added 0.1% to 6,979.43, the CAC 40 in Paris fell 0.1% to 5,699.86 and London FTSE 100 shed 0.2% to 6,365.9.

Advancers

Alcatel-Lucent, telecommunications equipment group, jumped 2.1% after a US court ruled in its favour against software company Microsoft over an MP3 patent infringement. Microsoft was ordered to pay Alcatel-Lucent $1.52 billion in damages. Deutsche Börse was in favor after Atticus Capital, the New York-based hedge fund, raised its stake in the German stock exchange operator from 7% to 11.7% and encouraged the company to spin off or sell its Clearstream division. Its shares gained 1.1%.

Oil groups advanced after crude prices rose above $61 a barrel on the New York Mercantile Exchange. Statoil, the Norwegian group, was up 1.6 %, while Neste Oil, which was raised from sell to neutral by Goldman Sachs, gained 1.4%.

Fresenius Medical Care, the dialysis provider, also gained 1.7% after its stronger-than-expected results, released in the previous session, prompted Goldman Sachs to raise its price target.

Decliners

Financial stocks suffered intense profit taking after some strong results in recent sessions. Greek EFG Eurobank fell 1.5% after Deutsche Bank said it was placing 7.5 million shares, or 2% of the share capital, at no lower than 25 euro a share. Lafarge, the largest cement group in the world, gave up earlier gains as investors took profits after the company reported a 25% rise in full-year net profit and issued an upbeat outlook statement. The shares slipped 0.2%.

Oil and gold

Oil trading was slow Friday as the market adjusted to a surprising drop in U.S. gasoline and heating oil inventories. Light, sweet crude for April delivery edged just 1 cent higher to $60.96 in light electronic trading on the New York Mercantile Exchange. Gold opened Friday at a bid price of $675.70 a troy ounce, down from $677.20 late Thursday.

Currencies

The dollar was trading at 121.46 yen Friday, down from 121.60 yen late Thursday in New York. The euro slipped against the dollar to $1.3124 from $1.3125.

[R]5:00AM Corn rallies to ten-year high Thursday, gold declines.[/R]
March corn settled 8.25 cents higher at $4.3450 per bushel, and May corn jumped 8.50 cents to $4.4750. Soybean futures climbed to new contract highs but pared gains amid late profit-taking. March soybeans closed up 2.50 cents at $7.8375, and May soybeans ended 2.50 cents higher at $8.0050. The March copper contract advanced 11.15 cents to settle at $2.7660 per pound. April gold declined $1 to $683 a troy ounce, while March silver also finished 2.3 cents lower at $14.25 an ounce. March palladium peaked at $351.80, its strongest level since Jan. 29, before ending up $6.55 at $350.70 an ounce. April platinum settled down $3.20 at $1,230 an ounce.

The front-month April crude oil contract closed up 88 cents at $60.95 a barrel. March heating oil settled up 4.34 cents at $1.7250 a gallon. March natural gas settled up 8.1 cents at $7.727 a million British thermal units.

On the New York Board of Trade, Arabica coffee futures surged to two-week highs as shorts hurried to cover in a broad-based commodity surge. The March contract closed up 3.75 cents at $1.1890 a pound, with active May up 3.70 cents at $1.2015. Futures on raw sugar in foreign ports for March gained 0.39 cent to settle at 11.10 cents a pound, with May up 0.29 cent at 10.68 cents.