Authorised and regulated by the Financial Services Authority

28th August – Low volumes but plenty of volatility

After yesterday’s solid buying, there has been a good follow through so far in London and by mid-morning the FTSE 100 index is up 60 points. Gains have been spread around various sectors today with Persimmon top of the pile once again on hopes the worst of the housing crisis is over, followed by Taylor Wimpey.

Our view is that these are very dangerous rallies to chase so we’ll stand aside for now. Banks are also recovering some of this week's losses with Lloyds TSB and HBOS the best performers here, but again one has to be very cautious given the potential for another big round of writeoffs..

It was a busy morning for results, and WPP edged down despite a strong first half, which was above most estimates. It said that prospects for 2009 remained less certain due to the financial crisis and commodity price increases, and overall it’s hard to make a short term call here.

Rentokil produced another poor set of results with a 55% fall in H1 underlying profit to £39.3m. It said it had made a solid start with strong improvement in customer service over the past four months, but it is on a three to five-year journey to profit recovery, so there seems little reason to nibble away here.

Arriva saw a surge in interim profits, despite the sharp increase in fuel costs. Pre-tax profit in the first half of 2008 rose to £66.3m from £47.3m a year earlier on revenue that grew from £909.2m to £1,443.4m. This was an undeniably impressive set of figures and the shares remain a clear buy here.

26th August – London follows Wall Street down on financial concerns

It was a busy morning for news but the FTSE 100 index remained well down mid-morning following the sharp reversal on Wall Street. Mining stocks were amongst the fallers as commodity prices fell back again, but most of the focus was on Rio’s figures this morning. The group saw record underlying earnings of $5,47bn, up 55%, and record net earnings of $6.91bn, up 113%, in the half year to June. These figures were well ahead of market forecasts and boosted by the 2007 acquisition of Alcan and strong metals demand for from China, so the 3% fall so far looks churlish to say the elast and we are buyers here.

In the oil sector, Cairn Energy moved from an operating loss of $18.7m to a profit of $44.2m in the half-year to June as its average price per barrel of crude more than doubled. It said that Cairn India was on track to deliver crude oil from Rajasthan in the second half of 2009 and significant progress had been made towards optimising and sustaining plateau production levels in this core asset. Again however the shares were unloved with a 3.6% fall, and the technicals suggest lower prices here. John Wood posted a 46% rise in H1 profit to $181.3m and added it would beat its full-year expectations. All major business areas were showing good growth with upstream very active and strong demand for subsea engineering activities, and here we see better recovery prospects for this oil services stock.

Last week saw a sharp rise at Liberty International and the shares moved up again on bid hopes after specialist mall owner Westfield announced a 2.96% stake and property investor Simon Property Group took its holding past 4%. Whilst there are clear problems in the sector, this is an intriguing development which merits closer attention.

27th August – Results dominate on an otherwise indifferent day

This morning’s focus was mainly on a raft of corporate results with the FTSE 100 index generally becalmed and down around 20 points mid-morning. The most shocking statistic came from Taylor Wimpey which announced a huge landbank writeoff leading to a £1.54bn H1 loss. It said that with regards to its debt, constructive discussions with the relevant lenders were ongoing and the board was of the view that a satisfactory conclusion would be reached. The shares initially dropped back but rebounded on recovery hopes, but our view is that this is a dangerous sector to be involved in.

In the resource sectors, Antofagasta raised H1 earnings by 8.8% to 80.4c, slightly above forecasts, as output picked up and the copper price climbed. It said that the copper and molybdenum markets should continue strong into next year, but the shares were virtually unmoved. Petrofac pleased the market as it saw interim net income surge by 57% to $121.2m from a year ago, helped by strong demand for new oil and gas facilities. It added that results for the full year would be at the top of end of expectations, and the shares deservedly rose, with more to come here in due course.

Tullow Oil also did well with underlying net profits more than doubling in H1 to £126m, boosted by the higher crude price. They said that production was now expected to be between 68,000 and 70,000 barrels of oil equivalent per day for 2008. Phase 1 of the Jubilee development was on track for first oil in the second half of 2010, and we can see more new highs here as and when the price of crude improves.

28th August – Another busy day for results but Footsie drifts lower

Volumes have been very low this week, but the FTSE 100 index has generally been in good form on the back of a generally healthy list of corporate results. The statements were somewhat more mixed today, and consequently we have seen the index drift back to stand almost 30 points down mid-morning. There were contrasting fortunes in the mining sector, with Kazakhmys the biggest faller so far as poor weather and changes in the timing of sales hit its H1 revenue and earnings at the miner. Ferrexpo however had an excellent H1, with revenue and earnings sharply higher.

Full year earnings came in slightly weaker than expected at Diageo due to rising costs and lower consumer spending. Earnings per share for the 12 months to 30 June rose 7%, just below forecasts, but the overall statement was robust as usual and we see this as a core portfolio holding. Star performer Amec raised its margin target for 2010 and said it saw record trading performance in H1 with continuing strength in energy end markets, and the shares probably merit more than a token rise so far.

Elsewhere, the acquisition of rival Alfred McAlpine helped Carillion post H1 results slightly ahead of expectations, SOCO International said it was once again generating operating cash inflows after selling its sole producing asset earlier this year. Aegis achieved what it said was a good result for the half year but said the trading environment was becoming tougher with its revenue outlook for H2 less certain, and this looks a possibility for a short term sell.

Research done by Blue Index, the

Trading Experts

28/08/2008

< back