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Footsie sees strong buying from the off today

Yesterday’s late rally on Wall Street suggests that for the first time in some weeks the smart money is beginning to buy into the market, and this has followed through with a good move in London.

By mid-morning the FTSE 100 index was up over 50 points, and buying was seen in many beaten down stocks, including Alliance & Leicester, Yell and London Stock Exchange. The LSE rose after a trading update showed revenue for Q1 rose 8% to £178m or by 3% in constant currency. While another casualty of recent falls, Bradford & Bingley, bounced on reports that its main shareholders were firmly committed to its rescue. Whilst we would see this stock as too risky, we are tempted to dip our toes in some good recovery plays for a good bounce to come.

The other main story was yesterday’s fall in crude oil prices, and this has boosted the airline stocks British Airways, Ryanair and Easyjet. FirstGroup is also going well, as is Carnival. Over in the housebuilding sector, Redrow and Bovis both said they would shed staff, and the latter is to cut its interim dividend by 75% to 5p to counter what it says is the worst market backdrop it has seen for many years. We remain bearish for now.

Another stock that has been in the doldrums is WPP, which has now launched a bid of 260.6p per share for Taylor Nelson Sofres. The bid consists of 173p in cash and 0.1889 of a new WPP share, and it will be interesting to see what happens next. WPP does have a good track record of acquisitions, but the timing looks a bit suspicious and we remain very cautious here.



Head of Research at Blue Index, specialists in trading Contracts For Difference
09/07/2008

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