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Footsie struggles for direction as more financial reports some through

Although the FTSE 100 index opened higher today, there has been some fair two-way action and by mid-morning the index was virtually unchanged and still looking shaky after yesterday’s big drop.

Once again, much of the focus has been on the bank sector after the statement from HBOS, which said that trading continued to be in line with expectations. The group added however that it expected H1 writedowns to reach £1bn and the UK economy to slow with house prices deteriorating further, with writedowns in its Treasury Trading Book since its interim statement in April, having increased by £58m to £1,028m.

This is the gloomiest assessment of the house market so far, and it suggests more bad debt problems for the sector, which has seen falls in Barclays, Royal Bank of Scotland, Alliance & Leicester and Lloyds TSB. We remain extremely cautious as we have been for last couple of months, and this applies to housebuilders and retailers aswell.

There was some better news from what has traditionally been viewed as a defensive stock, Cadbury’s. It gave a fairly solid update with the expectation of revenue growth in H1 of this year to be above the top end of its 4%-6% goal range. It also saw Q2 growth to be modestly higher than the 7% like-for-like growth reported in Q1 with good progress having been made on margins despite further increases in marketing. The shares opened higher but edged back to stand unchanged mid-morning, and our view is that the rating looks about fair for these at present.


Head of Research at Blue Index, specialists in trading Contracts For Difference
19/06/2008

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