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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.
 

Head of Research at Blue Index, specialists in trading

26/08/2008

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