Market Wrap, Thursday 5th June 2008

A bit of a rollercoaster today, with the FTSE falling down and then back to positive territory, and choosing to stay on the better side for the close, which was up 25.2 points at 5,995.3, just shy of the 6k level. Although we can add that it hit 6,005 during the session. The FTSE 250 closed up 33.3 points at 10,010.2, which is above that psychological 10k line.

As predicted, the Bank of England kept interest rates at 5%, whcih we expect to be the same for the next few months at least. Inflation, at 3%, is 1% higher than the 2% target, and looks like getting worse. With inflation rising there won’t be any interest rate cuts, and could even cause a rise if it hits 4%, but we’ll have to see. Analysts reckon that consumer confidence is back to a 20-year low, just as house prices started to fall off in the late 80s. Talking of house prices, Halifax’s housing market survey showed a 2.4% fall in May. Despite some positive moves, we feel the market has further to fall. The FTSE is so weighted with commodity stocks, that any fall back in the metals prices will see the FTSE take a tumble. Oil & metals have been rising at a much higher rate than anything else, giving the miners and oilers big boost.

Over the pond, by the time London closed the DJI was up about 125 points at 12,515, whilst the S&P500 was up over 13 points at 1,391, and the Nasdaq up 30 points at 2,533. The unemployment figures were supposed to be better than expected, as the US government said unemployment claims were down.  We’re not sure which part was down, as that’s a suprise.  Non-farm figures tomorrow. News that sales from some of the bigger US stores also helped the US markets jump today. Wal-Mart said their sales were up nearly 10% on the same month last year, which was to everyone’s suprise. It added that its International growth was at 16.6%, with the UK (Asda) seeing shoppers seek the best prices and value for money.

Back here in London, it was the miners that were holding the FTSE back. With metal prices falling, it was the big miners that saw some pull-back. Anglo American closed down 97p at 3,304, BHP down 22p at 1,878, Kazakhmys closed down 45p at 1,625, and Lonmin closed down 104p at 3,350 after a Goldman Sachs downgrade to ‘neutral’ from ‘buy’. Johnson Matthey, the big metals & chemical buyer/trader, closed off 76p at 1,963 on profit taking, despite saying its prospects remained good and posting a 16% increase in pre-tax profit at £265.4m. Merrill’s liked it, though, reminding everyone of its ‘buy’ stance and 21-quid target.

Vodafone, whcih had gone ex-div this week, closed up 5.8p at 160.45 as news that the telecoms giant was well into a JV deal with US-based Verizon to take out Alltel for £28 bln.

On to banks, where RBS closed up 9.5p at 259p, with the rights issue news coming tomorrow, and rumours of a hedge fund buying up what it could. Peer HBOS closed up 17.5p at 358p, Barclays up 11p to 363p, and Bradford & Bingley up 4.5p at 73.25p, still with the Texas Pacific private equity group sniffing with intent for 20%.

British Airways closed up 10.5p at 254.25p on the back of the recent lower oil price, whilst peer easyJet closed up 18.5p at 333.25p too.

Oil was up to US$123.50 bbl, but it didn’t seem to faze the big users, it seems. Oil companies still suffered, though, with Premier Oil closing down 56p at 1,588, and Hardy Oil & Gas down 49p at 758.

On to the housebuilders, where despite the poor housing figures they seem to be coming off the bottom. Bellway closoed up 32.5p at 626.5p despite the firm saying that the market has gone down in the last few months, resulting in over 30% drop in reservations, and broker Numis still saying it had a ‘buy’ rating. Peer Taylor Wimpey closed up nearly 5p at just shy of 83p, Bovis closed up 17p at 405p, Persimmons up 8.5p at 463.5p, and Redrow closed up nearly 13p at just shy of 227p.
Balfour Beatty closed up 8p at just shy of 427p after buying the construction management company Barnhart, prompting a double smile from ABN Amro and Landsbanki, who both reiterated their ‘buy’ stances.

In to the High Street where retailers also bounced. Home Retail Group, who own Argos, closed up 13.5p at 252p on the back of a Seymour Pierce upgrade, whilst peer Marks & Sparks closed up 11.5p at 392p. DIY experts Kingfisher, who own B&Q, closed up 3.6p at 139.5p as investors felt this week’s figures may not have been as bad as they first thought. Halfords closed up 13p at 279.5p after saying profits were up 8% to £90.2m, which was well received. Three brokers all reiterated their ‘buy’ stance on the popular sat-nav retailer.

Morrisons, the supermarket chain, closed down 7.5p at just shy of 285p after saying sales were slower.