FTSE 100 close: Traders pile into Pearson
By the skin of its teeth, the Footsie extended its winning streak to a joint-record eleventh day today.
The FTSE 100 index just managed to finish in the black, closing 9.5 points up 4,586.1, after a promising morning gave way to jitters in the afternoon as nervous traders took profits.
The Footsie's finish in positive territory matches a similar run seen at the end of 2003 and beginning of 2004 to mark the best sequence of gains since the index began in 1984.
Wall Street got off to an indifferent start, 13.6 down at 9,079.6, after mixed reports on the US economy and earnings left the stock market drifting. The oil price rally extended however into a third week, taking the world crude price back above $69.
David Fineberg, Head of Trading Western at CMC Markets, said the profit takers are about to set in: 'The general direction of the FTSE 100 will now be decided on how aggressive the sell-off is.
'Many will be expecting to see a degree of selling but the same old question will continue to rear its head. Is this a bear market rally or a new bull market?
'With economic readings still showing signs of improvement many now believe that the worst is over. However, US GDP numbers on Thursday will tell exactly how far we have come and how much recovery we still have left to go.'
Financial Times and Penguin publishing firm Pearson leant its weight to the rise, with a 12% climb that outstripped other gainers by some way. Shares soared 73p to 679p after the group said it was trading ahead of expectations so far this year.
Lloyds Banking Group followed in its wake after a positive broker comment. The state-backed bank added 5.34p to 83.33p after Nomura upgraded it to buy.
Royal Bank of Scotland was also on the leader board with a 4% rise - up 1.76p to 43.76p - as Chancellor Alistair Darling met chairmen and chief executives from the major UK banks to encourage them to improve lending to businesses.
Miner Lonmin added almost 5% or 58p to 1301p after an upgrade from Goldman Sachs amid gains for commodity stocks on higher metals prices.
BP was also a gainer ahead of tomorrow's interim results despite a sharp fall in profits expected on oil prices well below last year. With crude firming today, the heavyweight gained 8.1p to 519p.
Life insurer Friends Provident meanwhile gained 1.42p to 72.2p after shunning another approach from investment firm Resolution and ending talks.
Rexam was the top faller in the FTSE 100, after the world's largest drinks can maker said it is considering a rights issue after trading failed to improve since the first quarter.
'We view this as a very opportunist move by Rexam to test the market's appetite for an equity injection,' says analyst Kevin Lapwood at Seymour Pierce, downgrading the company to 'hold' from 'buy'.
'Not too many people thought a rights issue was a possibility and the company makes the point that they're a long way from breaching covenants.'
Rexam shares closed 39.25p down at 284.5p.p
In the FTSE 250, transport group National Express was one of the best performers. It added 4.25p to 350p after rival Stagecoach said it was in talks with another bid team over a possible break-up of the group. Stagecoach could also bid on its own.
Stagecoach shares were 2.75p down at 134.75p.
Shares in Irish budget airline Ryanair slumped 8% or €0.28 to €3.10 after it warned that its full-year profits would be at the low end of the range as fares have been cut to drum up demand.
'The downgrade in terms of profits, that spooked the market,' one Dublin-based trader says.
'People generally didn't believe him (Ryanair's chief executive) at the full-year stage when he was guiding yields down 15-20% and now that he is guiding them down further than that, guys are getting a bit scared.'
However, another dealer says Ryanair's Chief Executive Michael O'Leary could be exaggerating the negative impact on profits to gain some leverage in negotiations with airports.
'So, is he talking it down because he really believes it's going to be as bad as he is saying or is he talking it down to get a more favourable deals with these airports? I think there is a buying opportunity in it right now. We think he is guiding to the downside too aggressively,' says the trader.
Results this week
TUESDAY: BP, STMicroelectronics, Wolfson Microelectronics, Games Workshop, PZ Cussons
THURSDAY: British Sky Broadcasting, Trinity Mirror, BT Group, Reed Elsevier
Tomorrow's market issues
• Sky-high oil prices this time last year helped energy giant BP to huge second-quarter profits. The decline since then will make year-on-year comparisons tough with profits likely to be down almost 70%.
• Soap maker PZ Cussons will also give an update on its second-quarter earnings, with analysts watching for signs that the recession is forcing consumers to pick cheaper brands.
• Tabletop war games specialist Games Workshop has been a recession success story, and its annual results tomorrow will reveal whether the trend is set to continue. Traders were pretty confident today with the shares up 25p - nearly 10% to 300p. Altium Securities, which has a 300p target on the stock, says that the company's core war gaming business is expected to boom. It has a buy recommendation.
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