London Shares Firmer Midmorning; British American Tobacco Gains; Oil Stocks up

Source from:  iii.co.uk LONDON (Thomson Financial) 05/08/2008

Leading shares were firmer midmorning, building on moderate gains on Wall Street overnight, with British American Tobacco higher as investors cheered better-than-expected first-quarter results and a stronger oil price helping commodities. At 9:58 a.m., the FTSE 100 index was 26.5 points ahead at 6,241.7, near a session high of 6,247, while the FTSE 250 index took on 63.2 points at 10,392.2. "The market is being driven by a combination of a high oil price and growing optimism that we are going through a short sharp economic shock rather than a prolonged downturn. However the question is open to how sustainable this is," said Jim Wood-Smith, head of research, Williams de Broe. In London in the blue chips, British American Tobacco was 47 pence ahead at 1,985, after the maker of Lucky Strikes and Kent cigarettes posted an 18 percent rise in first quarter profits from operations to 807 million pounds, as price rises and favourable currency movements boosted the company's bottom line by 54 million pounds. Merrill Lynch said the tobacco manufacturer's results were "solid", with sales and EBIT 4 percent ahead of consensus expectations. Peer Imperial Tobacco also enjoyed the news, adding 42 pence at 2,480. Oil stocks were also in demand, fuelled by oil prices hovering around the $122 a barrel mark amid the weakening U.S. dollar, supply threats, and a note from Goldman Sachs late Tuesday predicting that oil could reach $200 a barrel. Exploration and production company Cairn Energy was a clear outperformer, 60 pence higher at 3,283. Fellow oil heavyweights also rallied, with Royal Dutch Shell up 14 pence at 2,051, BP 7 firmer at 617 and BG Group 5 ahead at 1,355. Quarterly earnings from InterContinental Hotels were also well received, with the shares taking on 12-1/2 pence at 837-1/2 after the hotelier posted results that Merrill Lynch described as "a little better than our and market expectations." IHG reported pretax profit of 42 million pounds for the first quarter, down from 56 million pounds a year earlier, with RevPAR growth for the quarter of 3.5 percent, despite being hit by the timing of Easter. And, British Land enjoyed a strong start, up 11 pence at 841-1/2 after Lehman Brothers upgraded its recommendation to 'equal-weight' from 'underweight' and kept the price target at 959 pence. United Utilities was also in demand, 5-1/2 pence firmer at 709-1/4, as investors cheered news its 4D consortium with Costain and MWH has secured an extension to its contract with Southern Water through to March 31, 2015. Sticking with utilities, but this time on the downside, International Power fell back 5-1/2 at 429, after announcing it will issue around 500 million euro in senior convertible bonds. The utility group, which said it remains confident that 2008 will be another year of growth, added that the issue's 500 to 600 million euros in net proceeds will be used to finance several investments, including the acquisition of additional shareholdings in Portugal's Turbogas and Portugen. Elsewhere, commercial property group Liberty International fell back 31 pence at 942 after announcing it swung to a first quarter loss and reporting falling net asset value, as property valuations continued to decline in the UK amid an unsettled property market. The company reported a pretax loss of 335 million pounds in the three months to end-March, compared with a profit of 293 million pounds a year earlier. Liberty was also held back by the stock trading ex-dividend Wednesday. A number of other stocks trading ex-dividend -- among them Rexam, Old Mutual, Antofagasta -- also tempered FTSE 100 gains. The mining sector also weighed, with Xstrata sliding 22 pence to 4,281, Kazakhmys down 13 at 1,726, Vedanta Resources off 20 at 2,451 and Eurasian Natural Resources 18 lower at 1,182 after Tuesday's sector strength. Turning to the second line, Yell Group surged almost 8 percent higher, up 14-1/4 pence at 190, on positive read-across from U.S. firm Idearc, which rallied 30 percent Tuesday after unveiling better-than-expected first quarter profits. On the reporting front, Savills gained 8-3/4 pence at 277 after saying trading conditions in the first-quarter continued to be challenging, but that its full-year outcome will be heavily weighted towards the second half, as in previous years. easyJet reversed some of Tuesday's losses to add 6 pence at 303-1/2 after the low-cost airline's pretax loss widened to a smaller-than-expected 57.5 million pounds for the six months to end-March, against a 17.1 million pound loss the year earlier. Mondi was 6 pence firmer at 411-1/4 after saying underlying operating profit since the year-end has come in ahead of the comparable period for the prior year, helped by a strong performance from the Europe & International division and, in particular, the bags & specialities business unit. Looking at the mid-cap fallers, Rank Group lost 3-3/4 pence at 90-1/2 after a trading update revealed the group's revenues have been hit by the impact of the smoking ban in England and Wales, with Landsbanki retaining its 'reduce' rating and describing the update as "poor". Finally, turning to UK economic news, the UK manufacturing sector unexpectedly recorded a broad-based fall in output during March, the sharpest in six months, official figures showed. The Office for National Statistics said manufacturing output fell by 0.5 percent from February, way below analysts' forecasts for a small rise of 0.1 percent. This is the biggest fall since September 2007 and follows a 0.4 percent rise in both January and February. joanne.frearson@thomson.com jf/cmr COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. 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