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London mid-morning: Global economic worries hit FTSE 100

Date: Thursday 10 Mar 2011

London mid-morning: Global economic worries hit FTSE 100

Shares are firmly in the red after some weak economic data from China and a downgrade for Spanish debt put the ongoing turmoil in Libya into the shade.

China posted a trade deficit of $7.3bn in February compared with the usual surplus, due mainly to the shutdown of factories during the Chinese New Year holiday, and higher commodity prices.

Credit ratings agency Moody’s has cut its stance on Spain as it believes the cost of restructuring the country’s banking sector will be much higher than the government expects. The rating drops one grade to Aa2 with a negative outlook as Moody’s predicts the Spanish administration, which currently prices a bank bail-out at €20bn, could be as much as €30bn short.

Turning to companies, Argos and Homebase owner Home Retail Group has lowered full year profit guidance as trading remains tough, especially at Argos. The shares are sharply lower. The guidance range for the year just finished has been lowered to between £250m and £255m, versus market consensus of £260.9m. "There are clear signs of further pressures on consumer spending, with recent trading conditions, particularly at Argos, proving to be more difficult and volatile than we anticipated,” said boss Terry Duddy.

Supermarket Morrisons is also predicting tough times but it is bucking the downward trend today after it beat expectations in 2010 as its reputation for value had hard-pressed shoppers flocking to its stores. Underlying pre-tax profits totalled £874m for the year, ahead of estimates and up from £767m the previous year. Turnover climbed by 7% to £16.5bn.

It also stirred up excitement with its plans to move into the online arena. The Yorkshire-based firm is moving to New York, having invested £32m on a stake in FreshDirect, an online grocer operating in the US city.

Meanwhile, struggling pubs group Punch Taverns is posting good gains after it claimed its turnaround campaign remains on track, with strong sales growth in its managed estate in the second quarter while trends in the leased estate improved in the second quarter. In a statement covering trading for the 12 weeks to 5 March, Punch said its managed estate enjoyed like for like (LFL) sales growth of 8.6% from the corresponding period a year earlier. That raised LFL sales growth for the first two quarters of the group’s financial year up to 4.9%.

Funeral parlour group Dignity is in demand after it revealed an 8% rise in annual pre-tax profit after a strong performance across all areas of the business. The Midlands based group said 2011 has started well and it remains confident in its future prospects.

Turning to companies with international exposure, Aggreko, the temporary electricity supplier that will power next year’s London Olympics, is labouring today after saying it enjoyed a strong year in 2010, but warning that the current turmoil in the Arab world makes predicting this year’s outcome difficult. Pre-tax profits were up by nearly a quarter from 2009 at £307.1m. Revenues were up by 20% to £1.23bn. The company was helped by its participation in some big events, including the football World Cup in South Africa and the Vancouver Winter Olympics.

Standard Life is also lower, even after it reported a “good” 2010, with net adjusted inflows up 46%. The insurer says it’s made a strong start to 2011. Excluding volatile and lower revenue yield UK money market funds and India cash funds, net inflows jumped to £8.3bn, with long-term savings net flows up 77% to £4.7bn. The UK’s fourth-largest insurer reported IFRS operating profit before tax from continuing operations grew by 7% to £425m, and core European Embedded Value (EEV) increased 24% to £629m.

FTSE 100 - Risers
Morrison (Wm) Supermarkets (MRW) 287.60p +2.53%
Shire Plc (SHP) 1,792.00p +1.41%
Sage Group (SGE) 274.10p +1.37%
GlaxoSmithKline (GSK) 1,199.50p +1.31%
Schroders (SDR) 1,820.00p +1.11%
Vodafone Group (VOD) 181.90p +0.94%
Smith & Nephew (SN.) 721.50p +0.91%
Pearson (PSON) 1,111.00p +0.54%
United Utilities Group (UU.) 584.00p +0.43%
Schroders (Non-Voting) (SDRC) 1,435.00p +0.42%

FTSE 100 - Fallers
Aggreko (AGK) 1,398.00p -6.11%
ARM Holdings (ARM) 539.00p -6.10%
Standard Life (SL.) 231.60p -5.35%
Fresnillo (FRES) 1,518.00p -4.47%
Randgold Resources Ltd. (RRS) 4,472.00p -3.39%
Rio Tinto (RIO) 3,952.50p -3.31%
BHP Billiton (BLT) 2,307.00p -3.19%
Eurasian Natural Resources Corp. (ENRC) 909.00p -3.14%
Xstrata (XTA) 1,335.50p -3.12%
Anglo American (AAL) 3,119.00p -3.09%

FTSE 250 - Risers
TalkTalk Telecom Group (TALK) 146.00p +8.55%
Punch Taverns (PUB) 75.10p +5.77%
Dignity (DTY) 743.00p +3.63%
St. Modwen Properties (SMP) 176.20p +2.32%
BH Global Ltd. GBP Shares (BHGG) 1,099.00p +1.29%
JD Wetherspoon (JDW) 426.70p +1.16%
Electra Private Equity (ELTA) 1,690.00p +1.08%
Heritage Oil (HOIL) 308.20p +1.08%
Enterprise Inns (ETI) 90.80p +0.94%
Cable & Wireless Communications (CWC) 50.95p +0.89%

FTSE 250 - Fallers
Home Retail Group (HOME) 197.00p -6.59%
Aquarius Platinum Ltd. (AQP) 354.60p -5.44%
Yule Catto & Co (YULC) 199.00p -4.78%
Ashmore Group (ASHM) 319.00p -4.63%
Hochschild Mining (HOC) 636.50p -4.07%
F&C Asset Management (FCAM) 79.55p -3.81%
Salamander Energy (SMDR) 294.80p -3.66%
Kenmare Resources (KMR) 40.05p -3.49%
Ferrexpo (FXPO) 370.10p -3.37%
Morgan Crucible Co (MGCR) 297.20p -3.35%

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