Market overview: FTSE closes down 2 at 5,853
Posted on: 21 Sep 2012 by Polly York

1630: The British economy is expected to show more signs of life later this year or in the early part of the next, according to Bank of England Chief Economist Spencer Dale whilst speaking to the BBC this morning. ‘There is some light at the end of the tunnel (…) it is an uncertain light … but we are hopeful,’ he said. Looking abroad, the Spanish government insists that it will not freeze pension plans, contradicting earlier reports from Reuters. Meanwhile, in Greece the retirement age has been raised to 67, bringing it in line with Germany, its major creditor and an occasional critic of the Greek work ethic. Back in the UK, Xstrata and Glencore were weighing down the footsie by the close after the former was granted its request for more time to decide on the latter’s revised merger proposal. The FTSE 100 closed down two points at 5,853.

1601: The Takeover Panel has granted a request to extend the deadline by which the independent non-executive Xstrata directors will announce their response to Glencore’s revised merger proposal. The extension was requested to enable Xstrata’s independent non-executive directors to take full account of feedback from consultation with key Xstrata shareholders. The new deadline is 07:00 on Monday, October 1st.

1559: Burberry has lost around a quarter of its value since its profit warning on September 11th but it is back in fashion today, despite Credit Suisse cutting its price target for the stock to 1400p from 1600p. The price target cut merely acknowledges the fall of more than 300p suffered by the shares since the profit warning, and the broker is sticking with its ‘outperform’ rating. ‘Our recent conversations with peers and initial checks with luxury operators makes us guess that Burberry’s warning possibly reflects a combination of sector-wide factors (e.g. slowing economy and pull-back in gift giving in China, slowing US) and company-specific issues,’ Nomura says. The broker notes how the whole board has recently bought shares, and the broker believes that the long-term growth story is still valid, ‘with menswear long-term potential re-emphasised yesterday and supported by our emerging market brand survey work.’ FTSE 100 is down 9 at 5,846.

1443: FTSE 100 has moved back into the blue on the back of gains in shares of RBS and Lloyds.

1408: Diageo is reportedly in advanced talks for a stake in United Spirits.

1344: UK equities continue to underperform their peers over on the Continent as well as equity futures Stateside. That on a day in which the agenda is bereft of data releases for this afternoon. Pearson has moved to the top of the leader board on the back of an upgrade fom analysts at Exane, while Evraz and Vedanta are gaining on the back of rising metals´ prices. Interestingly, Xstrata and Glencore are moving lower despite earlier speculation that the announcement of an agreement was imminent. FTSE 100 down 8 to 5,846.

1218: Sterling has risen to near a 13 month high versus the dollar this morning.

1134: ITV has been on a good run this week but it is giving back some of those gains today. Sentiment towards the stock has been improved by expectations that industry regulator Ofcom will renew ITV’s broadcasting licences. ‘If confirmed, this will not be a huge surprise but will enhance the bid premium on ITV (as bidders will be relieved at the visibility on licences),’ notes Panmure Gordon. The broker has also pointed out ITV is looking at launching pay-TV channels, according to industry magazine Broadcast. Finally, Panmure Gordon – a buyer of the stock – suggests that ITV would be a logical partner for BT as the telecoms giant tries to get a foothold in the video-on-demand and pay-TV market. FTSE 100 is down 8 at 5,847.

1104: Shares of Imagination Technologies – part owned by Apple – are moving quickly up the leader board on the FSTE 350 on the back of recurring media coverage of the launch of Apple´s new iPhone 5.

1022: Charles Stanley has decided to wade into the debate regarding the merits (or not) of owning shares of Imperial Tobacco. This is part of their take on that question: ‘At a price of 2362p, Imperial Tobacco (IMT) trades at a discount to global tobacco peers on 11.8x earnings (estimated fiscal year earnings per share 200p) and offers a dividend yield of 4.5% (estimated fiscal year dividend per share 105p) underpinned by robust cash flows (FCF yield 7.8%) and a supportive share buyback. IMT is committed to gradually raising the payout ratio (fiscal year 2011 50.6%) while steadily growing dividends ahead of adjusted earnings per share.’ For those reasons, amongst others, they are telling clients to ‘accumulate.’ FTSE 100 down 4 to 5,851

1008: Analysts at Credit Suisse have this morning remarked that: ‘a positive equity case on Lonmin in our view could be made if the company can grow to 950koz per year. which would require capex of $450m at a minimum.’ That, however, would require an equity raise of at least $500m, together with some debt, or $1bn should all its debt be eliminated, they explain. The broker has this morning reiterated its underperform stance on the miner´s shares.

0930: The public sector´s net borrowing (PSNB) for the month of August (excluding interventions) has come in at 14.4bn pounds, below the 15bn expected by the consensus. The public sector´s net cash requirement (PSNCR) on the other hand has come in at -9.6bn pounds, well ahead of a [surplus of] -5bn expected. The latter figure however was flattered by publicly controlled banks. Thus, the central government balance was in deficit by 8.5bn pounds. FTSE 100 up 18 to 5,873.

0813: Taking their lead from Asian markets, London’s blue-chips have opened the day slightly firmer, with miners leading the advance. The Glenstrata deal is set to be a hot topic of interest today, ahead of its deadline on Monday. In fact, some reports hold that it could be announced this same morning. G4S, the security firm behind the Olympic games staff shortages fiasco, is virtually unchanged following the publication of the damning report from the Home Affairs Committee. Across the Channel, there seems to be some optimism as regards Spain this morning. Both the Financial Times and Reuters report that planning on new structural reforms is under way. FTSE 100 is up 28 at 5,883.

Tags: british economy | executive directors | fashion today | footsie | ftse 100 | glencore | greek work | profit warning | retirement age | work ethic