02/07/07

FTSE 100	6607.9, +36.6	Dow	13408.6, -13.7
FTSE 250	11527.6, +8.4	Nasdaq	2603.23, -5.14
FTSE All Share	3404.14, +15.98	S&P 500	1503.35, -2.35
Nikkei	18146.3, +7.9	Hang Seng	21772.7
Oil (Brent)	$72.82	Gold	$650.90
Base Rate	5.5%	10 Yr Gilt	5.423%
£/$	2.011	Euro/Gbp	0.6743

Market report 

US markets fell on Friday with the financial sector leading the retreat on renewed concerns about subprime loans. The day had started in a positive enough fashion with the Dow rallying 100 points after a closely watched gauge of consumer inflation feel to its slowest annual pace in three years. However, with oil rising above $71 a barrel and investors keen to book profits before the quarter end, all three indexes retreated below their starting points.

The Dow Jones slipped 13.7 points to close at 13,408.6, the S&P 500 lost 2.35 points to end at 1,503.35. The Nasdaq fell 5.14 points to finish at 2,603.23.

Bear Stearns has continued to be in focus all week and news of a probe into two of its hedge funds that are heavily invested in subprime mortgages increased worries about the knock on effect of the fallout spreading to the banking industry. Bear Stearns dropped 2.8% to $140, Merrill Lynch also closed lower, losing 2.8% to $83.58 and Citigroup declined 1% to $51.29.

Research in Motion was one of the top risers on the Nasdaq, following quarterly profit that beat analysts estimates. The maker of the BlackBerry also announced a stock split, shares surged 20.8% to end at $199.99. Apple also rose as its iPhone went on sale in the US, shares were up 1.2% to $122.04.

VeraSun Energy gained after the US Department of Agriculture released a huge corn plantings number, beating analysts estimates and proving to be the biggest corn area in more than 60 years. Shares in the biofuel company jumped 5.4% to $14.48.

US light crude oil surged as high as $71.90 earlier in the session, but settled at $70.68 - up $1.11 for the day. COMEX gold for August delivery added $0.50 to $650.90 an ounce.

Treasury prices jumped pushing the yield on the 10 year note to 5.02% from 5.11% on Thursday.

The Nikkei closed just 7.9 points higher at $18,146.3 this morning. Trading houses were up, led by Mitsui & Co, after the price of oil rose to a 10 month high and a brokerage gave the company its most bullish recommendation. Japan Steel Works Ltd led machinery makers higher after the Bank of Japan's quarterly Tankan survey of business sentiment showed companies increased their planned capital spending. Orix Corp led leasing companies higher after the survey showed confidence among businesses in the industry exceeded forecasts.

The Hong Kong Stock Exchange is closed today.

The London market staged a late recovery on Friday after economic figures in the United States provided some respite from interest rate worries. The FTSE 100 spent much of the session in negative territory, but recovered after the opening of New York markets to close 36.6 points higher at 6607.9.

The about-turn came after weaker-than-expected US consumer inflation data dampened speculation that US borrowers may face further rate hikes. It also lifted miners out of negative territory, with Anglo American finishing 39p higher at 2945p and Vedanta Resources 21p stronger at 1615p. Sentiment also improved towards Northern Rock as investor spotted value in the mortgage bank following its share price slump earlier in the week. The stock closed 39p higher at 868p, a rise of almost 5%. Northern was followed by Home Retail Group, 10.5p stronger at 459p ahead of an update from the blue-chip retailer next week.

Energy stocks also built on advances seen yesterday after the cost of crude oil rose following a US government report revealing an unexpected drop in US petrol inventories ahead of the country's key summer driving season. Shares were up for most of the session, with BP finishing 4p higher at 603p and Royal Dutch Shell ahead 23p at 2083p. Other risers included BT, which gained 3.5p to 332.5p after its chief executive said in a interview that analysts were too pessimistic about the company's prospects.

On the downside, real estate shares took a hammering after a broker downgrade for Segro from HSBC. Segro dived 2%, or 12.5p to 625p, while Hammerson fell 26p to 1434p and Liberty International eased 28p at 1145p. Power station operator Drax Group joined them at the top of the fallers board after it indicated that planned power outages at two generating units might impact on the level of cash it is able to return to shareholders. The stock slipped 15p to 726.5p, even though the company also delivered a solid trading update. Among other fallers, Punch Taverns fell 9p to 1230p, while sector counterpart Enterprise Inns eased 3p to 689p.

This morning the FTSE is 10.5 points lower at 6,597.4. British Airways leads the fallers, down 1.3%, following the three foiled terrorist attacks since Friday, including a burning car crashing into Glasgow airport. Shire Plc is 1.05% after the announcement on Friday of new ADHA therapy, Vyvanse. Although, Bridgewell believes Shire will be successful in its rollout of four key products over the next 12 months, "for the moment we see limited additional upside, view Shire as fully valued, and reiterate our neutral recommendation". Barclays tops the risers up 1% to 703p, after Dutch financial markets regulator AFM has agreed a two-week extension to the deadline by which the UK bank must state when it will formally issue its EUR65bn all-share offer for Dutch rival ABN Amro.

Economic report

UK PMI Manufacturing (Jun) 0930 BST

The CBI survey suggested manufacturers' business sentiment remained buoyant in June so analysts expect this index to remain at around 54. Given the current inflation concerns, the pricing component of this survey is probably the most important at this juncture. The CBI survey showed pricing expectations eased back slightly in June and analysts expect the pricing component of this survey to also fall but remain high in a historical content.

UK Index of Services (Apr) 0930 BST

This is a new data series produced by the ONS and is the equivalent of the industrial production data for the services sector, and does feed into the GDP estimates. Analyst expect a very gradual moderation in service sector activity over the coming months as real estate and distribution start to slow on the back of higher interest rates. But this will be partially offset by continued strength in finance and business services.

US ISM Manufacturing (Jun) 1500 BT/1000 EDT

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