Morning:
8°c
Monday 8 December
Up to half a dozen blue-chip companies face losing their place as constituents of the Footsie 100 index when the regular quarterly review is undertaken later this week.
This is in addition to the high number of changes made in the September review, and that means equity-market strategists will hardly be comparing like-for-like when they make their 2009 year-end forecasts for the Footsie 100 in the next few weeks.
This may account for some of the diverging views we have already seen among brokers' forecasts. UBS has predicted a 2009 year-end figure of 5800, which has been contradicted by Morgan Stanley with a worst-case scenario of 2500 at the end of next year.
Critics of the lead indicator already claim it bears little resemblance to the UK economy because of the large number of foreign firms contained within it. They include companies such as miner Antofagasta, up 17¾p at 388p, SABMiller, 52p better at 1093p, and Mexico-based precious metals producer Fresnillo.
Those expected to lose their place this time around following the close of business on Wednesday include control valves supplier Invensys, 7.5p higher at 141.3p, buses and trains operator Stagecoach, up 3.7p at 123p, oil-industry services groups Petrofac, 15p better at 304¼p, and John Wood Group, 0.3p cheaper at 163.p, and Fresnillo, up 7.4p at 134.5p.
They are likely to be replaced by support services group Serco, 25¾p better at 422p, miner Randgold, 160p dearer at 2411p, Tate & Lyle, 9½p firmer at 404½p, Argos owner Home Retail Group, 12p better at 223p, and insurer Amlin, 1½p lower at 373½p.
Shares generally kicked off the week with strong gains. Investors were encouraged by the late rally in New York on Friday, in the face of a huge rise in the number losing their jobs in the US.
London was also given a boost by strong gains in Asia this morning. The FTSE 100 index rose 217.3 points, or 5.4%, to 4266.7 in a market short of stock. Fewer than 900 million shares had changed hands by midday.
Miners made much of the early running but failed to hold on to their best gains. China plans to revitalise its economy by ploughing extra funds into the system, and this is expected to rekindle demand for commodities.
Vedanta Resources surged 67p to 591p and Anglo American put on 149p at 1385p but the lead in Xstrata was limited to 20p at 595p.
Financial shares also enjoyed renewed support, but a shortage of stock is expected to have exaggerated some of the moves. Insurer Prudential put on 44¼p at 335¼p while Old Mutual added 5.6p at 48.7p and Aviva gained 33¼p at 390¾p. In America, regulators' group the National Association of Insurance Commissioners has given the go-ahead to several proposals designed to help those insurers exposed to the US market, such as the Pru.
Among the banks, Barclays rose 15.4p to 153.7p and HSBC put on 28p at 738p. Evolution has raised HSBC from add to buy, claiming it has the "best banking brand in the world". It has also jacked up its target price from 787p to 950p.
Dresdner Kleinwort has begun coverage of Close Brothers, up 5p at 465¾p, with a hold rating and 500p target. The shares have performed badly along with the rest of the financial sector but a yield of 8.5% means shareholders can afford to remain patient.
Nuclear power generator British Energy ticked 3½p better to 763½p after French bidder EDF announced that it now speaks for 918.58 million shares, 88.67% of the company. EDF bid £10 billion for British Energy earlier this year after fighting off similar offers from Iberdrola of Spain and Germany's RWE.
Imperial Tobacco rose 56p to 168p despite Citigroup cutting its target from 2010p to 1740p while repeating its hold rating. The broker says recent results confirmed that competition was increasing.
