Volume tails off after last week’s excitement

1^st February - London sees a surge of buying on bid activity

A much stronger start in London reflected a surge of buying in the miners, together a smattering of bid stories elsewhere.  Rio Tinto led the blue chips after it signed long-term agreements to supply Pilbara iron ore to Hyundai Steel, with BHP Billiton and Anglo American also both strongly ahead.  There were other sharp risers amongst housebuilders and financials with Taylor Wimpey a feature, rising 8%.  Once again there was plenty of corporate news to choose from, with British Airways meeting expectations in Q3 with operating profits rising 38% to £178m.  Yields rose 1.5% due to more premium passengers travelling, although gains were largely neutralised by exchange rates, particularly the US dollar, and it said that fuel costs remained a major challenge.  BG agreed to establish an alliance with Queensland Gas Company to develop onshore coal seam gas acreage and a new LNG production and export facility on the Queensland coast.

On the second line, Greene King said it expected to meet forecasts in the current year but was cautious over the outlook generally.  Loch Fyne, acquired in August, had a strong Christmas and New Year period and like-for-like sales since acquisition were up 2.3%.  Cranswick warned it was struggling to pass on recent food price increases while in some areas it was facing food price deflation, which was likely to have a negative impact on operating results this year.  Sales at RPC grew by 4% between October and December, but it said rising costs had largely eroded the positive impact of the increase.

4^th February - Volatile action as selling offsets several bid stories

There was an early markup in London after the surge of bid stories over the weekend, but sellers soon came in and by mid-morning the FTSE 100 index was virtually unchanged.  Former Footsie constituent Mitchells & Butlers saw a 5% rally on confirmation that Punch Taverns had put forward a merger plan that would see each firm's shareholders own 50% of the merged company.  In addition, Mitchells & Butlers shareholders would receive a cash payment of £175m.  There was also interest in Rio Tinto and other miners after the weekend's stakebuilding by Chinese investors, with Anglo American the pick with a 3% rise after it and China Development Bank agreed to establish a strategic relationship to identify and develop a pipeline of natural resources projects, but smaller peer Randgold fell after a mixed results statement with annual profits down.

Elsewhere, Ryanair saw underlying net profits fall 27% to €35m in Q3, and warned that high oil prices, an economic slowdown in the UK and weak sterling could mean a 50% profit drop next year.  Sage reported that trading for the three months to December was consistent with management expectations, with confidence that they would meet organic revenue forecasts for the full year.  Northern Rock shares saw some buying as the deadline for bids closes today.  Wolfson Microelectronics raised Q4 revenue by 36% despite challenging market conditions during the first half of 2007 and said it expected revenues in the current quarter to rise between 10% and 20%.

5^th February - London shares hit mild selling despite oils

A muted morning session saw bouts of selling in London, although trading volumes were not that high, and the oil majors improved after BP's Q4 figures.  It posted replacement cost profits of $2.97bn, down from $3.86bn as refining losses totalled $1.34bn.  For the full year profits dropped from $22bn to $20.85bn and on a replacement cost basis by 22%, with a 16% rise in the full year dividend.   Blue chip losses were patchy with financials among the weakest performers so far, but Northern Rock edged up after Olivant said it would consider re-entering the auction for Northern Rock if the government was willing to reconsider the terms.  It had pulled out because it wanted to repay a £25bn loan from the government over five years, whereas the government wanted to be repaid within three years, according to press reports.

In results, Carpetright reported a downturn in sales in recent weeks, as group sales increased by 4.8% in the third quarter to end January, but like-for-like sales in the UK and Republic of Ireland fell by 4.0%.  Regent Inns, owner of Walkabout sports bars and Jongleurs comedy clubs, saw H1 like-for-like sales fall by 3.8%, adding that January had seen a continuation of the trends, attributable to the slowdown in consumer confidence and the impact of the smoking ban in the winter months.  Sports Direct said it would bolster its presence in China through a strategic alliance with leading Chinese retailer ITAT Group.  Arm Holdings was weak after it missed Q4 forecasts and expressed caution over the outlook for the semiconductor industry in 2008.

6^th February - Early markdown in London but selective buying so far

After the sharp falls seen in the US and Far East, the FTSE 100 index saw another markdown at the open, but business was two way and by mid-morning the index was virtually unchanged.  Top of the board was BSkyB after its Q2 figures, despite it showing a loss after its £343m write-off on its ITV stake, and it added 167,000 net TV subscribers in Q2, at the lower end of expectations, though operating profits came in higher than expected. Broadband subscribers rose by 260,000 to 1.2m, and Sky plus users rose by 434,000 to 3.13m.  Another winner was Wm. Morrison on a report that it took market share from its rivals over Christmas.  Its share rose to 11.5% in the 12 weeks to 27^th January, up 11% on last year, according to data from market research company TNS Worldpanel.  At the bottom end, BHP Billiton fell 5% after it raised its offer for Rio Tinto to 3.4 shares for each Rio, or more than £70bn.  The feeling is that new Chinese shareholder Chinalco may be preparing a counterbid, having bought a 12% stake for £60 per share.  In the same sector, rumours that Vale would launch a bid for Xstrata sent it higher.

Elsewhere, Daily Mail Group reported revenue for Q1 up by 2%, adding that while slightly below last year its results were ahead of its expectations as they reflected timing differences, acquisitions and start-up costs.  It saw continued strong growth from DMG Information and good progress for Euromoney Institutional Investor, DMG World Media and DMG Radio Australia.  Homeserve reported that business had continued to grow on track so far this year with renewal rates high.  FKI said it remained on track to report strong trading growth in full year 2008, but warned on the performance of divisions reliant on the US.

7^th February - Not much happening despite plenty of corporate news 

It has been a week for the bears so far with a dreary performance on the FTSE 100 index and this morning has proved no exception.  The index stands down 44 points mid-morning on the back of some more badly received corporate statements.

The bear trend continues for Yell Group, which we have regularly featured on the short side, and the shares are down 10% as we write after it warned that revenue would be just short of expectations, reflecting tougher market conditions in the UK.  It's a similar story at BT, where despite the management's upbeat assessment of conditions, traders are not impressed with the bottom line.  The shares have been weak and have taken another hit today, down 6% so far.

It's no surprise that the bright spots tend to be companies which have outperformed the market, and BG leads the board, not for the first time,
after it reported a 23% rise in Q4 revenue, well ahead of forecasts.

For the bulls, that's what you need to look for as there are plenty of bright spots around despite it feeling a bit like the weather at the moment - dull, grey and a little bit cold.  One day soon the clouds will clear, and all will seem bright again, but for now you need to pick and choose very carefully, and of course avoid shares at or close to new lows, as that is where the problems are.