Markets lower as inflation casts cloud

Tuesday 13 May

The FTSE 100 Index fell 8.70 to 6211.90

Shares went into reverse as traders continued to fret over the inflation outlook - latest ONS figures offering little comfort as consumer prices rose 0.8% in April, giving a year-on-year increase of 3%. And with the picture likely to worsen over the coming months, further interest rate cuts may be pushed even deeper into the future.

In the market itself, traders gave the thumbs down to Alliance Leicester as further write-downs have now put H1 profits under threat. Another possible casualty could be the firm's dividend.

In a trading update the mortgage bank said that during the first four months of 2008 a £53 million reduction in the value of certain treasury assets and a £139 million impairment charge, were recognised in the Income Statement. Meanwhile, strategic funding costs and liquidity holding costs incurred during the period were £49 million.

The firm said that overall there has been no deterioration in the asset quality of its customer loans and advances. Meanwhile, Group net interest margin is on track to average around 1% during 2008.

G4S fell 15.75 to 224.25 - the security firm announcing plans to sell 127 million new shares at 240p each in a £305 million cash raising exercise. The placing represents about 9.9% of the firm's current issued capital.

TUI Travel eased 3.25 to 256 - the German-based travel operator (and Europe's largest) reporting strong demand for summer holidays - this against a backdrop of narrowed half year losses of £294 million (-£339 million).

The company was formed last year after TUI tied-up with rival operator, First Choice.

ITV gave up 2.70 to 64.10 - Goldman Sachs downgrading its recommendation for the broadcasting group from 'neutral' to 'sell', arguing that advertisers will reduce their activities if consumer spending continues to weaken.

Claiming that estimates for the firm from elsewhere have been too optimistic Goldman is forecasting a severe slowdown in advertising spending in the second half of this year.

Capita Group shed 1.50 to 685.50 - the construction group and management services provider confirming it has been selected by Bridgend County Borough Council, Merthyr County Borough Council and Rhondda Cynon Taf County Borough Council as successful bidder to develop a 15 year strategic partnership to deliver a wide range of highways, transportation, associated environmental management, and other related services.

Under the agreement, a joint venture owned by Capita's property and infrastructure consultancy, Capita Symonds, and the three local authorities, will be created.

The agreement will generate revenues of approximately £75 million to Capita over the 15 year period.

Baobab Resources surged 6.25 to 15.50 - the Mozambique focused minerals explorer announcing that Millridge Holdings - run by Alexander Crowe, the market relations manager of the Company, bought 50,000 shares at a 9.25p each on April 23rd and 10,000 at 9.50p each on April 24th.

Following this purchase, Crowe's beneficial interest in the company works out to 11.2%.

At 5pm sterling was down 0.0095 against the dollar at $1.9476. Against the Euro, sterling was down 0.0007 at 1.2587.

13 May 2008 © Moneyextra.com

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