*** More plans deflate Reuters investors
*** BP’s profits hit by its Texas City blast
*** What to expect from 2005’s second half...the deflation debate heats up...more from investment legend Jim Rogers...and much more still.. --------------------- – There was nothing wrong with Reuters’ profits, revealed yesterday. The group has finally returned to revenue growth in the second quarter of this year – for the first time since 2001. The information group grew its sales by some 0.4% during the period, compared to the same time last year.
– So why did Reuters shares fall 7% on Tuesday? Because just as the group winds up its three-year restructuring programme – due to be completed in 2006 – it announces a brand new, long-term strategy-plan. Not exactly what investors want to hear right now: the new initiatives will shave £50m off profit in 2006, and a further £20m a year later. Only by 2008 will the group reap the benefits, by then generating an extra 3% revenue growth.
– So just what is in it for Reuters investors? And are the new plans really going to make such a difference?
– Mind you, there was nothing wrong with profits at BP either, also released yesterday. Yet the oil giant’s share price traded 2% down, just behind Reuters on the blue chip loser list. BP’s replacement cost net profit for the second quarter surged 29% from the same time last year, to just under $5bn.
– Yet the group failed to hit record profits after paying some £700m for its Texas City blast, which claimed 15 lives. While BP blamed its junior employees for the incident, labour unions were having none of it, and attacked BP for procedural errors. Meantime, BP’s Thunder Horse platform will see its production delayed for six months, after Hurricane Dennis exited, leaving behind structural damage.
– The good news for BP? The group has raised its dividend to 8.925 cents from 8.5 cents, while announcing a share buy-back programme amounting to $6bn for the second half of the year. Shares traded at 629p.
– With both BP and Reuters in the red yesterday, the FTSE 100 shed 14 points on Tuesday, to close at 5,256. The FTSE 250 lost 5 points, to trade at 7,493.
– On the upside, Yell Group traded 5% in the black, after the directories publisher revealed a 12% rise in quarterly turnover. Even the prospects of a UK regulatory probe into the group were forgotten yesterday, as investment bank Merrill Lynch noted that the group is one of the “fastest growing organic revenue growth stories in the sector”, while it remained cheap. Shares closed at 460p.
– And Cadbury Schweppes said its sales rose 6% in the first half of the year, to £3.1bn. And it seems it's the hungry Americans who are consuming most of the chocolate, as US confectionary sales surged some 14%. Not even the growing threat from giants Coca Cola or PepsiCo could put investors off yesterday: the share price closed 1% in the black.
-------------------- What To Expect From The Year’s Second Half– So just what happened in the first half of the year? Well, by April, investors struggled globally as markets showed increasing volatility, thanks to the uncertain economic outlook. By May it seemed that calm had returned, well...until the French and Dutch both gave a resounding “no” to the European Constitution. And by June the euro’s weakness helped boost the EU’s export competitiveness. Now the question is: what should investors expect from the second half of 2005?
The Deflation Debate Heats Up:– A number of analysts believe that the US economy is facing hyperinflation, says Mike Shedlock in Whiskey & Gunpowder. But that simply isn’t true: if anything, the US is facing deflationary pressures. Already the seeds of this are being sown here in the UK, as bankruptcies increase and credit standards tighten. “Sounds like classic liquidity trap action to me”, says Mike.
Commodities Get No Respect– The commodity bull market is different from the one experienced in the 1970s to 1980s, says investment legend Jim Rogers in an interview with the Investment U E-Letter team. Indeed, China’s incredible growth plays a role in that difference. But this time supply is getting ever tighter, while demand is steadily increasing. Take the UK, says Jim: it has been one of the world’s great oil exporters for at least 25 years. Yet within a decade, Britain will be importing oil.
Published in Stock markets
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Heather D'Alton
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