London midmorning: Property stocks drag Footsie lower
The Footsie has slipped into the red due to falls in real estate stocks after a Morgan Stanley review hit the sector.
Morgan Stanley downgraded British Land by two notches to 'underweight' from 'overweight' in a review of the European property sector. The broker also cut its price target on the real estate giant to 560p from 1,280. It downgrades fellow real estate company Land Securities to 'underweight' from 'equal-weight' and cuts its price target to 1,030p from 1,730p.
Tullow Oil leads the risers after its Mahogany-2 well offshore Ghana hit a significant column of light oil. "The confirmation that Mahogany-2 is in communication with both Mahogany-1 and Hyedua-1, reinforces our interpretation that Jubilee is a major discovery and is likely to lead to a material upgrade of current resource estimates," Aidan Heavey, chief executive said.
Oil prices breaching $120 per barrel have also encouraged other oil stocks with Cairn Energy also picking up strongly, but airlines are under pressure for the same reason. British Airways and Easyjet are both suffering.
Miners Vedanta, Rio Tinto, BHP Billiton and Kazakhmys move up in line with rising copper prices.
Miner Xstrata said first quarter production levels increased in copper, semi-soft coking coal, platinum, ferrochrome, mined zinc and lead, but nickel production was down.
Housebuilders are under pressure. Bovis Homes says housing market conditions have deteriorated sharply in the last two months and results for the first half of 2008 will be substantially lower than previously anticipated.
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However, elsewhere in the sector, Bellway and Redrow move higher after it emerged the pair were in merger talks.
The Times, meanwhile, suggests that Apollo, the American private equity group, is understood to have approached Barratt Developments to offer to buy a stake in the troubled UK housebuilder. The US firm is believed to have offered to inject between £300m and £400m into Barratt at a small premium to the current share price.
Lloyds TSB says write-downs in its Wholesale and International Banking have cost it £387m, but without that achieved revenue growth in excess of cost growth, and a double-digit percentage increase in profit before tax in the first quarter of 2008. "Our strong liquidity and funding capability have ensured that the group has continued to raise wholesale funding at market leading rates," Lloyds added.
Market research firm Taylor Nelson has rejected a rival bid from WPP of 154p in cash and 0.1214 WPP shares, worth 230p per share. Taylor, which is also in merger talks with GfK, Germany's largest market research company, adds its board unanimously rejected the WPP proposal as not in shareholders' best interests.
Fund manager RAB Capital has warned that on the basis of four months' trading, its current expectation is for first half earnings in 2008 to be significantly lower than those for the first half of 2007.
Another fund manager Aberdeen Asset Management said half year pre-tax profit before exceptional items and amortisation of intangibles rose to £47.3m from £43.6m. Aberdeen is also acquiring Goodman Property Investors for an initial cash consideration of £89m.
