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Leading shares ended the week firmer, not far from session highs, putting in a strong performance in thin volumes and boosted by strong gains from telecom, media and technology (TMT) issues - which moved in tandem with rises on Nasdaq. Sharp falls from the Dow Jones Industrial Average were ignored. At close of play on Friday, the FTSE 100 index was 148.1 points firmer at 6,327.4 points, not far its peak at 6,341.9 recorded just before the close at 4.29 p.m.
All the broader FTSE indices were also positive, notably the TechMARK 100, boosted 169 points higher by Nasdaq's ongoing advance. Volumes were modest ahead of the May bank holiday, with 1.388 billion shares changing hands in 95,416 transactions - Vodafone Airtouch was once again the most active stock, with 170 million shares traded.
Weaker-than-expected UK first quarter GDP data dampened fears of an interest rate hike at next week's Bank of England MPC meeting. First quarter GDP rose 0.4 per cent quarter-on-quarter, well below consensus forecasts of a 0.6 per cent quarter-on-quarter hike. UK blue chips trundled higher throughout the Friday morning and lunchtime sessions, reaching a peak ahead of the Wall Street restart, helped by prospects for a positive early performance across the Atlantic.
However, once again, the DJIA and Nasdaq managed to go in opposite directions, with interest rate worries weighing on US blue chips following recent data, while technology issues continued their return to favour.
By London's close, the DJIA had extended the previous night's decline by 114 points at 10,773.31 points, but the Nasdaq composite index took on another 40 points at 3,814.70 points as technology issues returned to favour.
TMT issues dominated on the FTSE 100 leaders board, as 'new economy' stocks rallied in tandem with Nasdaq's ongoing recovery. Baltimore topped the blue chip gainers, adding 837 pence to 6,463 pence, ARM Holdings was close behind, up 82 pence at 655 pence, with Sage Group ahead 72 pence at 715-1/2 pence, and Reuters up 106 pence at 1,149 pence.
Vodafone Airtouch also lent the FTSE 100 index its considerable support. The blue chip added 15-1/4 pence to 294-1/2 pence , lifted again by the group's success in winning the licence with the broadest band available for existing operators in the UK 3G mobile auction. Warburg Dillon Read was rating the stock as a 'strong buy', with WestLB Panmure also a fan.
Selected 'old economy' issues also found gains. GUS gained 22-1/2 pence at 387-1/2 pence after taking a step towards its long-hoped for refocusing. The mail order retailer announced plans to dispose of its two main finance units - General Guarantee and Highway Vehicle Maintenance. Royal and Sun Alliance stood out, ahead 5 pence at 358-1/2 pence following a strong set of first quarter new business figures, with world-wide premiums up 44 per cent.
CGU was also in the spotlight, up 4-1/2 pence at 358 pence, as Dresdner Kleinwort Benson moved the insurer to a 'buy' from an 'add'.
ICI headed the list of FTSE 100 index fallers, losing 41-1/4 pence to 550 pence after posting first quarter results a touch light of expectations, with pre-tax profit of £90 million, though a big improvement on last year's £49 million outcome, but below the consensus estimate of £94 million.
Analysts said the ICI numbers looked a bit disappointing when compared to the good performances seen in the same period from its European peers. Others were disappointed on the absence of news on disposals, with debt levels at the speciality chemicals group remaining high. Merrill Lynch downgraded ICI's medium term rating to 'neutral' from 'buy'. But 'house' broker Warburg Dillon Read repeated its 'strong buy' on the stock up to 700 pence, with Williams de Broe also keeping 'buy'.
Nervous trading continued in BOC, with the stock sliding 20 pence to 1,057 pence amid worries that the FTC could move to block its planned joint take-over by Air Liquide and Air Products. Dividend concerns continued to upset Marks & Spencer, down 3-1/4 pence at 234-3/4 pence, with AstraZeneca off 19 pence at 2,689 pence - still reeling from cautious comment from Deutsche Bank.
The UK Small Cap Index closed at its firmest up 17.0 points at 3172 points, just off a low of 3159.6 points. A raft of company news led the FTSE Small Cap gainers list higher, with Gresham House staying near the top, jumping 50 pence to 177-1/2 pence after well-received full year results.
Anglo Pacific rose 2-1/2 pence to 17-1/2 pence reflecting news of plans to float the company's Anglo Digital unit on AIM as soon as market conditions are "appropriate". The developer of new technologies in software, internet, medical and other fields unveiled full year results which slipped into the red and said this resulted from a drop in coal royalty receipts.
Staffware advanced 497-1/2 pence, or 26.36 per cent to 2,385, after posting a 48 pct year-on-year hike in first quarter sales to £7.1 million. Press reports that the company could spin off its Robert Walters recruitment division in a £200 million flotation on the London Stock Exchange also gave the company a boost. Bid talk provided a boost for Community Hospitals, up 39 at 612-1/2, after confirmation of a £230 million, 650 pence per share agreed bid from privately-owned BUPA and Wellington Holdings, up 4 at 63-1/2.
London's technology shares built on earlier gains in an afternoon of thin trading, as Wall Street held prices and confidence high. At the Friday close, the techMARK 100 index was just off its day-high of 3680 points, up 160 at 3671.
This mirrored a solid opening on the Nasdaq Composite, which was holding steady on gains of 39.08 at 3812.99. Vodafone set the pace in the comparatively active telecoms sector, adding 15-1/4 pence to 294-1/2 pence to build on gains after it won licence B. The stock was also bolstered by Warburg reiterating its strong buy recommendation, along with positive comment from Teather and Greenwood. Bumper results from Ericsson and Nokia also added to the positive sentiment around the stock.
Other telecom stocks provided further gains, with Colt Telecom climbing 198 pence at 2729 pence, while Energis rising 3169 pence to 216 pence. BT also reversed recent losses, adding 19 pence at 1151 pence, and Kingston Communications gained 69 pence at 800 pence. Thus was also among the risers, adding 23-1/2 at 368-1/2 ahead of results.
The Nokia and Ericsson results also bolstered the chip sector, with ARM gaining 82 pence at 655 pence, and Filtronic adding 170 pence at 1745 pence. Psion finished the week by retaining its star-performer status, adding 323 pence at 3837 pence as the Sony deal to license its Symbian software for the Japanese giant's next generation range of phones kept the stock in focus. Baltimore Technologies was as volatile as ever, rising to the top of the FTSE 100 board after it added 837 pence to stand at 6463 pence. Analysts said these rises represented the first time since mid-April that the shares stood above their widely-accepted support level of 6000.
Internet stocks held steadier than in recent weeks, thanks to Nasdaq's recovery. Durlacher rose 12-1/2 pence at 121 pence, bouncing off recent lows. Easynet group also strengthened, adding 65 pence at 912-1/2 pence, and Axon Group gained 85 pence at 1125 pence after positive comments about new contracts at its AGM. LastMinute.com enjoyed its strongest rise since its infamous IPO, adding 31-1/2 pence to 217-1/2 pence as DLJ initiated coverage on the stock with a buy rating. The stock was also firmed by positive expectations of its impending maiden results.
WH Smith
WH Smith, the newsagent and newspaper distributor, reported a 4per cent decline in pre-tax profits to £101 million for the six months to February 26. The groups CEO argued that the retail market was particularly challenging and the group had strong performances in the core categories of books, magazines and stationery, where it had good sales growth and share gains. However, he added that in common with competitors WH Smith had poor sales and margins in music and video. Consequently, the group is continuing to reduce its exposure to this category.
WH Smith's publishing activities performed relatively well, with sales and profits up strongly. The group's branded product is starting to come through and WH Smith is capitalising on the opportunities for digitising data and licensing content online. In fact it has continued the programme of investment in News Distribution including the rollout of a new, fully integrated IT system. This is expected to put the group in a strong position to improve the efficiency of the supply chain and develop new online revenue streams.
WH Smith has invested well over the last two years in technology with its online retail engine and digitisation capability. Combining the group's core strengths and new technology together with the focused strategic alliances it is forging, it is creating a powerful proposition to capitalise on new markets as they emerge and enhance shareholder value.
Looking closer at the results, the WHSmith retailing businesses achieved profits of £79 million, with sales of £842m. In a difficult market the UK retailing activities achieved comparable sales growth of 2 per cent, with operating profits of £76m. Book sales grew by 6 per cent with good gains in market share. There was also a 5 per cent growth in magazines sales, a 5 per cent growth in stationery and exceptional growth in sales of electronic accessories.
WH Smith brand sales grew to 12 per cent of total sales from 10 per cent. These performances were, however, offset by the effects of the very poor music and video markets - with music sales down 13 per cent and video sales down 8 per cent. The decline in the music and video categories reduced sales by £15 million (2 per cent of total sales) and reduced profits by £8 million. Overall, retailing margins were down only 0.2 percentage points - with a 3.0 percentage point fall in music and video margins offset by progress in other areas and favourable mix.
WH Smith looks well-positioned across different distribution media and analysts believe that the benefits of multi-channel distribution media are not yet reflected in the share price.
Please note that the value of investments, and income (if any) yielded by them, may fall as well as rise, and you may not recover the full amount of your original investment. Past performance is not necessarily a guide to the future.
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