London afternoon: Rally fizzles out

27th Oct 2010 14:23

Expectations of a weak opening on Wall Street put an end to London's attempt to move into positive territory, and losses lengthened again over the lunch time session.Reports suggesting that any new stimulus in the US will be smaller than expected have knocked the miners with Kazakhmys, Xstrata and Rio Tinto the worst performers this morning.In company news, British American Tobacco's cigarette volumes rose in the Asia-Pacific region during the first nine months of 2010, but fell everywhere else as smokers cut back during the recession. The maker of Dunhill, Kent, Lucky Strike and Pall Mall grew market share, but volumes fell 1% to 526bn. They were up 5% in Asia-Pacific, but down 8% in Western Europe, 3% in Africa and the Middle East, and 2% in Eastern Europe.Ad agency WPP enjoyed its fastest growth in a decade in the last three months chief executive Sir Martin Sorrell said yesterday, as recovery in corporate earnings fed through into marketing spending. Even that cheery news has failed to garner buying interest in the shares and it is left to banks to provide some relief from the gloom, as they return to favour following the bashing Bank of England governor Mervyn King gave them yesterday.GlaxoSmithKline is under the weather after it agreed yesterday to pay $750m to settle charges that it made unadulterated drugs like antidepressant Paxil at the plant between 2001 and 2005.Oil explorer Soco has had no more luck with its second well in the DR Congo than it had with its first. The firm will now plug and abandon the second well, Kinganga Nyanya 1, in the Nganzi Block. The well was drilled to 1,164 metres. There were oil shows in the Lower Bucomazi and the Chela formations and log analysis indicated oil pay in the secondary target Chela formation sands, Soco said. Floor coverings retailer Carpetright said group sales declined 5.2% in the 12 weeks ended 23 October 2010 and warned it expects tough market conditions to continue into 2011. The closure of its operations in Poland accounted for 0.5% of the total revenue decline. UK and Republic of Ireland sales declined 4.6%, with like-for-like sales down 7.3%. FinnCap is a seller of the shares, saying the company "is being priced for a recovery that looks increasingly as though it is being deferred." KBC Peel Hunt is sticking with its "hold" recommendation and 700p price target, but has reassessed its forecast assumptions and reduced its 2011 estimated profit before tax from £31.7m to £28.2m, with 2012 estimates falling to £33.6m from £39.2m. Meanwhile, it is switching from "hold" to "sell" on fellow floor coverings firm Headlam in the wake of Carpetright's lacklustre update and the 25% increase in Headlam's shares over the last two months.Another heavy faller is CSR, the Bluetooth chip specialist, despite a "robust" third quarter, but revenue in the fourth quarter is expected to lower than last year. The company made sales of $222.1m during the three months, towards the bottom end of the $220-235m range predicted at the interim stage, though still up 6% on last year. Panmure Gordon thinks the net result may be that full year earnings will be around 4% below market consensus.DS Smith is in confident mood in the run up to December's interim results, which the paper and plastic packaging firm thinks will be way ahead of last year as the "encouraging" overall trading in the first quarter continued into the second. Helphire, which supplies replacement vehicles to drivers involved in accidents, is already predicting results for the year to June 2011 will be below current market expectations. The company, which only published its 2010 results at the start of this month, blames high petrol prices and fewer road miles being driven have led to lower accident rates.Falklands oil explorers Desire Petroleum and Rockhopper Exploration have jointly contracted for the use of the seismic data retrieval vessel MV Polarcus Nadia on their adjacent licences in the North Falkland Basin.Panmure Gordon has initiated coverage of Rockhopper with a "buy" recommendation and a 530p price target. "We believe that the forthcoming drilling programme can demonstrate the potential value in this area," the broker said. Westhouse Securities, meanwhile, has reduced its price target for Desire to 109p to reflect the initial disappointment with the Rachel well, and also trimmed its Rockhopper target price to 492p. Within moments of the broker trimming its target price Desire had burst through it, hitting 150p at one stage this morning, on rumours that it either discovered oil or had received a bid approach. The shares have since come off the top but still show a healthy profit on the day. First Derivatives, a provider of software and support services to the financial services and technology industries, reported a 5.9% increase in first half pre-tax profit and is still confident of achieving full year results in line with market expectations.