London pre-open: Declines expected ahead of US jobs report

2nd Nov 2012 07:33

City sources predict the FTSE 100 will open down 10 points from yesterday's close of 5,862, despite a strong rise in the US and broadly higher stocks in Asia overnight. Investors are likely to be cautious ahead of US non-farm payrolls which are due out today, at 13:30, along with manufacturing data in the Eurozone. Of interest, press reports are calling attention to the recent improvement in the Baltic dry freight index, an often reliable leading indicator for global trade and growth. Also on the agenda are US factory orders and speeches from at least two members of the Fed. Back in the UK, the construction purchasing managers index (PMI) for October is released at 9:30. We expect the headline index to be unchanged at 49.5, indicating continued stagnation across homebuilding, commercial construction and civil engineering. The consensus forecast is for a fall to 49.0.In company news, third quarter organic revenues at Meggitt, the company specialising in high performance components and sub-systems for the aerospace, defence and energy markets, were in line with an exceptionally strong performance from last year. Based on current projections, and notwithstanding the uncertainty in military end markets, the group expects to see percentage revenue growth in the mid-single digits in 2013.Car insurance firm Admiral saw a slight decrease in third-quarter turnover but has assured that it is still on track to hit its full-year targets, blaming the decline on seasonal factor. "Little has changed since the half year. The UK car insurance market is cyclical and we are in the softer part of the cycle with premium rates coming down," said Chief Executive Henry Engelhardt. We believe that the sensible strategy in this part of the cycle is to slow our rate of growth," he said.Revenue per available room (RevPAR), a key metric in the hotel business, rose in the third quarter at Millennium & Copthorne (M&C), with London enjoying an Olympic boost. M&C's revPAR in the third quarter improved 2.6% to £71.23 from £69.41 the year before. RevPAR in London was up 20.2% year-on-year, and also increased in the Rest of Europe (5.6%) and the US (1.5%), despite an 8.0% decline in New York. However, revPAR declined by 0.2% in Asia.Royal Dutch Shell has ambitious plans to increase production over the next few years, and despite investor fears that the level of investment needed will crimp returns, Questor in The Telegraph feels confident this is the correct strategy for Shell to pursue. The most important thing for investors to consider about Shell is its cash generation. The company's stated strategy is to improve cash flow by 50% to $200bn over the 2012-15 period. The quarterly dividend was increased by 1c to 43c and it will be paid on December 20th. The shares trade without entitlement to this payment from November 14th. The prospective yield in 2013 is a healthy 5%. The company has the scope to increase its payments, despite its ambitious capital expenditure plans. Gearing stood at just 8.6%, down from 10.8% a year ago, so borrowings are very low. The shares remain a buy for income and delivery on strategy.