The FTSE 100 was struggling to remain in the black this morning, as deepening losses in resource shares countered gains in the travel and telecom sectors.
British Airways was the best performing stock in the FTSE’s travel & leisure sector this morning, up 5.3% to 210.6p a share after Sky News reported that the British airline carrier and Spain’s Iberia could announce a merger agreement by this week. Merger talks have been ongoing and even encountered some anti-trust issues. If it does go through, however, BA would stand to benefit from substantial cost reductions.
Thomas Cook and Whitbread were among the other star performers in the travel & leisure sector, up 2.5% to 220.9p and 2.7% to 1284p respectively.
BT was also in the limelight climbing 4.4% to 148.2p after raising its full year sales outlook and dividend forecast. The largest fixed-line company in the UK also increased its full-year cash flow forecast, saying it now expects to generate at least £1.6 billion in free cash flow this year as a result of aggressive cost cuts. That’s 60% higher than its previous target of over £1 billion.
BT’s second quarter sales and earnings before interest, taxes, depreciation and amortization (ebitda), an important gauge of operating performance, missed consensus expectations, however. BT’s sales fell 4.4% to £5.07 billion while Ebitda came in at £1.31 billion in the second quarter, down £1.33 billion a year earlier. Bloomberg median estimates were pointing to sales of £5.14 billion and Ebitda of £1.36 billion.
Shares in rival telecom companies climbed as well, with Cable & Wireless advancing 1.9% to 136.3p and Vodafone rising 1.4% to 136p. Satellite communications firm Inmarsat rallied 5.2% to 642p after announcing that it will become a constituent of the MSCI world index. This means that MSCI tracker funds, which try to match the composition and performance of the MSCI index, will have to increase their weighting in Inmarsat as well, hence the reason for the share price’s ascent.
Elsewhere, Trinity Mirror, the publisher of the UK’s Daily Mirror, rallied 8% to 182.2p, the fourth straight gain, after saying that it’s confident the full year will be in line with expectations.
Pharmaceutical shares were also in favour, as a result of ebbing risk appetite and a broker upgrade. GlaxoSmithKline rose 1.6% to 1266.5p after UBS raised the company’s target price while Barclays Capital initiated coverage on the firm with an ‘equal-weight’ rating. AstraZeneca added 0.2% to 2751p after Barclays also initiated coverage on the company with an ‘equal-weight’ recommendation.
In contrast, miners weighed on the FTSE this morning, as industrial metal prices weakened on the back of a rebound in the US dollar. Eurasian Natural Resources retreated 2.1% to 903p following the release of its output figures. Xstrata, Vedanta Resources, Randgold Resources, Kazakhmys and Fresnillo traded 1% to 1.8% lower this morning.
Banks were mixed, with Lloyds Banking Group up 0.7% to 89.84p and Standard Barclays 2% firmer at 329.5p after Morgan Stanley and ING both lifted their price targets for the bank. In contrast, Royal Bank of Scotland slid 1.8% to 37.69p unveiling plans to make a rival offer of A$1.5 billion for Babcock & Brown Infrastructure Group.
By 10:50am (London time), the FTSE 100 was 14.43 points (+0.27%) higher at 5281.18, while the broader FTSE 250 was 21 points (+0.40%) above its previous close at 5269.50. In the meantime, December Dow and S&P 500 futures traded around 0.20% lower, suggesting that Wall Street is gearing up for a weak start this afternoon.
