LONDON (Thomson Financial) - Leading shares remained lower midafternoon, while Wall Street got off to a firm start, with Marks & Spencer leading the blue-chip casualties as its full-year results disappointed the market, dealers said.
At 3.06 pm, the FTSE 100 was down 14 points at 6,622.8, with the FTSE 250 down 9.7 points at 12,191.8.
Volume was heavy with 2.86 bln shares changing hands in 372,844 trades.
In early deals on Wall Street, the DJIA was 13.6 points higher at 13,557.8, while the Nasdaq composite index was up 1.94 points at 2,580.73.
US blue chips were higher as M&A activity offset mixed earnings news and uncertainties ahead of the US China trade talk.
In London, Marks & Spencer continued to lead the losers midafternoon, down 30 at 708-1/2, as its full-year results disappointed the market.
Earlier today, the fashion and food retailer said for the year to March 31, 2007, it made an underlying pretax profit of 965.2 mln stg, compared to analysts' forecasts of 940-1,000 mln stg, with a consensus of 960 mln stg.
In reaction, Pali International termed the results 'a bit disappointing', and said in the short term, the shares did not look to be going anywhere, given the shadow of High Street sector trading concerns.
Elsewhere on the high street Home Retail -- formerly owned by GUS -- took a dip on the back of M&S's falls, down 9-3/4 pence at 478-1/2 while Next was down 24 pence to 2,303.
Meanwhile, Experian -- also formerly owned by GUS -- was down 9 pence at 479-1/4, ahead of its final results tomorrow.
GlaxoSmithKline was also out of favour, touching five-month lows in morning trade, and still down 31 pence at 1,358-1/2 midafternoon, extending yesterday's declines, as analysts trimmed sales forecasts for Avandia after a study claimed the diabetes drug could significantly increase the risk of heart attack.
Yesterday, The New England Journal of Medicine released an article which suggested Glaxo's second biggest selling product increased the risk of heart attack by 43 pct, and death from cardiovascular causes by 64 pct.
In response, ABN Amro downgraded the shares to 'hold' from 'buy' today and slashed its 2011 sales forecast for the drug by more than half, to 1.4 bln stg, noting that the product had been a major part of its 'buy' case on the stock.
On the M&A front, British Airways extended morning losses, dipping 13-1/2 pence to 466-1/2 after announcing it has joined with TPG Capital, Vista Capital, Inversiones Ibersuizas and Quercus Equity to consider a possible consortium offer for Iberia Lineas Aereas de Espana, reported to be potentially worth 2.3 bln stg.
'There is no guarantee a formal bid will be made,' BA said in a statement, but yesterday the national carrier's chief executive, Willie Walsh, said a possible takeover deal could be imminent.
Broker comment weighed on ITV, down 1.1 at 116.9 after Morgan Stanley downgraded the group to 'equal-weight' from 'overweight' with a target price of 119 pence, highlighting the stock's recent rally.
Morgan Stanley also cited the continued fall in forecasts, the abolition of apparent discounting of contract rights renewal and the remote prospect of immediate bid activity for its downgrade.
On the upside meanwhile, broker comment helped push Alliance & Leicester to the top of the blue-chip leaderboard, with a gain of 48 pence to 1,195 with UBS initiating coverage of the group at 'buy' and setting the price target at 1,440 pence.
The broker said it believes A&L's strong brand, extensive distribution base and 3.5 pct UK market share make it an attractive asset.
A&L's sector peers also gained amid ongoing sector consolidation hopes, with Standard Chartered up 59 pence at 1,661 and Bradford & Bingley up 7 pence at 456-1/2.
Elsewhere, results news fuelled gains in Yell Group, which took on 18 pence to 507 after the telephone directories group reported a rise in its full-year pretax profit and adjusted EBITDA, helped by higher revenues and rapid growth in its UK and US online businesses. Yell also said the investment in its brands will drive continued profitable growth.
Seymour Pierce responded by saying the owner of Yellow Pages' trading statement last month made today's results largely academic and shifted the focus instead to the outlook for the US operations, where Yell still expects 3 pct organic growth at Yellow Book in the year to March 2008.
In the pubs sector, Mitchells & Butlers took on 16 to 893-1/2 after announcing its same outlet sales for the 32 weeks to May 12 were up 3.6 pct, and adding that trading in the 16 weeks since its AGM was in line with expectations.
Morgan Stanley upgraded the group to 'overweight' from 'equal-weight' with a price target of 1,000 pence, up from 830 pence following yesterday's news it is in talks with R20, the investment vehicle of 15 pct shareholder Robert Tchenguiz, regarding a partnership to release value from the majority of its property portfolio.
The broker said reported clean pretax profit of 89 mln stg was well above its estimate due to solid trading and strong cost control in the underlying estate.
Similarly, Wolseley benefited from ABN Amro reiterating its 'buy' advice and raising the price target to 1,570 pence from 1,375.
ABN Amro told clients this morning that Wolseley has been a significant underperformer in recent periods, down 34 pct and 7 pct over the past year relative to the sector and market respectively, and it believes this is set to reverse.
Wolseley had added 35 to 1,341.
On the second tier, LogicaCMG plunged 9 pct, losing 16-1/4 pence to 164-1/4, after the group warned it expects first-half revenues and margins and full-year revenue to be slightly lower year-on-year after disappointing performance in the UK in the first quarter.
SNS Securities cut the group to 'reduce' from 'add' in response and lowered its price target to 165 pence from 195.
Results from Paragon Group of Companies sent the stock 32-1/2 lower to 539-1/2 after the group said pretax profit for the six months to March 31 rose 11 pct to 43.3 mln stg, below consensus expectations.
Shares in Stagecoach were also lower, on news that Goldman Sachs were placing up to 26 mln shares in the bus operator at the 188 pence level.
Stagecoach shares dropped 6-3/4 pence to 184.
Meanwhile, shares in Aveva also took a fall, down 15 pence at 871, on profit-taking after reporting a rise in full-year pretax to 24.65 mln stg from 11.16 mln and giving a positive outlook.
Among the mid-cap risers, bullish broker comment attracted investors to a number of stocks, with Mitie Group the top performer, up 16 at 273, helped by Merrill Lynch upgrading its stance to 'buy' from 'neutral' with the price target set at 291 pence, as the broker thinks the stock is set to reassert its status as a growth play.
Broker comment also helped shares in Rank Group gain 6-3/4 at 201-3/4 after Citigroup upgraded the group to 'buy' from 'hold' with a target of 220 pence.
The broker sees possible upside in the potential abolition of VAT for bingo operations and in Rank's development of new games and addition of new game machines.
Similarly, Britvic was up 10-1/2 pence at 385-1/2 as brokers reacted positively to yesterday's first-half results, with Lehman Brothers upgrading the stock to 'overweight' from 'equal-weight' and others raising price targets.
Lehman told clients that, with Britvic's first-half results beating the broker's already-raised estimates, it now senses that positive momentum is building in both the core UK soft drinks operations, as well as international expansion.
Both Morgan Stanley and Citigroup raised price targets, to 410 pence and 450 pence respectively.
Finally among broker changes, Cairn Energy took on 56 to 1,881 as Merrill Lynch added the group to its Europe 1 Focus List with a reiterated 'buy' rating, saying it views market concerns surrounding key commercial parameters as overplayed.
Returning to earning news, SSL International added 8-1/4 at 441-3/4 after the group reported a 31 pct rise in annual profits, ahead of expectations, on strong sales of its Durex condoms and Scholl footcare products, and said the new financial year had 'begun satisfactorily'.
In the 12 months to end-March, pretax profits climbed to 46.9 mln stg from 35.7 mln in the same period last year. Basic earnings per share jumped 34 pct to 17.1 pence.
Pleasing results also propelled shares in Dairy Crest up 7-1/2 to 687-3/4 after the UK's biggest branded dairy foods group posted a 24 pct increase in underlying pretax profit, driven by strong growth from its star Cathedral City cheddar cheese brand, prompting Evolution Securities to upgrade its recommendation to 'buy' from 'add'.
Evolution said progress should continue into full-year 2008 and be enhanced further by recent acquisitions which, the broker said, are performing at least as well as expected, and in the case of the St Hubert spreads business, rather better.
Finally, buyers also came for Autonomy following the demerger of its audio and video search engine arm Blinkx, the placing of which was today priced at 45 pence per share, at the top of the indicated 35-45 pence range.
In reaction, Seymour Pierce recommended investors 'buy' into Autonomy. The shares climbed up 22.64 at 771. tf.TFN-Europe_newsdesk@thomson.com hco/tw/jsa COPYRIGHT Copyright AFX News Limited 2007. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.
© 2007 AFX News
