London shares up midmorning after Wall St, Asia rally; banks, retailers gain

LONDON (Thomson Financial) - Leading shares remained at higher levels in midmorning deals, following rallies on Wall Street and in Asian markets, and with good gains seen among United Kingdom banks and retailers. At 10:13 a.m., the FTSE 100 index was 67.3 points ahead at 6,154.6, near a high of 6,159.6, with the FTSE 250 index up 165.0 points at 10,238.0.

"Confidence has returned to the banking sector, also the retailers are looking good. The mining sector has held up well today too," said Mark Priest, of tradindex.com. "Generally, the market looks much better. There was a big rally on the Dow yesterday, which helped a lot, followed through by a rally in the Far East," he added. On the economic front Friday, a survey found the United Kingdom's construction sector saw activity and confidence levels at their lowest levels in nearly a decade.

In its monthly assessment of the sector, the Chartered Institute of Purchasing and Supply said its purchasing managers' index edged down from 47.2 in March to 46.1 in April, its lowest reading since October 1998.

Back with equity movements, Royal Bank of Scotland shares received a fillip, up 8-3/4 pence at 354-1/2, following reports private equity investor Texas Pacific Group is poised to bid for the bank's 8 billion pound insurance arm, according to the Daily Telegraph.

TPG is particularly keen on RBS's Churchill and Direct Line insurance brands, but is mulling an offer for the entire business, the newspaper said, citing a source. Other banks also benefited from the talk, with HBOS up 9-1/4 pence at 474-1/4, Lloyds TSB 8-1/4 pence higher at 439, and Barclays firming 9-3/4 pence to 474-3/4, the latter shrugging off a press report that Paul Idzik, chief operating officer, is to step down in a sign of a rift at the top of the United Kingdom's third largest bank, according to the Financial Times.

Strength was also seen among insurers. A report in the Financial Times pointed to talk Germany's Allianz could make a big United Kingdom purchase, and is gearing up for a possible assault on UK life assurance by importing United States-style retirement savings products. Aviva was up 15 pence at 646-1/4, Standard Life took on 7 pence to 259-3/4, and was 18-1/2 pence ahead at 715-1/4. Away from financials, retailers recovered from a battering on Thursday, after the department store chain John Lewis said Friday that week to April 26 department store sales increased 1.1 percent. Next was the top FTSE 100 riser, adding 53 pence to 1,200, with Marks & Spencer climbing 11-3/4 pence to 392-3/4, DSG International 1-3/4 pence ahead at 66-3/4, Kingfisher taking on 2 pence to 133, Home Retail Group, which on Wednesday unveiled full-year results which pleased investors, up 6 pence at 262-3/4. Mining plays were boosted as metals prices recovered slightly, following yesterday's dollar-led rout. Vedanta Resources added 64 pence to 2,306, BHP Billiton was up 28 pence at 18,17-1/2, and Rio Tinto was 76 ahead at 5,912-1/2. Buyers also came for Wolseley, up 17 pence at 517, spurred on by optimism over the state of the U.S. economy, where fears surrounding the housing market have hit the building and plumbing supplies group's shares.

Among broker changes, Whitbread was buoyed 32 pence to 1,250-1/2, thanks to Citigroup upgrading the leisure group to 'buy' from 'hold'. The broker said it thinks the stock has been "over penalised" for its UK consumer exposure.

Cadbury Schweppes began trading in London solely as confectionery group Cadbury Friday morning following the demerger of its drinks business.

In midmorning deals the stock was changing hands at 630-1/2 pence. Deutsche Bank, which has a 'hold' recommendation on the stock, said it expects the shares to trade around 630 pence per share, with every $1 move in the price of Dr Pepper Snapple -- to be listed in New York on May 7 -- to vary the Cadbury price by approximately 10 pence.

Only a handful of blue-chips featured on the downside, among which British Energy dropped 6 pence to 751-1/4, after reports RWE has abandoned a bid for the whole of British Energy as its potential partner, Vattenfall, has been blocked from bidding by the Swedish government. Meanwhile, a broker downgrade pushed shares in Carnival 1 penny lower at 2,028, with SG Securities cutting its recommendation on the cruise operator to 'sell' from 'buy' and lowered its target price to $32 from $53, on worries about a deterioration in U.S. consumer confidence.

On the second line, a number of broker changes helped several mid-cap plays, with Intertek Group up 41 pence at 1,003, as Goldman Sachs upgraded its recommendation to 'buy' from 'neutral' and lifted its target to 1,203 pence from 1,066. The broker said it believes Intertek's share price has been weighed down by concerns about the cyclicality of its exposures. Wellstream also benefited from bullish comment, with Credit Suisse upgrading the stock to 'outperform' from 'neutral' following recent share price weakness -- sending the shares 44 pence firmer to 1,288.

After plummeting over 20 percent Thursday on the announcement of a swing to first quarter pretax losses and issuing a weak outlook, shares in CSR clawed back 11 pence to 335 Friday, despite Credit Suisse downgrading them to 'neutral' from 'outperform'.

Rentokil Initial rose 1-3/4 pence at 96-1/2, after announcing profits dropped in the first quarter after being hit by the continuing problems at its parcel delivery service City Link, and also saying its full-year 2008 dividend payment will be cut.

However Seymour Pierce said there are two ways to interpret this update: either things are so bad that they cannot get any worse and there is operational upside, or the group requires radical restructuring. It added that either way it should be good for shareholders and upped its recommendation to 'buy' from 'hold'.

On the economics front in the United States, a further decline in jobs is expected, with analysts forecasting a loss of 75,000 jobs in April, following a loss of 80,000 in the previous month. The unemployment rate in April is expected to increase to 5.2 pct from 5.1 pct in the previous month.

Factory orders in March are expected to have increased 0.3 percent following a 1.3 percent decline in the previous month. Excluding transportation, factory orders are expected to have increased 2.0 percent following a 1.8 percent decline in the previous month.

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