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Newspaper Headlines 14 October 2010 The Times Tiddler to Watch: Shares in Instem Life Science Systems rose 10p to 185p on its first day as a listed company. Instem, which provides software to help big pharmaceutical companiesto manage data during drug trials, has raised more than £9 million in its flotation. The Staffordshire-based business plans to use the funds to buy up some smaller rivals in America. Bet of the Day: Shares in Balfour Beatty rose 0.3p to 263.9p after it extended the reach of Parsons Brinckerhoff, its recently acquired American construction and engineering business, by buying Canada‟s Halsall for £33 million. The employee-owned services business, which has seven offices and more than 300 employees, generated revenues of £26 million in 2009. Gilts: Gilt futures slipped but outperformed bunds thanks to weak British data and hawkish comments from European Central Bank policymaker Axel Weber. The December gilt future settled 35 ticks lower at 125.21, turning tail from a contract high of 125.82 touched on Tuesday but outperforming the equivalent bund contract by about ten ticks. Cable‟s £26 billion Royal Mail pension asset sell-off: The green light was given to one of the biggest asset sales seen in the City as the Government committed to taking over the Royal Mail Pension Plan and liquidating most of its £26 billion of bonds, shares and property. New image? Burberry has it in the bag: It is one of the first and most important lessons in fashion: there is nothing like the right handbag to set off an outfit. And it seems the message is getting through. Deloitte prepares Russian takeover as accountants integrate to accumulate: Deloitte‟s British division is in talks about the acquisition of its Russian counterpart in the latest move by leading global accountancy firms to streamline their European operations. Britain goes retro in Christmas run-up: The gradual encroachment of Christmas into autumn has been a perennial bugbear of Scrooges for years. But this month a cold spell really has triggered an unusually early start to Christmas spending, according to John Lewis. BAA refuses to admit defeat in fight against break-up: BAA will appeal to the Supreme Court after a Competition Commission order to break up its monopoly control of Britain‟s airports was restored. Contact Details BA cabin crew vote: will it be on a pay offer, or for a strike?: British Airways is Manoj Ladwa 0207 392 1487 edging closer to a peace deal with its cabin crew, with further meetings Index and Equity Desk 0207 392 1479 planned for today. Institutional Equities 0207 392 1477 Starbucks rules say slow down and smell the coffee: If you think the queues Commodities 0207 392 1403 at your local Starbucks are long, just wait until your friendly baristas have Options 0207 392 1472 read their employer‟s latest training manual. Currencies 0207 392 1455 Barcrest is prize in £100 million bidding game: Barcrest, one of Britain‟s Internet Dealing Desk 0207 392 1434 biggest gaming and amusement machine suppliers, has been put up for sale with a price tag of up to £100 million. We are also available on: Twitter Facebook Linkedin ETX Capital, Beaufort House, 15 St Botolph Street, London EC3A 7DT Tel+44 (0) 207 392 1453 firstname.lastname@example.org www.etxcapital.com Refer to the last page for disclaimer 14 October 2010 Big banks fear they will be forced into cash calls: Britain‟s biggest banks were under pressure to follow Standard Chartered‟s surprise £3.3 billion capital- raising and satisfy regulators‟ demands for extra financial strength. Price of miners‟ fame may be £100 million family fortunes... or fallouts: Films, book deals and television documentaries could net the Chilean miners as much as £100 million — provided that they stick together — media experts said. Microsoft makes its Bing Facebook-friendly: Microsoft‟s Bing search engine will be able to tell users what kinds of things their friends like by incorporating user data from social-network platform Facebook to improve its search results. BAE Systems: Rose up 10p to 365p, ahead of winning a $300 million (£188 million) five-year deal with the U.S. Defense Intelligence Agency to modernise its computer workstations by creating a worldwide virtual desktop infrastructure for its users and intelligence analysts. Icap: Rose 211/4p to 479p, after Barclays Capital raised its price target to 535p to 500p arguing that the inter-dealer broker was best placed to benefit from over the counter derivatives reform. Rockhopper Exploration: Dropped 97p to 363p, after it said that more data was needed to justify the level of reserves it previously said it had at its Sea Lion oilfield in the Falkland Islands. Beowulf Mining: Rallied 1.05p to 10.3p, after a stock overhang was cleared. Financial Times Man Group rising as fund nears key fee level: Man Group continued its run as the FTSE 100 hit its highest level in almost six months. Listed fund to feed appetite for structured credit: Rising investor interest in trading structured credit will be underlined this year when Brevan Howard floats a new fund on the London Stock Exchange. Texas court issues stay on Liverpool deal: The U.S. Owners of Liverpool mounted an audacious 11th-hour attempt to derail the club‟s £300 million sale to New England Sports Ventures by obtaining a temporary restraining order from a court in Dallas, Texas, a move that has forced club Directors to put the deal on hold. HIG backs Engine Groups‟ forays overseas: Engine Group, the London-based marketing services company, is raising up to £62.5 million from a private equity firm to fund expansion into the U.S., Brazil and China. Liverpool ruling paves way for sale: A High Court judge has dealt a potentially fatal blow to attempts by Liverpool FC‟s U.S. Owners to halt the club‟s £300 million sale to New England Sports Ventures. Terry Smith to leave Collins Stewart: Terry Smith, the veteran City broker, is to leave Collins Stewart in December, marking the end of an era for one of London‟s biggest independent stockbrokers. Lenders‟ plans for cash lifeline fall short: Attempts by the U.K.‟s biggest banks to silence criticism over lending to small and medium-sized businesses appear 2 Newspaper Headlines Refer to the last page for disclaimer 14 October 2010 to have fallen flat after it emerged that the centrepiece of new proposals could help as few as 150 businesses over the next decade. John Laing to float infrastructure fund: John Laing is to launch an initial public offering for a £270 million ($429 million) infrastructure fund, as the project management group becomes the latest company to cash in on investor appetite for low risk government-backed assets. Bain Capital set to sign £1 billion deal with Priory: Bain Capital, the U.S. private equity group, is close to sealing a buy-out of the Priory Group, the mental heathcare provider famed for its celebrity patients, in a deal worth slightly less than £1 billion. Sale of Cairn unit to be test case for India: Sir Bill Gammell is founding patron of a sports charity whose mantra is “winning isn‟t everything, but wanting to win is”. Burberry builds on China gains: Burberry committed itself to further store openings in China after maintaining double-digit sales growth in its second quarter. Hicks plays Texas Hold „Em with Anfield board: Having failed in their attempts to get U.K. law to see their point of view, Tom Hicks and George Gillett on Wednesday night resorted to the legal system back in Mr Hicks‟ home state of Texas in an attempt to prevent the sale of Liverpool Football Club. Topland expands into green energy: Topland has invested in a solar energy technology business that will use its real estate portfolio to generate and trade power. Moulton backs bioscience launch: The launch of a “world class” bioscience company in Liverpool backed by Jon Moulton, the private equity pioneer, has underlined the strength of the sector in the north-west of England. Walker Greenbank: Jumped 5.9% to 38p, as its first half results showed it bouncing back from the recession. Carphone Warehouse: Rose 6.8% to 2803/4p, after Citigroup upgraded its earnings forecast by 16%, citing the strong performance of the company‟s U.S. joint venture. Centamin Egypt: Added 6.4% to 182.9p, helped by the record gold price and a push from Goldman Sachs. Kesa Electricals: Climbed 9.5% to 165.3p, in heavy volume of 27 million shares on fresh bid speculation. Lex: Standard Chartered: Something does not add up about Standard Chartered‟s latest trip to market. As in the previous two outings – in November 2008 and August 2009 the capital-raising comes with lots of flannel about enhancing flexibility in an opportunity-rich environment. This time, though, there is an additional notional catalyst: Basel III, and the general sharpening of expectations on the quantity and quality of bank capital. The official deadline for compliance is nine years away. Even if Chief Executive Peter Sands is right that StanChart‟s regulators will accelerate that timetable, what practical advantage will the bank gain now, from moving from a core tier one ratio of 9% of risk-weighted assets, to 11.2%? If this really is guesswork, pre-empting unknown future standards, why not pay out a little less in dividends, or increase RWAs 3 Newspaper Headlines Refer to the last page for disclaimer 14 October 2010 more slowly? There are two more plausible explanations. One is liability management. The $5.3% of equity raised in this rights issue is uncannily close to the $5.5% of preference shares and “innovative hybrid securities,” costing between 6 and 8%, on StanChart‟s interim balance- sheet; if the bank cannot count these instruments as core capital, it makes sense to pay them off. U.S. small caps: The big boys grab the headlines but the U.S. earnings season is also under way for thousands of small-cap stocks you will never read about. The prospect of third quarter results this week from Winnebago, WD-40 and Bank of the Ozarks tickle the imagination far more than JPMorgan‟s ever will. Glued to their screens, however, will be the 40% of small-cap fund managers who lag behind their benchmarks this year, according to Bank of America Merrill Lynch. For them the big question is whether quality small caps with bigger, stronger balance sheets and which actually turn a profit will outperform for the rest of the year as they have done since the beginning of May. History suggests they can relax. Median third quarter revenues grew an estimated three times faster for quality small caps compared with the dodgy end of the spectrum, while net profits growth at 15% was roughly a third higher. In addition, during past midterm elections, better-quality small caps have done better. More important, expectations of aggregate profits growth next year, while unrealistically high at 20% for quality stocks, are ludicrously high at 50% for low-quality names. To hull and back: You can learn a lot about the world economy from the heavies: Hyundai Heavy and Samsung Heavy, the world‟s number one and two shipbuilders. If the Baltic Dry Index, a measure of freight costs for commodities, is a leading indicator of global demand, then these stocks – building the ships that carry them could be considered leading, leading indicators. If so, investors might glean three things from the industry‟s rebound, none of them wholly encouraging. First, the excesses of the boom won‟t be worked off any time soon. Given the long lag between orders and delivery, the biggest Asian shipyards will be flat out for the next few years. Among the Koreans, dominant in the decade before the crisis, 2009 was the best ever for aggregate completions across the industry (390). But it was also the worst for new orders: just 49. Excess capacity may weigh on ship Owners of all stripes for years to come. Lombard: RBS makes Broughton Liverpool‟s man of the match: Over the past three years, Royal Bank of Scotland has seemed unable to put a foot right. Purchase of ABN Amro? Own-goal. Taxpayer bail-out? Red card. Pension for disgraced Chief Executive? Foul. Bonus package for his replacement? Offside. Yet on Wednesday, lawyers for Royal Bank of Scotland were cheered from the High Court by ecstatic fans after the bank‟s injunction against Liverpool FC‟s American Owners was upheld, opening the way to a possible sale. If only Sir Fred Goodwin had spent more time putting in crunching tackles against reviled proprietors of British football clubs and less plotting world domination, perhaps he would be a national hero with a season ticket to Anfield rather than the reclusive assistant to an Edinburgh architect. Sale or return to court: Anybody who has suffered a flight delay will sympathise with the Competition Commission. Its attempt to force BAA to sell Stansted and either Glasgow or Edinburgh airport has so far led to a long, stressful period of inaction, punctuated by moments of despair and, almost worse, hope. Wednesday‟s ruling restoring the sale order was one such hopeful development – the legal equivalent of a man in a Day- 4 Newspaper Headlines Refer to the last page for disclaimer 14 October 2010 Glo jacket unlocking the door to the departure gate. BAA is not rushing to board the flight. If it manages to appeal against this latest ruling to the Supreme Court, this saga could drag out until early 2012. That would give BAA another 12 months for the U.K. economy to recover, the likely price of airport assets to appreciate, and the pain of the forced sale of Gatwick to dissipate. But it would also add another year to airport users‟ quite reasonable expectation of more competition and better service. Stand up for your rights: The Standard Chartered rights issue appears to offer hope to finance Directors who despair of being able to get rights issue fees back down to pre-crisis levels. When the bank set out to raise £1.8 billion in November 2008, it paid 2.75% in underwriting fees. This £3.3 billion share offer cost StanChart 2.15%. Furthermore, the share of commission has tilted further towards sub-underwriters. Institutional investors soak up much of the risk, but routinely complain that investment banks get an unduly large proportion of the fees. Here they‟ll get 150 basis points as sub-underwriters, with 65 kept by the primary underwriters. Before stomping round to their broker to ask for the same treatment, however, Finance Directors should consider whether their company bears comparison with mighty StanChart. Even when the financial system was under threat, the bank paid less than 3% to insure its share offer against failure, while other companies were charged 4% or more if they could get a rights issue away at all. The Daily Telegraph Lloyds to axe a further 4,500 jobs in its IT arm: The latest job cuts will bring the total number of roles lost at the bank since its merger with HBOS in January 2009 to “about 22,000”, the company said. Standard Chartered rights issue prompted by new rules: Peter Sands, Chief Executive of the emerging markets bank, confirmed on Wednesday that Standard Chartered will raise the funds in a deeply-discounted rights issue to “safeguard our ability to grow”. JPMorgan Chief defends home foreclosures: Jamie Dimon, Chief Executive of JPMorgan Chase, has robustly defended how the bank evicts homeowners, as the row over repossessions in America escalates in the run-up to key elections. News Corp‟s political donations prompt investor protest: F&C, the U.K. fund manager, plans to vote against the re-election of the Chairman of News Corp‟s audit committee in protest at political donations the media company has made in the U.S. Part-time workers make up nearly a third of U.K. workforce: The number of people working part-time hours rose by 143,000 in the three months to August to reach 7.96 million, the highest figure since comparable records began in 1992, the figures by the Office for National Statistics have revealed. BAA airport sell-off challenge fails: Earlier this year Spanish owned BAA, had successfully challenged the Competition Commission‟s decision that it should surrender two more of its airports, having already sold Gatwick to Global Infrastructure Partners. Ascent Resources: Jumped 1.1p to 51/4p, after an independent report corroborated the highly prospective nature of its Petisovci-Lovaszi gas project on the Hungarian/Slovenian border. 5 Newspaper Headlines Refer to the last page for disclaimer 14 October 2010 Rentokil Initial: Lost 0.1p to 1003/4p, as UBS took a bearish view on the stock. Analysts at the broker said “on a bear case scenario we see downside to around 88p”. Bodycote International: Jumped 25p to 301p, following a much better-than- expected trading update. Barclays: Shed 23/4¾ to 292p, as traders said they thought the banking group would be the next in line to tap investors for fresh cash. The Questor Column: RPC Group looks a slow and steady package: There have been strong headwinds in terms of polymer pricing, but the company is able to pass these on to customers. However, it takes a few months to do this, so there is a lagging effect if input costs rise. Despite this, the group still expects to meet full year forecasts. In its trading update a couple of weeks ago, the company said revenues in the first half of the current year would be higher than in the first half of last year. About 60% to 70% of the group‟s business is in the production of bespoke plastic packaging on contracts that last three to five years. This means earnings are pretty visible. The shares are trading on a March 2011 earnings multiple of 10.2 times, falling to 9.3 in 2012. The shares are also yielding 3.8%.They were first recommended at 211p on 26 July last year and they are now 41% higher, compared with a market up 23%. The company‟s business should benefit from a broad economic recovery and it will continue to pass on rises in input costs to customers should they occur. RPC Group. 298½p - 2½. Questor Says Buy. Antofagasta is quality, but shares fully valued for now: Worries over Chinese demand for commodities emerged this week after reports suggested that China had raised reserve requirements on six banks for the next two months. This is a way of removing cash from the economy and helps with inflationary pressures. The news led to a sell-off in Asian equities. The price was propelled to this level on the expectation that poor U.S. jobs data would spark a further round of quantitative easing with asset purchases probably starting in the early part of next year. The most bullish proponents of the copper price have been talking about copper hitting $10,000 a tonne recently, compared with about $8,300 now. Questor is quite sceptical about such bullish forecasts, although a falling dollar will support the copper price. The shares are trading on a December 2010 earnings multiple of 16.9, falling to 11.1 next year. This demonstrates the growth in production that the company is expected to show next year. The shares were first recommended at 915½p on 13 December last year, and they are now up 34% compared with a market up 7%. The shares do appear fully valued at the moment and therefore the rating is downgraded to hold from buy. Antofagasta. £12.49 -19p. Questor Says Hold. The Independent Shortage of jobs prompts part-time boom: Youth unemployment stands at a16-year high, while more than 1.5 million people are in temporary or part- time work because they cannot find a full-time post. 6 Newspaper Headlines Refer to the last page for disclaimer 14 October 2010 JPMorgan to expand review of 100,000 pending repossessions: JPMorgan Chase said it could face penalties over missing paperwork and irregularities in its foreclosure processes, but said the costs would be minor and that no customers had been inappropriately thrown out of their homes. Promised rise in ISA limit is set to be £470: The amount of money people can save into a tax-free ISA looks set to rise by £470 next year. Cuts threatening 50,000 firms: Cuts announced in next week‟s Comprehensive Spending Review could lead to 50,000 private sector insolvencies. Lovefilm signs to PlayStation3: Movie rental group Lovefilm has secured a “game changing” deal to stream movies through Sony‟s PlayStation3, expanding its reach to three million more homes. Wyfla nuclear closure deferred: The Wylfa nuclear power station is to operate up to December 2012, making use of a two-year lifetime extension granted, the U.K. Nuclear Decommissioning Authority (NDA) said. Canvas should be blocked, says Sky: BSkyB has become the latest media group to call on Ofcom and the Office of Fair Trading to block the launch of YouView, the internet TV venture formerly known as Project Canvas. The Guardian Hands seeks £7 billion from Citi over EMI: Guy Hands is seeking a staggering £7 billion in damages from Citigroup in a showdown with the American bank that moves to a New York court next week. Jobless benefit claimants rise again: The picture in the labour market remains bleak, with the number of people claiming jobless benefits in Britain last month rising at its fastest rate since January. Angry investors balk at News Corp‟s $2 million gift to Republicans: Shareholders are poised to vote against re-election of company Director Sir Rod Eddington in protest at Rupert Murdoch‟s decision to back Obama opposition. U.S. spend-or-cut debate rages on at World Knowledge Forum in Seoul: Economic heavyweights Professors Paul Krugman and Niall Ferguson clash again over stimulus spending proposals Big six make a small concession to business lending: There was progress of sorts when the big six British banks trotted round to Downing Street to present their findings on small business lending. Daily Mail Pound weak as economic clouds darken: The pound continued its recent falls gainst the Euro to new five-month lows as U.K. consumer confidence worsened, but still managed to gain against the dollar. Pensions tax relief set for „massive‟ cuts: Wealthy savers are bracing themselves as the Government prepares to curb the tax breaks it affords on money ploughed into pensions. 7 Newspaper Headlines Refer to the last page for disclaimer 14 October 2010 Consumers relying on costly payday loans: Consumers are becoming increasingly reliant on expensive payday loans to tide them through cashflow problems, according to new research. Broker Views: Corin Group: Investec Securities upgraded the stock to “Hold” and increased the target price to 46.00p from 45.00p Bodycote: FinnCap maintains a “Buy” rating on the stock, with a target price of 318.00p Rockhopper Exploration: Westhouse Securities maintains a “Buy” rating on the stock, with a target price of 495.00p Rotork: Bank of America downgraded the stock to “Underperform” and decreased the target price to 1,750.00p from 1,860.00p Whitbread: Numis Securities downgraded the stock to “Add” and decreased the target price to 1,800.00p from 1,900.00p Hambledon Mining: Fox-Davies Capital maintains a “Buy” rating on the stock, with a target price of 18.00p Daily Express Morning meeting: welcome measures to help small businesses: Many small firms feel they have been left financially high and dry by the banks since the credit crunch struck. Banks in dragon fund for small businesses: The Bosses of Britain‟s biggest banks have proposed a £1.5billion Dragons‟ Den-style growth fund to boost small businesses. JP Morgan sees profits take off: JP Morgan Chase reported a 23% jump in third quarter profits and triggered estimated annual bonuses of £250,000 for hundreds of its staff in London. Standard leads way with £3.3 billion cash call: Standard Chartered tapped its investors for £3.3 billion to help fund its growth in some of the world‟s fastest growing emerging market economies and to meet impending regulatory demands on banks to hold more capital. Royal mail put up for sale: Postal unions warned of job losses after the Government unveiled its plans to privatise Royal Mail. The Scottish Herald Shock as power Chief quits post: Nick Horler, the Chief Executive of ScottishPower, has resigned from his post with immediate effect, according to a statement issued by the Spanish-controlled company. Consumer price inflation stays stubbornly above official target: British consumers paid less for petrol and airfares in September but shelled out more for food and clothing as official figures showed consumer price inflation was stubbornly high at 3.1%, well above official targets. 8 Newspaper Headlines Refer to the last page for disclaimer 14 October 2010 Power of Lloyds Group „distorts mortgage market‟: The leader of Britain‟s building societies singled out Lloyds Banking Group, Owner of Bank of Scotland, for distorting the mortgage market and posing a potential risk to the financial system. C&C Group toasting strong Magners and Tennent‟s sales: C&C Group has highlighted a strong performance by the Tennent‟s lager business in the first half, during which sales of the company‟s Magners cider increased in the U.K. for the first time since 2007. Market Round Up FTSE 100 rose 1.5% to 5,747.4. FTSEurofirst 300 index added 1.4% to 1,086.5. DJIA gained 0.7% to 11,096.1. NASDAQ climbed 1.0% to 2,441.2. S&P 500 index closed 0.7% higher, at 1,178.1. Nikkei 225 index is trading 1.4% higher, at 9,537.9. In Asia, crude oil for November delivery is trading 75 cents higher at $83.76 per barrel. At 0410 BST today, the GBP is trading 0.3% higher against the USD at $1.5978, 0.4% lower against the EUR at €1.1348 and 0.3% down against the JPY at ¥129.81. 9 Newspaper Headlines Refer to the last page for disclaimer 14 October 2010 Disclaimer This e-mail, including its contents and any attachments are confidential. Please delete this email and notify the sender immediately, if you are not the named recipient. You should not copy it for any purpose or disclose its contents to any other parties. Copyright is the property ETX Capital. Any prices or data contained herein are indicative and subject to change without notice; its accuracy is not guaranteed and should not be relied on. E-mail transmission cannot be guaranteed to be secure or free from errors. 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