SL..L Share News (SL.)

LONDON (Alliance News) - UK stocks were mixed Monday midday despite declines by Chinese stock markets after a mixed set of economic data from the Asian giant over the weekend, while in New York shares were called higher ahead of the start of the US earnings season.

The FTSE 100 index was up 0.2% at 5,920.75 points, the FTSE 250 was down 0.3% at 16,689.00, and the AIM All-Share down 0.3% at 723.80. In Europe, the CAC 40 index in Paris was up 0.3%, while the DAX 30 in Frankfurt was up 0.4%.

Asian stocks ended lower, with the Shanghai Composite down 5.3%, starting another week with heavy losses, while the Hang Seng in Hong Kong dropped 2.8%. The Tokyo market was closed for the Coming of Age holiday.

Data over the weekend showed China's consumer price inflation increased marginally in December on a rise in food prices but still remained well below the government's target. At the same time, producer prices continued their deep downward trend, giving space for monetary policy adjustment.

Consumer inflation edged up to 1.6% year-on-year as expected from 1.5% in November, the National Bureau of Statistics revealed on Saturday. Inflation has remained well below the government's full year target of around 3%.

Another report from the NBS showed that producer prices decreased for the 46th consecutive month in December. The producer price index dropped 5.9% year-on-year in December, the same rate of decrease as seen in previous four months. Economists had forecast a 5.8% fall for December.

"It was a shaky start for European investors this morning, as cautious buying took the place of last week's rampant selling. Weekend data from China was not particularly encouraging, while gyrations in the Chinese FX market continues, but as with any story eventually the power to shock wears off," said IG senior market analyst Chris Beauchamp.

"We are seeing this with China this morning, and while there will still be plenty of concerns, the impending arrival of US earnings season provides a new story to focus on," added Beauchamp.

US aluminum giant Alcoa will release fourth-quarter earnings after the New York close. Alcoa's results are traditionally the unofficial start of the US earnings season. Results from financial powerhouses JPMorgan Chase, BlackRock, and Citigroup are expected later in the week.

US stock futures pointed higher, with the Dow Jones Industrial Average seen up 0.4%, the S&P 500 index up 0.5% and the Nasdaq 100 up 0.3%.

Still in the US economic calendar, the US labor market conditions index is due at 1500 GMT, while Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, will make a speech at 1740 GMT.

In London, broker rating changes were driving many of the winners and losers in the FTSE 100. Sage Group was up 2.4%, benefiting from an upgrade to Buy from Underperform by Bank of American Merrill Lynch, while defence contractor BAE Systems traded up 1.8% after JPMorgan lifted it to Overweight from Neutral.

Owner of Premier Inn and Costa Coffee, Whitbread was up 1.5% after it was initiated at Buy by BoFA, while investment and savings company Standard Life was up 1.4% after it was upgraded to Buy from Hold by both Deutsche Bank and Jefferies, after HSBC had done the same on Friday.

At the other end of the blue-chip index, Sports Direct International was the worst performer, down 1.5%, after Liberum downgraded the sporting goods retailer to Hold from Buy.

St James's Place and Prudential were down 1.4% and 0.2%, respectively, after Deutsche Bank cut both life insurers to Hold from Buy.

Meanwhile, shares in drugmaker Shire were up 1.5% as investors await the confirmation of an agreed USD32.0 million takeover of Chicago-based Baxalta by Dublin-based Shire.

Citing sources familiar with the matter, Reuters said on Friday that both parties are confident the tax concerns around Baxalta spin-out from Baxter International will not impede the agreement, but are waiting for a formal legal opinion on the matter before announcing the merger.

In the FTSE 250, Laird was the best midcap performer, up 9.7%. The wireless components manufacturer could be a takeover target for US electronics group Amphenol, according to a report in The Sunday Telegraph.

The newspaper said it understood Amphenol, which makes electronic and fibre optic connectors, cables and interconnector systems, has been running the rule over Laird. The process is at an early stage and may not ultimately lead to a bid, the Telegraph said, but Amphenol is understood to have been attracted by Laird's relative discount to peers.

Shares in Home Retail were up 8.3% after several shareholders in the Argos and Homebase owner have demanded more than GBP1.6 billion for the business from J Sainsbury, the Sunday Times reported. According to the newspaper, the supermarket now faces an uphill struggle to acquire Home Retail, following news last week that it had made an offer for the company in November.

The first offer was thought to have valued Home Retail at GBP1.1 billion, according to the report, which said three big shareholders told the Sunday Times they wanted at least GBP1.6 billion, compared to Home Retail's current market cap of GBP1.2 billion.

Shares in Sainsbury's were up 1.0%.

On AIM, Rockhopper Exploration and Falkland Oil & Gas were both up 13%. Alongside partner Premier Oil, down 0.3%, the pair said they have made a new oil discovery whilst confirming a previous discovery after re-drilling one of their wells.

Oil was encountered in "a number of sandstone reservoirs" between 2,564 and 2,861 metres at the Isobel Deep well, and the partners said no oil-water contacts were encountered. Further evaluation will now be required to calibrate the well with the existing 3D seismic in order to determine future plans and the extent of the discovered resource, the partners said.

By Daniel Ruiz; danielruiz@alliancenews.com

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