London open
City sources predict the FTSE 100 will open down 18 points from yesterday's close of 5,484.
Stocks to watch
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Royal Dutch Shell is ploughing on with its bid for Cove Energy, extending the offer period, even though less than one-twentieth of Cove's shareholders have so far accepted the offer. As at 13:00 on June 13th, Shell's 229p-a-share offer had received acceptances in respect of around 4.84% of the issued share capital of Cove. The Anglo-Dutch oil giant's offer was announced on April 24th and was backed by the Cove Energy board, but since then the bid has been trumped by Thai oil firm PT Exploration and Production Public (PTTEP), which is offering 240p per share. Not surprisingly, the board of Cove is now recommending acceptance of the PTTEP offer.
Design and engineering consultancy WS Atkins said it had performed well over the last year despite tough conditions and was boosting its dividend. The company reported revenues up 9.4% to £1.7bn in the year to the end of March, with earnings per share up 5% to 7.9p. Pre-tax profits were up 48% to £135.5m, although this included the sale of its UK asset management business, which netted £7.2m.
First quarter revenues and profits were down at electronics components supplier Premier Farnell, but the group said sales are stabilising. Total revenue in the February to April quarter was down 5.0% at £241.0m from £252.5m the year before. Both Europe and Asia Pacific showed strong sequential growth of 2.1% and 8.5%, respectively with Asia Pacific returning to year-on-year growth. North America was 2.7% lower, sequentially, as Premier Farnell continued strategic shift away from commodity maintenance, repair and operations (MRO) markets.
In the Press
Microsoft is in talks to buy a leading social network for companies for more than $1bn, according to reports. A deal for Yammer could be sealed as soon as today, Bloomberg reported, citing unidentified sources. Microsoft already owns a range of business products, and adding Yammer would step up the rivalry with Salesforce.com, which landed social-marketing tools when it paid $745m purchase for Buddy Media earlier this month. Oracle also recently bought two companies that analyze data on social-media sites - Vitrue and Collective Intellect. Frank Shaw, a spokesman for Microsoft, declined to comment to Bloomberg on a potential deal. Deanna McPherson, a spokeswoman for Yammer, also declined to comment, The Telegraph comments.
The oil price could almost halve later this year if the crisis in the Eurozone escalates, Credit Suisse believes. "Brent oil prices would again hit $50 (£32) a barrel" in a worst-case scenario, according to analysts Jan Stuart and Stefan Revielle. "Oil demand would deflate sharply following acute crises of confidence." The analysts said that all potential negative scenarios involved Europe "to some degree" with the starting point of collapse coming over the summer. However, Brent crude rose $1.06 to $98.20 yesterday after the US Energy Department said the country's stockpiles had seen a surprise fall of 191,000 barrels to 384.4m barrels last week, according to The Telegraph.
France's newly elected government has abruptly suspended licences to drill for oil off the coast of French Guiana in a potentially shattering blow for Shell and Tullow Oil. An exploration well less than 160km (100 miles) off the South American colony struck a hydrocarbon deposit at a first attempt in September, sparking excitement about prospects for as much as $80bn (£51bn) in oil. The find raised the possibility that the tiny tropical territory of fewer than 200,000 people could become a big player in global energy. Shell, Tullow Oil, Total, Wessex Exploration and Northern Petroleum jointly own the drilling project and had expected authorisation to continue, The Times reports.
Newspaper tips
The market was spooked by yesterday's trading update from supermarket group Sainsbury, but Questor thinks the market is wrong. Performance at its convenience store operations was solid, although there is some slowing of the out-performance relative to its superstores. However, they remain a good driver of growth. Sainsbury has also gained market share in general merchandise and clothing, as non-food sales continue to grow faster than groceries. John Rogers, Sainsbury's finance director, confirmed to Questor yesterday that he expected dividend cover would start to rise in the future as capital expenditure was reduced. Mr Rogers plans to increase the dividend cover to about twice, while still raising the payment. This is important, as it implies the chunky yield, which is higher than utilities such as Severn Trent, is secure. The shares are likely to be supported by the yield and Sainsbury is definitely a share to own for those seeking income, The Telegraph says.
New investors have a week to buy shares in Severn Trent before they trade without the right to a 63p-a-share special dividend. But is it worth it? The shares trade without the right to this payment from June 20. The cash return was announced alongside the company's results two weeks ago. Severn shares offer a yield of 4.2pc rising to 4.5pc next year. The special payment is also an attractive proposition, although the shares are likely to slide next Wednesday when the shares trade without the right to the one-off dividend. It will be interesting to see if the fall is more than 63p a share. Severn shares appear richly priced and the company's exposure to non-regulated businesses in Southern Europe clouds the issue. So, on balance, Questor maintains a hold rating, Questor says.
US close
The main US equity benchmarks finished near to their worst levels of the day on Wednesday, as investors reacted to the very weak retail sales numbers out earlier and nervousness in the Eurozone which weighed on bank stocks. That despite yesterday's gains on the back of speculation of further monetary easing by the Federal Reserve.
PC manufacturer Dell, howeverk was cast in a positive light after announcing that it will begin to pay-out a dividend.
JP Morgan climbed almost 2% after its embattled Chief Executive, Jamie Dimon, responded before the Senate Banking Committee for the $2bn in derivate losses incurred by his traders.
Shares of Mc.Donald's held up despite a downgrade from Goldman Sachs. Johnson&Johnson's acquisition of Synthes has received regulatory approval; while JP Morgan upgraded its recommendation on shares of the company to buy from neutral.
Philip Morris announced a plan to buy-back approximately $18bn of its own shares over the next three years.
