Market Watch: City Dealers Raise a Glass to Diageo’s Figures

By NO BYLINE

THE Footsie was again testing the 5800 level in morning trading, helped by a positive response from City dealers to drinks giant Diageo’s latest half-year report.

Towards the end of the morning session the blue chip index was up five points at 5796.

Diageo, the owner of brands such as Guinness and Smirnoff vodka saw its shares lift 1.4 per cent following a better-than-expected seven per cent increase in operating profits. Peer Cadbury Schweppes rose 2.2 per cent in sympathy.

But the top flight index largely maintained the uncertainty of recent days.

Buy-to-let lender Bradford & Bingley, Britain’s ninth-biggest bank, saw its revelation of full-year results at the top end of expectations rewarded with a one per cent boost to its share price and further fuelled hopes that the lender could be promoted to the FTSE-100.

Also having an effect on the stockmarket was oil’s stay below dollars 60 a barrel, which boosted confidence in equities because it means lower energy costs for companies. However, the effect is partly muted on the Footsie, given its heavy weighting in oil and gas companies.

Also on the upside, Cairn Energy rose 0.5 per cent after investment bank Credit Suisse raised its investment rating on the stock to “outperform”. And a Morgan Stanley ratings upgrade for BAE Systems boosted its shares by 1.3 per cent.

Outside the top flight, BowLeven, the Edinburgh-based energy explorer saw its shares dip a further 0.5 per cent after announcing it has sacked its chief executive with immediate effect.

On the oil markets, prices hovered around the dollars 58.13 a barrel mark for US light crude – up 48 cents, while in London, Brent crude was trading up 35 cents at dollars 58.50 a barrel.

US prices have fallen to their lowest level since late December and analysts said dealers had been cashing in on gains in January, when prices headed towards dollars 70 amid strong investor fund buying and a series of supply disruptions.

Oil prices have fallen around 15 per cent since early January. Some analysts have predicted that crude prices will soon zoom towards the dollars 100 a barrel level.

“The recent falls have breached so many technical barriers, that it is hard to see where the new support level is.” said Lin Hui, senior analyst at China International Futures.

In a report, Barclay Capital said that although the twin issues of Iran’s nuclear ambitions and violence in Nigeria are temporarily off investors’ minds, there is increasing pessimism that these situations will be diplomatically resolved.

The Organisation of Petroleum Exporting Countries forecast yesterday that crude oil demand will grow at a slower pace this year as uncertainties remain over economic growth in the US and Asia.