London shares higher midmorning; rumours of emergency rate cuts by central banks

LONDON (Thomson Financial) - Leading shares were back in positive territory midmorning as the FTSE 100 index recovered from its opening slump as rumours circulated about possible co-ordinated emergency rate cuts by central banks.

At 10.02 am, the FTSE 100 index was 45.2 points higher at 5,623.4, after opening with a 239.5 point slump to 5,338.7, while the FTSE 250 index was up 105.5 at 9,366.2.

The UK blue chip index closed a massive 323.5 points, or 5.48 pct, lower yesterday at 5,578.2, its biggest drop since Sept 11, 2001.

The broader FTSE indices were mixed with the FTSE 250 and All Share indices also in positive territory after opening slumps, but the FTSE Small Cap and techMARK 100 indices remained weak.

"We are hearing rumours of a coordinated rate cut by the US, UK and ECB which has helped the market to move back into positive territory. Real estate stocks have moved higher on this as a rate cut would help this sector," said Mark Priest, head of equity sales at Tradindex.

London shares rallied from lows as traders reacted to initial rumours that the Federal Reserve could be set for a 75 basis point emergency US rate cut, and then moved in to the blue on talk that the Bank of England, the European Central Bank, and the Swiss National Bank might undertake a co-ordinated easing in monetary policy.

Turning to the blue chip risers, real estate stocks gained with Taylor Wimpey the top riser, up 15.1 at 198.8 as rumours circulated of an emergency rate cut.

Peer Persimmon was up 17-1/4 at 314 and in the midcaps Berkeley Group gained 68 at 1,075 making it the top riser in the FTSE 250s, while Redrow was 15-3/4 higher at 312-1/2 and Barratt Developments was 24-3/4 higher at 424-3/4. Elsewhere, Home Retail Group gained 10 at 283-1/2 as HSBC upgraded the group to 'neutral' from 'underweight' following last week's trading update from the retailer to reflect the share price correction seen relative to its peers.

Meanwhile, a positive trading update from Pearson helped shares rise 20-1/2 to 641.

The group said it expects to report full-year adjusted earnings at or above the top-end of current market forecasts of between 42.0 and 45.5 pence per share. The group is confident of sustaining its financial and competitive progress in 2008.

And, Land Securities Group was 23 higher at 1,524 as the group said high levels of activity have resulted in continued strong performance across all three of its divisions, adding that it is well placed to run the group through the "current challenging environment".

Looking at the downside, the miners was the main sector dragging the FTSE lower as investors feared a global recession would reduce demand.

Kazakhmys was off 42 at 999, Vedanta Resources was 51 lower at 1,540, Anglo American was down 62 at 2,291, Xstrata was 83 weaker at 3.06 and Rio Tinto fell back 146 at 4,082.

A broker downgrade did not help shares in Experian, 10-3/4 lower at 353 as Credit Suisse has downgraded its stance on the credit checking agency, to 'underperform' from 'neutral', following the company's announcement of a third-quarter slowdown in sales in a recent trading update.

Elsewhere, Scottish & Newcastle was off 12 at 744 as the group agreed to sell back the Belgian cider group Stassen SA to Philippe Stasse.

Turning to the midcap on the downside, Northern Rock fell back 7-1/4 at 87 following yesterday's gains on reports by the Daily Telegraph the group is to pay the government up to 400 mln stg as an arrangement fee for providing the lifeline finance package that will allow the troubled mortgage bank to be sold to a private sector bidder.

And finally, a broker downgrade did not help shares in DS Smith off 10-1/5 at 160 as Goldman Sachs downgraded the group to 'sell' from 'neutral'. tf.TFN-Europe_newsdesk@thomson.com jf/sal

I suppose the impact of Fed rate cut would be short-lived if other central banks do not follow with their own rate cuts.

Risking world-wide inflation to prop up U.S. bubble. Who knows? They might impose world-wide ban on sale of gold, if this does not work.

1 posted on 01/22/2008 7:03:53 PM PST by TigerLikesRooster

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