THE ECONOMIC MONITOR

24 September 2010

U.K.
Free Edition

INSIDE THE REPORT MARKETS AT A GLANCE

 Stock recommendations and price targets from top  FTSE 100 closed at 5598.48, up 51.40 points or 0.93
brokerage firms percent.

 Forecasts on Economic Indicators  The pound rose to $1.5772, its highest since early August.

 Important Events Scheduled on 27 September  Gilts underperformed Bunds for a second day, widening
the 10-year yield spread to 70 basis points from an 8-
Economic Events month low of 61 bps on Wednesday.

 Gold rallied to record highs in Europe, with spot prices

 ECB-Governing Council member Ewald Nowotny takes knocking on the door of $1,300 an ounce.
part in a panel discussion at a conference on financial
market supervision  U.S. crude oil futures prices rose more than $1. On the
New York Mercantile Exchange, November crude rose
 ECB President Jean-Claude Trichet gives opening remarks $1.13, or 1.5 percent, to $76.31 a barrel by 10:11 a.m. EDT.
on "Macro-prudential Regulation as an Approach to
Contain Systemic Risk
STOCK INDICES
 ECB President Jean-Claude Trichet testifies before
Economic and Monetary Committee INDEX LAST CHNG % CHNG

FTSE 100* 5,598.48 51.40 0.93

FTSE 250* 10,539.00 112.98 1.08

Corporate Events
FTSE 350* 2,953.73 27.71 0.95
 Wolesely, System C Healthcare, Ceres Power Holdings FTSE Tech Mark 100* 1,958.46 32.99 1.71
preliminary estimated results
FTSE AIM 100* 3,565.52 29.25 0.83

 Northern Petroleum, Energitix interim results (estimated) FTSE All Share* 2,889.12 26.67 0.93

FTSE Eurofirst 300* 1,078.05 12.13 1.14

 Ecommerce Alliance Q2 earnings (estimated)
DAX* 6291.97 107.26 1.73

CAC 40* 3780.97 70.36 1.9

Breaking News
Stoxx Europe 50 2538.42 22.99 0.91
 New CEO for HSBC * CLOSING VALUES

 First obstacle cleared in BHP-Potash bid

CURRENCIES
 Dana acquisition offer unconditional :KNOC
INDEX LAST PRIOR

 John Lewis sales surge Euro (EUR/USD) 1.3482 1.3319

U.K. Pound (GBP/USD) 1.5804 1.5676
 CSG Systems to buy Intec
Japanese Yen (USD/JPY) 84.22 84.33
 Euromoney expects record profit in FY All prices are at 11:11 AM EDT
 London luxury-home quarters see slow growth
FUTURES
 England to attend Commonwealth
LAST CHANGE
 U.K. online shopping to slow: Verdict Crude Oil 76.48 1.3

 Commission mulls on separating banking divisions Natural Gas 4.018 -0.138

Gold, Dec. 1298.7 2.4

Copper (¢), Dec 362.2 3.15

Wheat (¢), Dec. 704.5 7.25

All prices are at 10:56 AM EDT

THE ECONOMIC MONITOR - U.K.

STOCK RECOMMENDATIONS BY BROKERAGE HOUSES

BROKERAGE/COMPANY ACTIONS RATING
UBS
Antofagasta Cuts to sell from neutral Sell
Anglo American Cuts to neutral from buy Neutral
Kazakhmys Cuts to sell from buy Sell
Vedanta Resources Cuts to neutral from buy Neutral
Evolution
Aberdeen Asset Management Raises to buy from neutral Buy
Fiberweb Raises price target to 85p from 75p --
Panmure
GlaxoSmithKline Cuts to hold from buy Hold
Intec Telecom Systems Raises to buy from hold Buy
Investec
Alexon Group Cuts price target to 26p from 30p Buy
Robert Wiseman Cuts target price to 395p from 560p Buy
Numis
Euromoney Institutional Raises to buy from add Buy
Collins Stewart
Euromoney Institutional Raises price target to 670p from 660p Buy
Altium
Euromoney Institutional Raises target price to 800p from 720p Buy
Credit Suisse
Hammerson Raises to outperform from neutral Outperform
Goldman Sachs
Kier Group Raises price target to 1,310p from 1,225p --
KBC Peel Hunt
RAB Capital Cuts price target to 13p from 15p Hold
ROK Cuts to sell from hold Sell
Wilmington Group Raises target price to 155p from 135p Hold

Disclaimer: The views and investment tips expressed by investment experts are their own, and not that of IBTimes or its management. We advise users to check with certified experts before
taking any investment decisions.

MARKET PERFORMANCE

FTSE 100
A. Banks were leading index down with the government-appointed
Independent Commission on Banking confirming that the issue of retail
banks owning an investment division is firmly on its agenda. Barclays,
Lloyds and Royal Bank of Scotland were all lower. Meanwhile, the
unprecedented boardroom spat at HSBC seems to have been settled with
the likely departure of chief executive Michael Geoghegan to be replaced
by Stuart Gulliver, its investment head. Miners were also under the cosh led
by Kazakhmys, Antofagasta and Anglo American. ARM tops the risers. FTSE
100 down 25 at 5,535.

B. Index was still stuck in the red by a couple of points, with miners holding
the leading share index back. Kazakmys was the heaviest faller, with the
miner's announcement of an acceleration of the investment programme at
its Ekibastuz power station in Kazakhstan failed to excite investors.

C. Index moved into positive territory ahead of the U.S. open. Chipmaker
ARM, often the subject of bid speculation, was higher again, with computer
systems group Oracle said to be the latest predator with ARM in its sights.
THE ECONOMIC MONITOR - U.K.

ANALYSIS AND VIEWS

Housing market may experience further decline: Reuters Poll

Quarterly poll of economists and property analysts conducted by Reuters shows that Britain's housing market may experience fall of another 5
percent on an average, in the current house prices. The prices rose 1.0 percent in 2010, and in July analysts predicted home prices would climb 3.5
percent this year and nearly 2 percent next year.

The poll results shows noticeable shift in the view from previous polls, as 18 out of 24 respondents said they expected to observe "double-dip" in
house prices, a scenario dismissed by all but six analysts out of 22.

The poll showed that UK houses are still too expensive, assigning a score of 7 on a 10-point scale where 1 is extremely undervalued. That is a rise
from 6 predicted in the July poll, despite the average house price having fallen since then.

Home buyer’s lack of confidence in the economy, with severe government budget cuts and public sector job cuts expected over the next six year,
were cited by the respondents, the main reasons for driving the prices lower. Some respondents also identified legal and tax changes as major
factors that will push down house prices. Nationwide Building Society, Royal Institution of Chartered Surveyors and Rightmove also reported
fall in house prices last month.

The poll suggested that the tightening of banks' credit standards after the financial crisis would keep mortgage lending far short of pre-crisis levels
for at least a year, despite the benefit of record low interest rates. The poll showed monthly mortgage approvals at 50,000 in six months, and 55,000
in 12 months. The number of loans approved for new mortgages fell in August to its lowest since the housing market hit a trough in 2009,
according to data from major British banks.

"We are seeing signs that homeowners who had managed to hold off putting their homes on the market, are finally
giving up, causing a pick-up in supply which has depressed sale and asking prices."
Azad Zangana of Schroders
“It was hard to foresee another crash of the sort that wiped around 20 percent off the average value of homes,
peak-to-trough, during Britain's worst recession since World War Two.”

Analysts “Prices would not see any hints of real recovery until well into next year.“

John Hawksworth of
PricewaterhouseCoopers "House prices should eventually recover but it will be a long haul before they return to their mid-2007 peak levels."

"Numerous recent policy announcements are inadvertently conspiring to stunt what has been a surprisingly
strong bounce back in the UK housing market."

Philip Rush of Nomura “The withdrawal of home information packs had increased the number of listings and therefore the
overhang of residential stock, while an increase in capital gains tax and cuts in housing benefit would hurt
rental property values.”
THE ECONOMIC MONITOR - U.K.

SPECIAL REPORT

Gold trades at a record high, while silver at 30 months peak

Gold rallied to record highs in Europe on Friday, with spot prices knocking on the door of $1,300 an ounce due to increase in jobless claims and weaker-than-expected
data in Europe boosted concerns that the global economic recovery may slow down. Investors also looked for alternative to a weakening dollar due to the concerns
that central banks may further ease monetary policy to recover from crisis.

Soaring prices reached record within three days, while silver rallied to a 30-month high as the dollar fell on worries that there may be a
further easing of monetary policy by the Federal Reserve to safeguard the economic recovery.

Silver rose to a 2-1/2 year high at US$21.21 an ounce very near to its highest since 1980, and was later bid at US$21.06 an ounce against
US$21.11. The biggest exchange- traded fund backed by silver, iShares Silver Trust shares climbed 73.04 metric tons to a record
9,582.59 tons yesterday, as per the company’s website. Platinum was at $1,644 an ounce against $1,638.10.

U.K. Gold scenario

Gold held near record highs on Thursday at US$1,300 an ounce, while silver remained at 30-year peaks as the threat of currency devaluation raised interest in the
metals as a safe store of value. Gold spot prices in Europe hit record at $1,300 an ounce.

After the U.S. Federal Reserve signaled that it was looking to reintroducing quantitative easing to tackle sluggish U.S. economic growth, knocking the dollar, gold prices
went to a record high at US$1,296.10 on Wednesday.

U.S. Gold scenario

December-delivery gold on the Comex in New York gained 1.4 percent this week at $1,295.20 an ounce.

Spot gold was at record high of all-time high of $1,298.25 an ounce and was bid at $1,297.70 an ounce at 0917 GMT, against $1,293.50 late in New York on Thursday.

December delivery U.S. gold futures also hit record at $1,300.00 an ounce and were later at $1,299.10 an ounce, up $2.80. Silver was also at its highest of 30 years at
$21.40 an ounce, tracking gains in gold.

The dollar though fell 0.2 percent against basket of currencies, it stayed on the defensive as speculation that the Federal Reserve will soon start printing more money
drove down Treasury yields and kept the unit near a five-month low versus the euro.

Concern on further monetary easing is providing good support to price, as the slight recovery in the U.S. currency is keeping a lid on further gains in gold.

Darren Heathcote, “It is continuing to appreciate at every opportunity.”

head of trading at Investec “We didn’t manage to break and test $1,300 but certainly it looks like it is still on the cards and could happen as soon as today,
Bank given the sentiment at the moment is still one of uncertainty.”

“In its Sept. 12 meeting, the FOMC indicated that the current sub-par U.S. economic growth needs to improve, re-iterating its
commitment to further quantitative easing if this was not the case.”
Anne-Laure Tremblay,
“The FOMC announcement was positive for gold, and by extension silver, with both metals rising sharply.
BNP Paribas analyst
“If gold could dip on short-term profit taking, its outlook remains strong in light of QE implications in terms of dollar weakness and
longer term inflation expectations.”

“Heightened fears of the currency debasement that could result from an expanding Fed balance sheet, the potential for the Bank of
England to follow suit, and last week's yen intervention all compound gold's medium-term allure.”

"A sizeable factor underlying the current performance of the precious metals sector as a whole arrives from portfolio managers
who, in an effort to erode less impressive market returns earlier in the year, are putting money to work in gold, but also silver,
Edel Tully, platinum and palladium."
UBS analyst "While gold's investor audience continues to evolve, the rest of the precious metals have been on the receiving end of 'new'
interest over the past two months."

"This goes some way to explain the sizeable increase in futures positioning across the metals but can also explain the turnaround in
silver ETF demand.”

"The U.S. Fed is obviously contemplating, and the market is expecting, some kind of statement on quantitative easing.”

"The influx of new money in the system raises longer term expectations for inflationary forces"

Daniel Brebner, "If you look at peripheral Europe, you have sovereign risks which have been increasing for both Ireland and Portugal. There is a
likelihood that there will be some kind of move by the European Central Bank to resolve that challenge."
Deutsche Bank analyst
"These two things, and the likelihood that the dollar will continue to erode in value... (mean) there is real potential that we will see
higher prices."

"We could see some significant moves in gold and silver over the next quarter."
THE ECONOMIC MONITOR - U.K.
COMPANY NEWS
New CEO for HSBC
HSBC's top management seems shaken after a boardroom row has left
the bank. Stuart Gulliver, the head of investment banking will replace
the existing chief executive Michael Geoghegan, while Finance
Director Douglas Flint is to take over as chairman.
First obstacle cleared in BHP Potash bid
The first regulatory obstacle gets cleared by BHP Billiton in its bid for
Canada's Potash Corp, though still contingent on other regulatory
approvals. The company said it received antitrust clearance from the
U.S. Federal Trade Commission to proceed with its $39 billion hostile
bid for the world's largest fertilizer maker.
Dana acquisition offer unconditional :KNOC
British oil explorer Dana Petroleum 64 percent stake is under the
control of Korea National Oil Corp., so as to pave the way for the
biggest hostile acquisition of $2.6 billion by a South Korean firm to take
place, KNOC said. The company has received acceptances from 34.8
percent of shareholders to add to the 29.5 percent stake it bought in
Dana. The company requires 75 percent shareholders acceptance
before it can delist Dana from the London Stock Exchange and 90
percent before it can begin a squeeze-out process.
John Lewis sales surge
John Lewis, a British retailer reported another strong weekly
performance with sales at its Waitrose supermarket chain enhanced
by students stocking up on ready meals for the start of the university
term. The company’s sales at its 233-store
Waitrose chain rose 8 percent to 89.1 million
pounds ($139.6 million) in the week to Sept. 18.
Higher growth was basically attributed to steady
hike in online sales of 38 percent and a 16.7
percent increase in fashion sales and a strong
outcome from the London stores.
CSG Systems to buy Intec
CSG Systems, U.S. billing firm agreed to purchase British rival Intec
Telecom Systems for 236.7 million pounds ($370.9 million) so as to
create a global presence in business support systems. After the sale,
Intec shareholders will receive 72 pence a share in cash as per the
agreement.
Euromoney expects record profit in FY
Euromoney, British financial information group said that it expects the
company’s pretax profit this financial year to record high after
advertising and delegate numbers to its events recovered. The
company also forecasted its growth in subscription revenues to rise and
it expected headline sales growth of 3 percent for the year to end-
September.
Arsenal property profits soar on property sale
Arsenal Football Club announced a record full-year profit before tax of
56 million pounds ($87.76 million), attributed to the sale of property at
the old Highbury site and the sale of players such as Eduardo and Jay
Simpson. The company had generated 157 million pounds of revenue
from property, allowing them to repay 130 million pounds of bank
loans. The company said that their full-year accounts showed the club
was in good financial health and the group's property business was
now debt free.
ECONOMY NEWS
London luxury-home quarters see slow growth
As owners put more properties on the market and demand weakened
in some parts of the British capital, London
luxury-home prices gains slow in quarters,
Savills said. A new index compiled by the
London-based property broker stated that
the average value of a home costing more
than 1 million pounds ($1.6 million) soared
9.1 percent from a year earlier after a 14.4
percent annual gain in the second quarter.
Prices increased 0.1 percent from July
through September. A drop in the number of luxury-home sales in
London helped lift prices in the past 18 months.
England to attend Commonwealth
England which hesitated earlier to attend Commonwealth Games in
India, finally decided to attend it after all 17 member sports agreed to
go amid signs of improvement on the ground in India. India was facing
problem after many champion athletes quit the showcase event and
nations threatened to stay home unless authorities cleaned a village
deemed "unfit for human habitation".
U.K. online shopping to slow: Verdict
Verdict research estimates U.K. online shopping to grow at a
considerably slower pace as the Internet becomes more common
among the population and government spending cuts weigh on
shoppers. The market researchers predicted the average annual growth
to be 12 percent between 2009 and 2014, compared with 35 percent in
the previous decade, while online sales rose to 20 billion pounds ($31
billion) in 2009, or 7 percent of total retail spending.
REGULATORY NEWS
Commission mulls on separating banking divisions
A British government-commissioned enquiry may advise lenders to
separate commercial and investment banking divisions after the
financial crisis forced taxpayers to pour billions of pounds into the
sector. The banks may be ceased from proprietary trading, where they
trade with their own money, as well as introduce living wills and the use
of contingent capital, The Independent Commission on Banking said.
The commission will also think on decreasing “market concentration” in
the industry.
Additional Stimulus uncertain: Braker
Kate Barker, former Bank of England policy maker said two days after
policy makers signaled in minutes of their September meeting that
more economic stimulus through so- called quantitative easing seems
less certain and they may opt for more stimulus to kick-start the
recovery, aligning themselves with the Federal Reserve’s stance.
She told CNBC that “Inflation has been above target for 26 of the last
32 months and it’s been quite a long way over that target” of 2 percent.
A concern with quantitative easing is that “the result was that it pushed
inflation expectations up. That’s why inflation has been running higher
than expected,” she added.
THE ECONOMIC MONITOR - U.K.
NEXT TRADING DAY
Economic Events
Monday, 27 September 2010
ECB-Governing Council member Ewald Nowotny takes part in a panel
discussion (0945 GMT) at a conference (0700 GMT) on financial market
supervision hosted by Austrian Financial Market Supervision FMA,
speech by EU Commissioner Michel Barnier (0715 GMT) .
ECB-CFS Research Network on "Macro-prudential Regulation as an
Approach to Contain Systemic Risk: Economic Foundations, Diagnostic
Tools and Policy Instruments". ECB President Jean-Claude Trichet
gives opening remarks.
ECB President Jean-Claude Trichet in European Parliament, Trichet
testifies before Economic and Monetary Committee (EMAC) 1300
GMT.
Corporate Events
Monday, 27 September 2010
Wolseley, a trade distributor of plumbing and heating products to
professional contractors, and a supplier of building materials to the
professional market will release its preliminary results. The company is
expected to report a full year profit of £75.795 per share, down from
£95.50 reported a year ago. Analysts expect the company to report a
full year revenue of £13,221.76 million, down from £14,441 million
reported a year ago.
System C Healthcare a supplier of health and social care solutions will
declare its preliminary results. The company is expected to report a full
year profit of £4.390 per share, up from £3.66 reported a year ago.
Analysts expect the company to report a full year revenue of £36.45
million, up from £21.89 million reported a year ago.
Northern Petroleum, a U.K. based oil and gas exploration company
engaged in exploration, development and production of oil and gas
assets in Europe will release its estimated earnings. The company is
expected to report a full year profit of £14.845 per share, up from
£2.387 reported a year ago. Analysts expect the company to report a
full year revenue of £31.43 million, up from £4.18 million reported a
year ago.
Ecommerce Alliance will release its estimated earnings figures for the
second quarter 2010. The company is expected to report a full year
earnings (GAAP) of £0.075 per share. Analysts expect the company to
report a full year revenue of £31.75 million.
Ceres Power Holdings, a U.K. based company engaged in developing
fuel cell technology for use in small scale combined heat and power
products for the residential sector and in energy security applications
will release preliminary 2010 estimated earnings data. The company is
expected to report full a year profit of £12.88 per share, up from £11.94
reported a year ago. Analysts expect the company to report a full year
revenue of £1.49 million, up from £0.95 million reported a year ago.
Energetix Group, engages in the development of products which
provide solutions to certain identified problems in the alternative
energy market will release its estimated earnings for interim 2010.
ECONOMIC INDICATOR WATCH
No major indicators scheduled for the release.
MARKET BRIEFING
FTSE 100 closed at 5598.48, up 51.40 points or 0.93 percent. At 1241 GMT,
the FTSEurofirst 300 index of top European shares was up 0.5 percent at
1,071.29 points. The index was flat shortly before the data was released.
European stocks inched higher in afternoon trade after data showed U.S.
business spending rebounded strongly and new orders for U.S.
manufactured goods excluding transportation rose more than expected.
Sterling extended gains against a broadly lower dollar after U.S. durable
goods orders came in lower than expected. Durable goods orders fell 1.3
percent in August after a revised 0.7 percent increase in July. Markets had
expected orders to fall 1.0 percent from a previously reported 0.4 percent
gain. The pound rose to $1.5772, its highest since early August.
British government bonds fell after upbeat data from the United States
and Germany fuelled a move into riskier assets and investors booked
profits on a strong gilt rally earlier this week. Gilts underperformed Bunds
for a second day, widening the 10-year yield spread to 70 basis points
from an 8-month low of 61 bps on Wednesday. In the cash market, the 10
-year gilt yield rose more than 7 basis points to 3.03 percent, the 30-year
yield was 5 basis points higher at 4.02 percent, while the two-year yield
was little changed at 0.68 percent.
Gold rallied to record highs in Europe on Friday, with spot prices knocking
on the door of $1,300 an ounce due to increase in jobless claims and
weaker-than-expected data in Europe boosted concerns that the global
economic recovery may slow down. Spot gold hit an all-time high of
$1,299.95 an ounce and was bid at $1,298.30 an ounce at 1416 GMT,
against $1,293.50 late in New York on Thursday. U.S. gold futures for
December delivery hit a record $1,301.60 an ounce and were later at
$1,299.60 an ounce, up $3.30. Silver also reached its strongest in 30 years
at $21.45 an ounce, tracking gains in gold.
U.S. crude oil futures prices rose more than $1 on Friday, bolstered by
strong German business sentiment data, the dollar's weakness and a
higher open by equities markets on Wall Street. Energy investors also were
eyeing Tropical Storm Matthew in the Caribbean and building on
Thursday's gains, sources said. On the New York Mercantile Exchange,
November crude rose $1.13, or 1.5 percent, to $76.31 a barrel by 10:11 a.m.
EDT (1411 GMT), trading from $74.66 to $76.35.
CORPORATE RESULTS
DATE - 27/September/2010
COMPANY NAME EVENT
Wolseley Preliminary 2010
System C Healthcare Preliminary 2009/2010
Northern Petroleum Interim 2010 (Estimated)
Ecommerce Alliance Q2 2010 (Estimated)
Ceres Power Holdings Preliminary 2010 (Estimated)
Energetix Interim 2010 (Estimated)
This report is produced by
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