London shares higher midday on late Wall Street bounce

Leading shares remained firmer but off intraday highs in thin midday trading, tentatively clawing back some of yesterday's massive losses, although investors continued to tread warily in the wake of the apparent $4 bn (€4.06bn) fraud at WorldCom, dealers said.

Leading shares remained firmer but off intraday highs in thin midday trading, tentatively clawing back some of yesterday's massive losses, although investors continued to tread warily in the wake of the apparent $4 bn (€4.06bn) fraud at WorldCom, dealers said.

At 11.55 am, the FTSE 100 index was 16.5 points higher at 4,547.5, but well below an early peak of 4,589.6, with the blue-chip index still taking its lead from the partial late recovery on Wall Street overnight.

The broader FTSE indices also remained higher, with the techMARK staging an impressive recovery, surging 17.57 points to 858.35.

Volume was thin with 814.9 million shares changing hands in 59,084 transactions.

Indications from futures markets point to a rise of around 45 points on the DJIA, extending the flurry of late bargain hunting on Wall Street last night.

There was precious little economic news for investors to get their teeth into this morning after the US Federal Reserve's FOMC, as expected, left interest rates on hold overnight.

Economists do not expect any change in the third and final revision for US first quarter GDP, with growth forecasts to stand at 5.6% for the quarter.

The latest US initial weekly jobless claims are forecast to drop a slight 3,000 to 390,000 for the week ended June 21.

Mobile phone issues spearheaded the tentative recovery on the FTSE 100 this morning after yesterday's WorldCom-inspired rout.

mm02 jumped 3-1/4 pence to 41-3/4 and Vodafone rose 1-3/4 to 88-1/4, with the latter's volume inflated by some large crosses thought to have been transacted by Merrill Lynch.

But C&W shares failed to benefit from the brighter tone in the sector, shedding 3-1/2 pence at 164-1/2 as the group faced fresh criticism of its accounting methods in the wake of the $4bn (€4.06bn) WorldCom scandal. Credit Lyonnais Securities price-target cut was also weighing on C&W.

Life assurers staged an impressive rally, having fallen sharply yesterday on fears of their exposure to WorldCom and concerns over their solvency levels in the face of deteriorating stock markets.

Royal & Sun Alliance climbed 6-1/4 to 239-1/4 and CGNU was 5-1/2 higher at 488-1/2.

But banking stocks were mixed, with a reassuring trading update from Royal Bank of Scotland failing to provide much of a boost.

RBoS said its interim results give a 'very positive picture' of the group's progress, and added that its first provision charges are in-line with expectations and consistent with 2001. Shares firmed 10 pence to 1818.

Meanwhile, Abbey National rallied 18 to 755, benefiting from an upgrade in stance by WestLB Panmure to 'buy' from 'outperform', albeit on valuation grounds.

Reckitt Benckiser was another firmer feature, rising 45 pence to 1,144, benefiting from an upgrade to 'buy' from 'hold' by UBS Warburg, which also reiterated its 1,330 pence share price target.

Also boosted by positive broker comment was BA, which was upgraded to 'market perform' from 'market underperform' by Deutsche, which feels that the flag carrier's underperformance relative to its peer group since Sept 11 is unjustified. BA rose 4-1/2 to 182-1/4.

On the downside, building materials group Hanson reversed earlier gains to fall 6-1/2 pence to 456-1/2 as investors were unnerved by its cautious outlook for 2002. Nevertheless the group said first half to June profit before tax and exceptional items is expected to be ahead of the £129.2m (€199.6m) reported a year earlier, reflecting stronger trading in its UK and Australian operations.

Elsewhere, features were sparse among the blue chips fallers and consisted largely of defensive issues as investors switched into the beaten down TMT sector.

Utilities were particularly weak: Lattice fell 3-1/4 pence to 171 and National Grid lost 3-1/2 to 461-1/4.

Trading on the second line was lively, as investors reacted to a wave of trading updates.

Avis Europe shares was the biggest mid cap faller, plunging 47-3/4 pence or 27.6% to 125 after the carhire firm warned that its full-year euro pretax profits are now expected to be up to 15% lower year-on-year after further weakness in the corporate sector.

Prepared foods group Geest followed close behind after it cautioned that its first half operating performance will be similar to last year due to the impact of poor weather on the salad market. Its shares lost 165-1/2 pence to 597-1/2.

Meanwhile, Fitness First dropped 37-1/2 to 362-1/2 as investors reacted with disappointment to news that first half profits fell short of expectations.

Among the more positive trading updates, discount retailer Matalan reported a 25.6% increase in group sales for the 17 weeks to June 22, with like-for-like sales up 5.7%. Its shares soared 16-1/2 pence to 293.

Reassuring trading news at Trinity Mirror lifted its shares a penny higher to 418-1/2, with the group confident of a satisfactory full year outcome.

It was a similar story with Persimmon, which jumped 13-1/4 pence to 436-3/4 after the company said it is enjoying its strongest ever forward sales position and good margins.

Also lifted by some upbeat trading news was AMEC, which rose 16-1/4 to 422 after reassuring investors that full-year 2002 pretax profits will meet its expectations, and that its order book remains strong at £4.7bn(€7.26bn).

Kidde rose 3 to 83 after declaring that first-half trading was in-line with expectations, while Persimmon added after unveiling its strongest ever forward sales position and good margins.

And First Technology shares also found good support, adding 13-1/2 pence at 456 following news of an increase in its full year pretax profit to £19.7 million, from 18.9 million. The group also said it is confident of long term growth in its chosen markets.

Among the smaller caps, AIM-listed Computerland was in demand after reporting a doubling in full year results, and saying the current year has started well. In response, Computerland shares jumped 24% higher, up 13-1/2 pence to 69-1/2.

Wilshaw shares were trading 2-3/4 higher at 26-1/2 as investors cheered news it is to return £5.1m (€7.8m) to investors through a tender offer at 30 pence per share and that first quarter trading is in line with expectations.

Meanwhile, a distribution deal with Danish group, Biotech Line lifted shares in Tepnel Life, 3/4 firmer at 11-3/4.

Railtrack shares remained in the spotlight as trading in the stock resumed following confirmation of the sale of its rail operating business.

Railtrack shares resumed life at 215 pence this morning, and were trading at 223 midday, down from 280 pence when the group was placed in administration by ousted transport secretary Stephen Byers last October.

A gloomy outlook statement and a slide into full year losses wiped 2 pence off shares in Telework Systems to leave them at 11.

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