Rentokil a focus for range-bound FTSE-100

23 Aug, 2004

A long-awaited strategy review from services group Rentokil will provide a focus this week for UK investors, jaded by concerns over rocketing high oil prices and thin trading volumes.
And as Persimmon kicks off the UK house-builder reporting season, investors will look for the effects the recent interest rate hikes have had on the housing market.
By Friday's mid-session the FTSE-100 share index was down 8 points at 4,354.8 - set to end the week slightly higher but still just under 3 percent down so far this year.
Mounting concerns that crude oil prices - currently eyeing $50 a barrel amid escalating violence in Iraq - will stifle the corporate profit recovery has weighed on sentiment in recent months and market watchers said they see no signs of correction in sight.
Worries that the earnings recovery has reached a peak - evinced by flagging sales and weak outlooks at US technology bellwethers such as Intel - has also hindered the benchmark FTSE's progress.
"We still believe markets are range-bound in the near-term and that for a full blown break to the upside we need both a lower oil price and visibility on growth into 2005, something we think is unlikely before the autumn," said Deutsche Bank analyst James Barty.
But a growing feeling that interest rates may be peaking in the UK may act as a support.
"Now we can really begin to think about interest rates peaking, people can factor that into their assumptions for shares - that's a big barrier out the way," said Mervyn Douglas, UK equity fund manager at Morley Fund Management.
"You want to be more cyclical now. Coping with interest rates will be a real factor as is the fact that shares are cheaper than they were."
Turnover has remained thin as those investors not away on holiday largely stayed on the sidelines, awaiting a catalyst.
Pest-control-to-cleaning-services group Rentokil reports first-half earnings on Thursday. The market's attention will be on whether the company's new chairman Brian McGowan will recommend breaking up the pest control to security company following his internal review.
The stock has been the best performer in its sector in the past few weeks on the back of speculation of a potential break up or bid.
"There is a lot of faith in a major strategic event of some type, with expectation that this may come as early as Aug. 26," said Dresdner Kleinwort Wasserstein analysts in a note.
"We feel this may be hype with the focus returning to the company's operating woes."
Elsewhere among blue chips the world's biggest drinks can maker Rexam reports interim's on Wednesday, while hotels and gaming firm Hilton posts half-year figures on Thursday.
Among mid-cap speciality finance companies, lender and debt collector Cattles, the subject of market speculation of a possible take-over, reports results on Thursday.
Mid-cap investment bank Singer & Friedlander - also the subject of take-over talk - delivers its interim's on Monday.
On the economic front, the release of the UK GfK consumer confidence report and the University of Michigan sentiment release - both due on Friday - will be watched for clues on the mood of the all-important shopper.

Read Comments