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FTSE 100 holds steady after Moody's keeps French rating - UPDATE

Last updated: 13:57 16 Jan 2012 GMT, First published: 14:57 16 Jan 2012 GMT

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The FTSE 100 held steady in morning trade as reassuring comments from Moody’s offset the impact from Friday’s downgrade of the ratings of nine European countries including France and Austria, which lost their AAA status, by Standard & Poor’s.

The UK’s blue chip index stood at 5,635 in early afternoon, down just one point from Friday’s close. Volumes were low owing to the Marthin Luther King Day holiday in the US.

The move by S&P left Germany as the only euro area country with the top notch AAA rating.

In response to S&P’s downgrade, fellow rating agency Moody’s reaffirmed France’s AAA rating with a stable outlook, helping European stock market indexes claw back some of their early losses.

Confidence in euro zone deBT will be tested at today’s auction of French bonds, the first sale of European deBT since the S&P move.

The euro zone’s second largest economy is looking to raise up to €8.7 billion via the deBT sale, which will be followed by tomorrow's auction of Spanish bills.

“Trading has started choppy, with investors tentative in terms of building up position sizes in the context of the move by S&P late on Friday,” said chief market strategist at City Index, Joshua Raymond.

“The move itself was of course expected and had been for some time, though of course it remains a sensitive issue in terms of how lenders react.”

Financial Times publisher Pearson (LON:PSON, up 2.6pct at 1,249p) topped the FTSE 100 leaderboard in early afternoon. It was followed by telecom group BT (LON:BT., up 1.7pct at 206.9p), which was upgraded from “reduce” to “buy” at Nomura which hiked its target price from 182 pence to 285 pence.

Carnival (LON:CCL, down 17pct at 1,864p) hit the bottom of the FTSE 100 pile as investors ran for the hills following the accident of its cruise ship Costa Concordia on the Italian coast.

Other notable fallers included oil and gas major Cairn Energy (LON:CNE, down 2.3pct at 285.4p), which, a report in the Sunday Times suggested, was in talks with Rockhopper Exploration (LON:RKH) that could potentially result in a takeover bid for the Falklands operating group.

Banks including Lloyds (LON:LLOY, down 2.3pct at 28.84p) and Barclays (LON:BARC, down 1.4pct at 198.3p) also were in decline, weighed on by concerns over their exposure to the euro zone deBT crisis.


UK corporate news

Back in the UK, other news in the top flight included an update from property group Hammerson (LON:HMSO, down 1pct at 367.4p), which announced the termination of pre-let negotiations with CMS Cameron McKenna.

Hammerson said CMS has postponed its plans to relocate, ending talks over the pre-let agreement at Principal Place.

“I have consistently said that in current conditions we would not expose our shareholders to excessive risk through building London offices on a speculative basis, which remains our policy,” said chief executive of Hammerson David Atkins.

Fellow blue chip Essar Energy (LON:ESSR, up 0.5pct at 170.7p) has commissioned the Hydrogen Manufacturing Unit (HMU) as part of the Phase I expansion at its Vadinar Refinery in India.

Essar Oil will commission six additional units by March 2012, thus completing a US$1.81 billion expansion project to increase the refinery’s capacity to 18 million metric tonnes per annum (mmtpa) from 14 mmtpa.

In the FTSE 250, housebuilder Bovis Homes (LON:BVS, up 1.5pct at 459.7p) said it is “well positioned” to achieve a further improvement in profits, which grew significantly in 2011 and met expectations as both home sales and prices increased.

In an update ahead of its full year report, the housebuilder said it has completed 2,045 homes in 2011, while the overall average sales price for private and social homes rose from £160,700 in 2010 to £162,400.

At the start of the year, the group’s forward sales for 2012 stood at 568 homes, a 35 percent improvement compared to 2012 as both private and social reservations rose in part due to an 11 percent increase in active sales outlets.

Fellow midcap, construction giant Balfour Beatty (LON:BBY, up 0.5pct at 282.6p) has won £100 million worth of contracts in the commercial sector, it said today.

In the City, London's financial heart, the firm has been awarded a two phase £57 million contract to build AXA Real Estate's Sixty London prime office development.

It has also won a £25 million contract to deliver an 11-storey office building in the City for Viridis Real Estate Service Ltd on behalf of their client, Emmatown Properties Ltd, it said.

Turning to the oil and gas sector, Exillon Energy (LON:EXI, down 1.5pct at 267.2p) reported that its average daily production reached 11,055 barrels per day in December. The group’s output in the Timan Pechora region of Russian stood at 3,314 barrels per day and daily production in West Siberia reached 7,741 barrels.

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