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US stocks mark time as budget talks drag on

Published: 15:24 25 Sep 2013 BST

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US stocks have opened slightly lower, extending the losing streak, despite a surprise increase in US durable goods orders.

Concerns over the ability of the US legislature to reach an agreement on a stop-gap budget are weighing on sentiment.

The Dow Jones average is virtually unchanged at 15,334, while the S&P 500 is off 2 points at 1,696 and the NASDAQ Composite is also down two, at 3,766.

Dual listed stock Carnival (LON:CCL) is lacking buoyancy after a profits warning.

The company, which operated the Costa Concordia before it famously crashed into the Italian shores, warned that it could face another three years of tricky waters, hinting that it could make a loss in the current quarter.

“While some of our current challenges and cost pressures will continue well into next year, we have tremendous opportunities to enhance shareholder value over time,” insisted chief executive Arnold Donald.

Morgan Stanley piled more misery on the company by cutting the stock to ‘sell’ on the back of the statement.

The profit warning saw the heavyweight broker cut its earnings per share estimates considerably – by 28% for this year and by 16% for the next.

Even a major restructuring or cash return is unlikely to haul the sinking share price out of the water, Morgan Stanley added.

“The shares have held up well in the face of significant earnings downgrades over the last few years, reflecting investors’ increasing willingness to look through to a more normal yield environment,” it said.

“But ‘normality’ keeps being pushed out, and even on F15 the shares look expensive to us.”

Orthopaedic devices maker Stryker is marginally lower after it announced a US$1.65bn deal to buy Mako Surgical. The US$30 a share offer saw Mako’s share price surge 83% to US$29.51.

In other mergers & acquisition news, life assurance mutual New York Life Insurance has agreed to acquire Dexia Asset Management for €380mln.

The mood is similarly downbeat back in Blighty, where Carnival’s 6.8% fall is dragging down the Footsie, while utilities such as SSE (LON:SSE) and Centrica (LON:CNA) are also under the cosh, after Labour leader Ed Miliband’s conference pledge to freeze energy bills.

Gains from RBS (LON:RBS) and Travis Perkins (LON:TPK), which benefited from a UBS upgrade to ‘buy’, offset the losses some, but the blue-chip index is still down 36 points or 0.6% to 6,536.

Leader of the opposition, Ed Miliband, said: “Your bills will not rise: it will benefit millions of families and millions of businesses.”

Shares in power suppliers tumbled as investors mulled the possible consequences of a Labour government from 2015, but JPMorgan insists that any weakness in Centrica’s share price represents a buying opportunity.

The broker is more cautious on SSE given its stretched balance sheet and a lack of a recovery in UK spark spreads.

To make matters worse for Centrica, its shares were trading without the right to get a share of the latest dividend.

On the mid-cap index, investors are having a hard time working out what to make of ICAP’s (LON:IAP) settlement with regulators over allegations some of its traders rigged LIBOR rates.

The inter-dealer broker will pay a total of £55mln, the bulk of which will be paid to the US Commodity Futures Trading Commission, with the rest going to the Financial Conduct Authority.

Chief executive Michael Spencer said: “We deeply regret and strongly condemn the inexcusable actions of the brokers who sought to assist certain bank traders in their efforts to manipulate Yen LIBOR.

“Their conduct contravenes all that ICAP stands for. As soon as their actions came to light, we provided assistance to regulators in the US and UK to understand what had happened.

“None of the three individuals at the centre of the activity remains with the firm. Others are either no longer with the company or are being disciplined.”

The shares, which were down around 3%, rebounded to trade some 2% higher at 403p after news of the settlement, before ebbing back to 387p, down 2.2% on the day.

Women’s fashion retailer Laura Ashley blamed the bad weather on its 11% profits fall and also said competition is picking up from big rival Marks & Spencer (LON:MKS), which has launched a high-profile women’s autumn/winter range promoted by Helen Mirren and Ellie Goulding among other famous female faces.

Laura Ashley’s shares fell 8.6% to 24p.

On the small cap side of things, Rare Earth Minerals (LON:REM) was up 55% after yesterday’s interims, which failed to ignite the shares at the time.

David Lenigas’s Mexican lithium explorer has now jumped more than 2,000% in the last three months.

Iofina (LON:IOF) was another high flying junior, up 19% to 177.8p. The iodine specialist posted record revenues in its latest half year as its new extraction process made its first significant contribution.

Iofina had two plants, IO#1 and IO#2 , running by the end of June, but is on track to increase this to six by the end of the current year, while sites for another six IOsorb plants have been identified for a roll-out in 2014.

IOsorb extracts iodine from the brine produced from shale oil and gas wells in the US.

Shares in Camco (LON:CCE) shot up as the clean energy company is set to be issued 54,497 California carbon offsets under California’s cap-and-trade programme. Shares in Camco were trading at 5.51p in the afternoon session, up 54% on the day, having reached a 52-week high of 6.03p earlier.

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