GLOBAL MARKETS: London Stocks Flat With Europe Closed

GLOBAL MARKETS: London Stocks Flat With Europe Closed
By Kimberly Vlach
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--London stocks were little changed Friday in very quiet trade as European equity markets remained closed for the May Day holiday, leaving investors in the U.K. to start the new month with some profit-taking and sector rotation following April's stellar run. "In the near term, we believe the rotation out of defensives into cyclicals may continue, provided we don't get a significant relapse in economic newsflow or stock market performance," said strategists at Morgan Stanley. London's FTSE 100 index was almost unchanged at 4244.17 at 0755 GMT, while the Frankfurt and Paris markets were closed. Morgan Stanley said a sustained and solid economic - and stock market - recovery is unlikely and that it prefers defensive stocks in the medium- to long-term horizon. European corporate announcements were thin, with only U.K.-listed companies reporting. Rentokil Initial reported first-quarter revenue growth but a drop in operating profit, adding it expects earnings growth to start in the third quarter. Its shares rose 14% to 75.8 pence. Pan-European telecoms operator Colt Telecom Group reported a doubling of first-quarter pretax profit before exceptional items, helped by currency movements and an increasing proportion of high margin data revenue. Its shares were 2.7% higher at 97 pence. And Informa PLC launched a GBP242 million rights issue to cut its debt levels and said it was changing its corporate structure to take advantage of favorable Swiss taxes. Its shares were 14% higher at 340 pence. On Wall Street Thursday, the Dow Jones Industrial Average closed down 0.2% at 8168.12 and the Standard & Poor's 500 index finished 0.1% lower at 872.81. Much of the afternoon slide came after President Barack Obama said Chrysler will file for Chapter 11 bankruptcy protection. While the move was expected, trading desks noted it provided a reminder that economically sensitive companies remain on a weak footing, even after many have paced a more than month-long surge for the market. On Friday in Asia, Japan's Nikkei 225 index closed 1.7% higher but Australia's S&P/ASX 200 index finished 0.2% lower. Hong Kong, China and Korea were closed for public holidays. Those who were investing the in the markets mostly shrugged off the Chrysler news, as well as further updates on the spread of swine flu. The World Health Organization said Thursday that a new flu strain continued to spread, particularly in Mexico and the U.S., but refrained from declaring a global pandemic even as more countries confirmed cases. Amid a growing debate around the globe about travel restrictions, the United Nations public-health agency raised the number of confirmed cases of the A/H1N1 virus to 236 from the 148 reported Wednesday. "Despite the attention given to swine flu and the odd looks at colleagues who cough or sniffle, markets have remained focused on facts and figures. Measures of risk continue to show that fear is dissipating, helping bolster risk appetites," said analysts at RBC Capital Markets. Elsewhere, in the currency markets, the small increase in risk appetite benefited the euro and sterling against the dollar and the yen. The euro climbed to $1.3275 at 0745 GMT from $1.3230 at the Thursday New York close. But the dollar firmed to Y99.33 from Y98.63. In the sovereign debt market, trading activity was restricted due to the May Day holiday and a closed bund futures market. However, gilts opened higher Friday, as traders looked to square positions ahead of the holiday weekend. June gilts were up 0.54 at 121.14 at 0750 GMT, with the 10-year gilt up 0.45 at 108.77, yielding 3.44%. Spot gold eased to $883.65 per troy ounce from $899.15 in late New York business Thursday, and July Nymex light, sweet crude oil futures dipped to $50.55 per barrel from $51.12. -By Kimberly Vlach, Dow Jones Newswires; +44-20-7842-9352; kimberly.vlach@dowjones.com
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