RAMSEY CROOKALL & CO 5th July 2012 Morning Report

The FTSE 100 is up 0.2% at 5692.58, edging a little higher, although overall, investors are reluctant to make any bold moves ahead of the BOE rate decision. GKN is still the standout gainer, up 12% after buying the aircraft engine division of Volvo. The BOE rate announcement is at 11:00 with the chances of further QE very high. In the US, initial jobless claims are announced at 12:30.

Global engineering firm GKN jumped over 12% after saying it had agreed to buy Volvo's aero engine division and would turn to institutional investors to raise money to help pay for it. Arden Partners upgraded its rating on the stock this morning to 'buy'.   GKN plans to pay AB Volvo around £633m for Volvo Aero, which designs, engineers and manufactures components for aircraft engine turbines. To help fund the deal GKN aims to place £140m of new shares with institutional investors, with the rest of the money coming from new debt facilities.

Shareholders of Xstrata were clearly pleased with the group's decision to adjourn its extraordinary general meeting until a later date, with the stock rising early on. Shareholders were due to vote on the Xstrata-Glencore merger on July 4th.

Utilitiy giant Centrica fell after Goldman Sachs downgraded the stock to 'neutral' and cut its target from 441p to 422p.

Banks were out of favour early on with Royal Bank of Scotland, Lloyds and Standard Chartered among the worst performers. Barclays edged higher this morning following the sharp falls seen over the past week. Over the last seven days, the stock has dropped over 14% on the back of the LIBOR scandal.

Volkswagen will take over in August the remaining 50.1% stake in Porsche Automobil's sportscar unit it doesn't already own for EUR4.46 billion in cash plus one common share. Siemens could be preparing to make an offer for Ansaldo Energia, a unit of Finmeccanica, in the coming days, according to Italian business daily Il Sole 24 Ore.

THE FTSE 100              @ 10:00    Up     20      @      5,705 THE DOW JONES            closed      Up     72      @     12943 THE NASDAQ               closed     Up     24      @      2976 Exchange Rates GBP – USD        @      10:00                  1.5579 GBP - EURO      @      10:00                  1.2451