SHARES STRONGLY UP/DOWN this week 19/12/05 (Master RSI)

London shares hit 4-1/2 yr highs as BOE minutes stoke hopes of rate cut

LONDON (AFX) - Leading shares jumped in midmorning deals, flirting with
4-1/2 year highs, as minutes from the Bank of England raised expectations of a
rate cut early next year, dealers said.
At 10.00 am, the FTSE 100 was 32.9 points higher at 5580.8, mirroring the
positive wider market.
In economic news, the market was given an early Christmas gift after the
BOE's rate-setting Monetary Policy Committee revealed it voted by an 8-1 margin
to keep the benchmark repo rate at 4.50 pct at its Dec 8 meeting.
Pundits had been expecting a unanimous vote, as has been the case since
September, so the news is likely to stoke expectations that a reduction will
emerge in 2006, possibly as early as February.
In equities, strength in heavyweight miners and oil stocks also helped to
underpin gains, boosted by higher base metal and oil prices overnight.
Sentiment in the mining sector was further lifted by positive broker comment
as UBS said Rio Tinto is likely to increase its 1.5 bln usd capital return
program in February or possibly announce a special dividend payment.
Furthermore, Numis lifted its price target on Rio to 3,019 pence from 2777p
due to the potential for further price increases in iron ore.
And the same broker lifted its target on peer BHP Billiton to 957p from 947
on the back of an oil discovery in the Gulf of Mexico.
In response, Rio Tinto rose 33 to 2,597, with BHP Billiton 12 higher at
918-1/2, Xstrata up 18 at 1,364, Antofagasta added 27 at 1834 and new boy
Kazahhmys firmed 13-1/2 at 697-1/2.
Oil stocks were also in demand as crude futures closed higher yesterday for
the first time in five sessions, supported by expectations for stronger demand
from China and a decline in last week's US crude supplies, as well as reports of
an oil pipeline blast in Nigeria.
BG added 6 at 570, Shell firmed 15 at 1844 and BP rose 3-1/2 at 623-1/2.
But BAE Systems was the top blue blue chip performer, rebounding from losses
yesterday, amid reports the defence group is set to agree a valuable jet
contract with Saudi Arabia.
Following a meeting in Riyadh yesterday with UK defence secretary Dr John
Reid, Crown Prince Sultan bin Abdulaziz, the Deputy Premier, Defense and
Aviation Minister reportedly told press that a deal with BAE to buy Eurofighter
jets is imminent.
The deal is reportedly involving the purchase of 48 Eurofighter Typhoon
jets, with an option to raise that to 72.
BAE Systems shares were up 10-1/4 pence at 358.
In media, Daily Mail gained as reports indicated that first round bids for
the publisher's Northcliffe Regional newspaper were submitted yesterday -
sending shares 12 higher and 768-1/2.
And still in the sector, British Sky Broadcasting gained 3 at 505 following
a report the broadcaster has agreed a deal with Sony to cross-sell each others'
products and services, in a move that could accelerate the take-up of
high-definition television in the UK.
On the downside, Compass led the fallers, dropping 3-3/4 to 216, with
dealers saying Citigroup Smith Barney has placed 29.8 mln shares in the contract
caterer via an accelerated book-build at a price range of 216-218 pence a share,
according to dealers.
In retail, GUS was 3-1/2 lower at 1,013 after Seymour Pierce downgraded the
stock to 'hold' from 'buy'.
Meanwhile, Unitied Utilities fell back 12-1/2 to 673 after going ex-dividend
today.
On the second line, Dairy Crest Group soared 17-1/2 pence to 534 amid
reports the UK dairy group has held extensive takeover talks with French peer
Lactalis.
The Daily Mail claims it has seen internal documents indicating that there
have been numerous meetings between the dairy rivals, and that Lactalis has been
given access to sensitive financial information.
The news contradicts a statement yesterday from Dairy Crest saying it has
not received a formal takeover approach and was not engaged in such discussions
with Lactalis or any other party.
Insurers were also courted thanks to ongoing sector consolidation hopes as
talk continued that Jardine Lloyd Thompson is eyeing peer Benfield.
Amlin rose 3-1/4 at 242-1/2, Hiscox added 3 at 234-1/2 and Benfied rose
3-1/4.
Sentiment in Benfield was further boosted as Merrill Lynch upgraded the
stock to 'buy' from 'neutral' in a review of the Global Reinsurance industry.
On the downside, F&C Asset Management fell 11-1/2 to 178-1/2 following an
unispiring trading update.
In an initial reaction, Bridgewell said the update contains mixed news, with
fund outflows accelerating due to poor investment performance.
The broker said it expects this trend to continue into the start of 2006
which will further reduce the group's revenue margin, already the lowest in the
peer group.