The Intelligent Investor

18 January 2011

U.K.
The Economic Monitor Series. Free Edition.

INSIDE THE REPORT MARKETS AT A GLANCE

Stock recommendations and price targets from top brokerage  Britain's top share index rose, led higher by Burberry, as investors
firms cheered an upbeat trading update from the luxury goods group,
while buyers came in for banks and commodity stocks. The FTSE
Analysis and views on IBM and ARM deal, Burberry share prices 100 was up 70.73 points, or 1.18 percent, at 6,056.43.
and Rio Tino's iron ore production  Gilt futures recovered some of the ground they lost following
higher than forecast UK inflation figures that strengthened the
Economic Indicator Watch case for an earlier than expected rise in interest rates. In the cash
market, the yield on 10-year gilts rose by 1 basis point to 3.63
Important Events Scheduled on January 19 percent, tightening the spread over Bunds by around 2 basis
points to 55 basis points.
Economic Events & Indicators  Sterling also hit an eight-week high of $1.6060 after much higher-
than-forecast UK inflation data.
 Adam Posen to speak at the Aston Centre for Europe
 Oil slipped after the International Energy Agency (IEA) said OPEC
 Nordic-Baltic Summit members had been quietly raising output while the oil producing
group insisted the market was already amply supplied. Brent crude
 Labour Market Statistics for March settlement was at $97.89 a barrel, up 46 cents.

Gold rose for a second day, drawing strength from the dollar's
Corporate Events 
decline against the euro as well as from Asian consumption and a
degree of uncertainty over Europe's debt crisis. Spot gold rose 0.7
 Ebiquity interim results percent to $1,371.30 an ounce by 1520 GMT

 Asos Q3 trading updates

STOCK INDICES
 J D Wetherspoon trading updates
INDEX LAST CHNG % CHNG
 William Hill pre-close trading updates.
FTSE 100* 6056.43 70.73 1.18
 Land Securities Group third quarter interim management FTSE Tech Mark 100* 2173.01 29.43 1.37
statement FTSE Eurofirst 300* 1167.59 10.65 0.92

DAX* 7143.45 65.39 0.92

Breaking News
CAC 40* 4012.68 37.27 0.94

 U.K. inflation at eight month high Stoxx Europe 600 286.48 2.42 0.85

* CLOSING VALUES
 Nationwide says consumer confidence up in Dec

 House prices falls at a slower pace -RICS CURRENCIES

 Meggitt to buy Danaher unit INDEX LAST PRIOR

Euro (EUR/USD) 1.3399 1.3284

 Emerging markets drive SABMiller’s Q3 volume
UK Pound (GBP/USD) 1.5999 1.5885

 Rio iron ore output sets new record Japanese Yen (USD/JPY) 82.67 82.71

All prices are at 11:52 AM EST

 Burberry sees FY at top end of expectations
FUTURES
LAST CHANGE

Crude Oil 91.65 0.11

Natural Gas (Mar) 4.458 -0.032

Gold, (Feb) 1369.4 8.9

Copper (Mar) 442.45 1.25

All prices are at 11:41 AM EST

The Intelligent Investor - U.K.

STOCK RECOMMENDATIONS BY BROKERAGE HOUSES

BROKERAGE/COMPANY ACTIONS RATING PREV CLOSE

RBS
Astrazeneca Cuts price target to 3250p from 3500p Hold 2978.50p
BP Raises to buy from hold Buy 500.70p
Soco International Raises to buy from hold Buy 341.80p
Salamander Energy Cuts to sell from hold Sell 282.10p
Premier Oil Cuts to hold from buy Hold 2005p
Disclaimer: The views and investment tips expressed by investment experts are their own, and not that of IBTimes or its management. We advise users to check with certified experts before
taking any investment decisions.

THE NEXT TRADING DAY

Economic Events
 Bank of England's Member of the Monetary Policy Committee, Adam Posen will speak on "Decoupling and Divergent Recoveries in
Europe" at the Aston Centre for Europe at 1700 GMT.

 Nordic-Baltic Summit (to January 20), involving Britain, Iceland, Sweden, Denmark, Finland, Norway, Estonia, Latvia and Lithuania will
look at social issues but also aim to improve competitiveness and could include discussions on North Sea oil industry.

Company Events
Ebiquity, which provides a range of business critical data, analysis and consultancy services to advertisers, media owners and public relations (PR)
professionals, is expected to announce its interim results for the six months to October 2010. Following the acquisition of Xtreme Information
Services Limited, the company, in December announced strong progress for the half year to October 2010 with the achievement of the expected
synergies occurring earlier than expected. Ebiquity said that revenues are in line with market expectations and its pre-highlighted operating profit for
the period is likely to be ahead of expectations.

Asos, the UK's leading online fashion store, will announce the details of its performance over the Q3 trading period to 31 December 2010 on
Wednesday, 19 January 2011. As a business we remain positive about the outlook for the second half of the financial year and beyond. The retailer
said its shoppers will not face the price rises other firms have warned in 2011 as it posted a 59 percent rise in first-half profit and pledged not to raise
the price of its own-brand products.

ECONOMIC INDICATOR WATCH ON JAN 19, 2011

Labour Market Statistics (Nov/Dec)

Claimant Count (December)

Forecast: 1.5k, Prior: -1.2k

ILO Unemployment Rate (November)

Forecast: 7.9%, Prior: 7.9%

Average earnings (3mth yy, November)

Forecast: 2.2%, Prior: 2.2%

Avg earnings ex bonuses (3mth yy, November)

Forecast: 2.3%, Prior: 2.3%

Office for National Statistics is due to release figure on Labour Market Statistics on Wednesday, Jan 19 at 0930 GMT.

Analysts forecast claimant count unemployment to have risen slightly in December as heavy snow curtailed the usual seasonal boost to
employment. However average earnings growth is likely to remain submissive by historical standards.

Previous figures have surprised analysts as the number of Britons out of work rose for the first time in six months in the three months to October.

The jobless number on the internationally comparable ILO measure was up by 35,000 to more than 2.5 million in the three months to October. The
jobless rate also rose for the first time in six months to 7.9 percent, confounding expectations for a steady reading of 7.7 percent.
The Intelligent Investor - U.K.

ANALYSIS AND VIEWS

IBM and ARM Team Up On Semiconductor Technology
By IBTimes

Days after announcing a partnership with Samsung; International Business Machines has announced a similar deal with ARM. The two companies will
collaborate in designing and creating advanced semiconductor technologies for the next generation of mobile products. The hoped-for result is a
suite of optimized physical and processor IP by ARM tuned to IBM's advanced manufacturing process down to 14 nanometers. The industry
standard is currently 32 nanometers.

ARM describes getting a chip design manufacturing process to 14 nanometers as an increasingly difficult challenge. It mentions lithography and
variability as issues in achieving this goal while having to simultaneously meet performance, power and area targets across hundreds of millions of
transistors. The end result, however, is a chip that provides more power, extended battery life, smooth internet access, complex multimedia and
security.

IBM and ARM have been collaborating since 2008. In the past, this effort has resulted in the implementation of extensive process and physical IP
refinements to system-on-a-chip density, routability, manufacturability, power consumption, and performance.
"The ARM Cortex processor family has become the leadership platform for the majority of smartphones and many
Michael Cadigan, general other emerging mobile devices.”
manager, IBM
"We plan to continue working closely with ARM and our foundry customers to speed the momentum of ARM
Microelectronics technology by delivering highly advanced, low-power semiconductor technology for a variety of new
communications and computing devices."
Simon Segars, executive "IBM has a proven track record of delivering the core research and development that is relied upon by major
vice president and general semiconductor vendors worldwide for their advanced semiconductor devices. Their leadership of the ISDA alliance,
manager, ARM physical IP which features a diverse set of top-tier companies as members, is growing in importance as consolidation trends in
division the semiconductor manufacturing industry continue.”

ANALYSIS AND VIEWS

Burberry share price up on FTSE 100 as Q3 sales rise 27%

By IBTimes

Shares in Burberry were up on the FTSE 100 in morning trading after the luxury fashion retailer strong double digit profit growth in the third quarter
ended 31 December.

Total revenue, excluding the group's Spanish business, rose 27 per cent on an underlying basis and 30 per cent on a reported basis to £470 million.
In Spain revenue dropped from £18 million to £10 million. Burberry said its Retail arm had seen underlying sales increase of 36 per cent to £335
million, thanks to strong sales of outerwear and large leather goods combined with a strong performance in China. Wholesale revenue rose 15 per
cent to £112 million, again thanks to growth in China and strong consumer demand.

Angela Ahrendts, Chief Executive Officer of Burberry, said, "The Burberry team delivered a 30% increase in revenue in the third quarter, with strong,
consistent growth in both retail and wholesale and in every product division and region. As a result, we now expect adjusted profit before tax for the
current financial year to be at the top end of market expectations. Ongoing initiatives in retail, digital, product development and new markets
underpin our confidence in the future."

ANALYSIS AND VIEWS

Rio Tinto's iron ore production sets new record

By IBTimes

Global miner Rio Tinto (ASX: RIO) has set a new quarterly production record at 65 million tonnes and a new annual record at 239 million tonnes.

Chief executive Tom Albanese said: "Running our operations at full capacity was a priority for Rio Tinto in 2010, in an environment of strong prices
for most of our commodities.

"Our success is clearly demonstrated in iron ore where we set new quarterly and annual production records. During the quarter we approved a
further $5.5 billion in value-adding growth projects, including the expansion of our Pilbara iron ore operations to 283 million tonnes a year and the
first phase of an aluminium smelting pilot plant in Quebec using our new AP60 technology."

Mined and refined copper were down 9 per cent and 6 per cent on the fourth quarter of 2009 and down 16 per cent and 5 per cent on full year
2009, in line with previous guidance, Rio Tinto said. Bauxite production increased 9 per cent year on year in line with higher demand. Alumina and
aluminium production were broadly flat.

Australian hard coking coal production was up 8 per cent on the fourth quarter of 2009 and rose 20 per cent on full year 2009, following increased
investment at the Queensland operations. Australian thermal coal production was down 9 per cent overall for the year, mainly due to wet weather in
the Hunter Valley. The resource giant said the force majeure declaration at the four Queensland coal mines remains in place. All the Queensland coal
mines are operational but are still constrained in some way by weather impacts, including the impact on third party infrastructure.

Rio Tinto said it is currently unable to provide an estimate of the full impact of this adverse weather or the duration of the force majeure declaration.
The Intelligent Investor - U.K.

TOP STORIES

U.K. inflation at eight month high

Britain's inflation figures will mark the start of a difficult few months for the Bank of England after it jumped to an eight-month high in December, piling pressure on the
Bank of England to raise interest rates. The Office for National Statistics said the annual rate of consumer price inflation increased to 3.7 percent last month from 3.3
in November, after prices rose by a record 1 percent between November and December. Analysts predict still higher inflation in January, due to an increase in value-
add tax to 20 percent from 17.5 takes effect. George Buckley, economist at Deutsche Bank said that the figures are obviously a lot worse than expected, and will raise
the risk that the Bank of England will have to move interest rates in the first half of this year. Oil prices are also fast approaching $100 a barrel, far above BoE
assumption in its November Inflation Report.

Nationwide says consumer confidence up in Dec

British consumer confidence picked up in December for the first time since August, though concerns on jobs cut and the economic outlook still left it far below its long-
term average of 81. The Nationwide Consumer Confidence index jumped eight points to 53 last month from 45 in November. The measure of people's expectations
for the economy in six months also increased to 73 as compared to 61 in November, while the spending index jumped 10 points to 90. Nationwide's Chief Economist
Robert Gardner said that the index appeared to show a "decrease in pessimism" rather than a sense among consumers that the economy will significantly improve in
six months. He also stated that though the up-tick is encouraging, household confidence remains subdued, reflecting ongoing uncertainty about the economic outlook.

House prices falls at a slower pace -RICS

The Royal Institution of Chartered Surveyor stated that England and Wales house prices fell in December, but at a slower pace as it nudged up to -39 from -44 in
November. RICS said that a fewer new houses coming on to the market helped the pace of decline to moderate for a second consecutive month. It also stated that
heavy snowfall in December kept transaction volumes subdued. New buyer enquiries declined at a slower pace in December, while new vendor instructions declined at
a faster pace. The December survey found that 29 percent more surveyors thought prices would fall in the next three months than rise, down from 41 percent in
November. Even eight percent more surveyors were optimistic on sales to increase over the coming three months than decrease, up from six percent in November.
RICS spokesman Jeremy Leaf said that the surveyor sentiment does appear more positive for the coming months.

Meggitt to buy Danaher unit

Meggitt, British aeroplane parts supplier stated that it agreed to buy U.S. component maker Pacific Scientific Aerospace from Danaher, improving its product range.
The company will fund the purchase by placing 69.8 million shares, or roughly 10 percent of its share capital for $685 million. Meggitt, which supplies products such as
flight displays and wheels to planemakers Airbus and Boeing said that the acquisition would boost its ability to offer fire and smoke suppression, electric power systems,
sensors and anti-icing products for aircraft. The acquisition is expected to complete by the end of April 2011 and the details of the placing price will be announced after
the close of the book-building process.

Emerging markets drive SABMiller’s Q3 volume

Brewer SABMiller beat forecasts after it reported a 3 percent rise in quarterly volumes in its latest trading update. The company said that strong growth in Africa and
Asia and an improving Europe offsetting a fall in Colombia, which was hit by the heaviest rain for 50 years, lifted its quarterly volumes. It also stated that quarterly
revenue was up by 6 percent, mainly due to rise in beer prices and soft drinks volumes for the quarter rose 5 percent on an underlying basis. The company said that the
growth in Britain and Ukraine helped offset falls in Russia and the Czech Republic. The company which earns over 80 percent of its profits in emerging markets like
Colombia, South Africa, Poland and China says that it is seeing a recovery in many of these markets, though other markets are held back by high unemployment hitting
consumption.

Rio iron ore output sets new record

Global miner Rio Tinto has set a new quarterly production record at 65 million tonnes and a new annual record at 239 million tonnes. Mined and refined copper were
down 9 per cent and 6 per cent on the fourth quarter of 2009 and down 16 per cent and 5 per cent on full year 2009, in line with previous guidance. Bauxite production
increased 9 per cent year on year in line with higher demand. Alumina and aluminium production were broadly flat. Rio Tinto said it is currently unable to provide an
estimate of the full impact of this adverse weather or the duration of the force majeure declaration. Chief executive Tom Albanese said that the company’s success is
clearly demonstrated in iron ore where they set new quarterly and annual production records.

Burberry sees FY at top end of expectations

Burberry, the luxury fashion retailer reported a strong double digit profit growth in the third quarter ended 31 December. Total revenue, excluding the group's Spanish
business, rose 27 per cent on an underlying basis and 30 per cent on a reported basis to £470 million. In Spain revenue dropped from £18 million to £10 million.
Burberry said its Retail arm had seen underlying sales increase of 36 per cent to £335 million. Wholesale revenue rose 15 per cent to £112 million, again thanks to
growth in China and strong consumer demand. Angela Ahrendts, Chief Executive Officer of Burberry, said, "The Burberry team delivered a 30% increase in revenue in
the third quarter, with strong, consistent growth in both retail and wholesale and in every product division and region. As a result, we now expect adjusted profit before
tax for the current financial year to be at the top end of market expectations. Ongoing initiatives in retail, digital, product development and new markets underpin our
confidence in the future."

This report is produced by

International Business Times
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