The Intelligent Investor

05 January 2011

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

INSIDE THE REPORT MARKETS AT A GLANCE

 Stock recommendations and price targets from top  Britain's FTSE 100 ended up by 29.99 points, or 0.5 percent at
brokerage firms 6043.96.

 Gilts turned negative in a global bond sell-off, after a survey

 Analysis and views on Next and Domino’s Pizza showed the United States created three times as many jobs as
share prices expected in December, erasing earlier gains from weak UK retail
and construction news. Ten-year gilt yields were 4 basis points up
 Economic Indicator Watch along with Graphs at 3.50 percent.

 List of companies earnings which hit and miss the
analysts’ expectations
 Important Events Scheduled on January 06
Economic Events & Indicators
 The Energy and Climate Change Committee report
on oil spill
 Halifax House Prices (December)
 Markit/CIPS Service PMI (December)
Sterling lost ground against a resurgent dollar, after the U.S. data

while activity in the UK construction sector contracted last month.
Sterling was down 0.6 percent at $1.5487, having fallen to $1.5478
after the U.S. data.
 ICE Brent crude oil and U.S. crude oil futures prices bounced and
turned positive, as buyers came in to buy the dip after a
commodities-wide sell-off the previous day. ICE Brent crude for
February rose $1.50 to $95.03 a barrel, trading from $92.37 to
$95.58.
 Gold extended losses, continuing its biggest three-day slide since
mid-November, after surprisingly strong U.S. jobs data, which
encouraged investors to buy into riskier assets. Spot gold was bid
at $1,369.80 an ounce at 1539 GMT, against $1,379.73 late in New
York on Tuesday.

 Markit/CIPS Composite PMI (December) STOCK INDICES

Corporate Events INDEX LAST CHNG % CHNG

FTSE 100* 6043.86 29.99 0.50

 Clinton Cards, Hays, Johnson Service Group and
FTSE Tech Mark 100* 2092.69 14.68 0.72
Cape trading updates
FTSE Eurofirst 300* 1141.04 -0.98 -0.09

Breaking News DAX* 6939.82 -35.53 -0.51

CAC 40* 3904.61 -11.42 -0.29
 Construction activity falls surprisingly in Dec Stoxx Europe 600 280.16 -0.22 -0.08

* CLOSING VALUES
 Bad weather hits Christmas sales
CURRENCIES
 LDP supporters drop to new low: Poll
INDEX LAST PRIOR
 2013 to see additional new businesses: Govt
Euro (EUR/USD) 1.3159 1.3297
 Domino's Pizza positive on full year U.K. Pound (GBP/USD) 1.5487 1.5585
Japanese Yen (USD/JPY) 83.28 82.04
 Panmure sees pipeline of deals in 2011
All prices are at 11:49 AM EST

FUTURES
LAST CHANGE

Crude Oil 90.00 0.62

Natural Gas (Mar) 4.456 -0.176

Gold, (Feb) 1375.90 -2.90

Copper (Mar) 439.15 2.25

All prices are at 11:38 AM EST

The Intelligent Investor - U.K.

STOCK RECOMMENDATIONS BY BROKERAGE HOUSES

BROKERAGE/COMPANY ACTIONS RATING PREV CLOSE

Investec
Imperial Tobacco Group Raises to buy from hold Buy 1985p
Smith and Nephew Raises price target to 703P from 633p Buy 670p
Associated British Foods Cuts to hold from buy Hold 1164p
Future Cuts to hold from buy Hold 27.5p
Deutsche Bank
British Airways Raises to buy from hold and price target to 330P from 290p Buy 285.90p
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
The Energy and Climate Change Committee will be publishing its report on 'UK Deepwater Drilling Implications of the Gulf of Mexico oil spill' on January 6, 2010.

Company Events
Clinton Cards is looking forward to report its performance on January 6, 2010. The company had earlier stated in its interim management statement that since the
beginning of the financial period in August, the company has closed four stores and relocated three resulting in 650 stores trading. Net debt as at the 22nd November
was £37.7m compared to £48.1m at the same time last year, an improvement of £10.4m. In the 16 weeks to 21st November 2010, Clinton Cards' like for like sales
decreased by 3.3% and Birthdays UK increased by 0.7%. Birthdays trading in the Republic of Ireland decreased by 14.0%. This resulted in total Group like for like sales
lower by 3.0%. The company had stated in October that it was cautious about the economic climate.

Hays, Britain's largest recruitment agency will release its trading update. The company intends to increase the number of its consultants in China more than fourfold
and open several more offices there within three years. The company which places people in white-collar jobs is looking at lifting its number of consultants in China to
about 300 from around 65 and adding five or six cities like Dalian, Nanjing and Tianjin to its presence in Shanghai, Beijing and Suzhou.

Johnson Service Group, the British laundry firm will report its trading update on January 6, 2010. In its first half yearly result, the company has reported a 17 percent
increase in pretax profit, benefiting from a strong performance from its work wear rental business. Evolution Securities says that the company is seeing the benefits of
its restructuring, it has fixed its balance sheet and offers investors an attractive operationally geared play on UK economic recovery. Analyst expects the company to
declare a revenue of £230.73 million, higher than £228.5 million a year ago. The company is expected to declare a dividend of 0.8 pence per share, same as the previous
year.

British energy services firm Cape, which is due to release its trading update, had shown a rise in first-half profit, boosted by its Australian and Asian operations, enough
to start paying dividends again after a barren decade. The average forecast for Cape's full-year pretax profit stands at 64 million pounds. Analysts forecast the company
to declare a revenue of £655.54 million in FY 2010, while EPS is expected at 41 pence.

ECONOMIC INDICATOR WATCH ON JAN 6, 2011

Markit/CIPS Services PMI (December)

Forecast: 52.9, Prior: 53.0
Markit/CIPS will release Service PMI and Composite PMI data at 0930 LST. Analysts are expecting a continued slowdown in services activity, with indications in
December's BoE regional report that some professional and financial services firms feel early effects of government spending cuts.

Growth in British service sector activity fell back slightly in November, suggesting a slowdown in overall fourth-quarter economic output and no change to monetary
policy anytime soon. The headline business activity index in the Markit/CIPS PMI index eased to 53.0 in November from October's four-month high of 53.2.

Halifax House Prices (monthly, December)

Forecast: -0.4%, Prior:-0.1%

Halifax House Prices 3 m/y

Forecast: -1.4%, Prior: -0.7%
Mortgage lender Halifax is forecasted to show further decline on the year-on-year decline in house prices for the month of December, despite an unexpected monthly
rise reported by its rival Nationwide. Most economists expect modest weakening in house prices in 2011, rather than a return to the steep declines from late 2007 to
mid 2009.

British house prices showed first annual decline in a year in the three months to November. House prices fell 0.1 percent in November, meaning prices in the three
months to November fell 0.7 percent compared with a year ago -- the first decline on this measure since November 2009. The average price of a home stood at
164,708 pounds in November.
The Intelligent Investor - U.K.

ANALYSIS AND VIEWS

Next share price up on FTSE 100 following "cautious" update

By William Dove, IB Times

Shares in Next were up on the FTSE 100 in morning trading after the retailer predicted a rise in pre-tax profit for the year ending January 2011 of
seven to ten per cent. The stock rose 4.37 percent and closed at 2103p.

The group said that although trading conditions before Christmas had been "very challenging" it still expected full year pre-tax profit to be in line
with current expectations at between £540 million to £555 million. In the period from 1 August to 24 December Next said that its total next brand
sales were up 0.2 per cent, while retail sales declined 3.1 per cent. The fall in retail sales was attributed to "extreme weather conditions and increased
competitor discounting".

Next said it believed that the heavy snow at the end of last year could have cost it as much as £22 million in lost sales. The snow did have some
positive affects however, with Directory sales rising briefly until demand tailed off thanks to fears that orders would not be delivered in time for
Christmas.

In an outlook statement Next said, "The outlook for 2011 is uncertain. The impact of Government cuts on consumer spending is still unclear and we
have yet to fully understand the impact of rising retail selling prices on overall demand. We reconfirm that our own prices will be increasing by circa
8% as a result of higher input costs and the rise in VAT. Our best guess is that price rises will moderately suppress like for like sales, though we
believe this will be offset by the addition of profitable new Retail space and continued growth of Directory's online business."

"Next has maintained its customary cautious outlook on prospects, despite there being some upbeat trends within
the statement.”

"Deep discounting on the High Street affected margins in the run up to Christmas, whilst the rise in input costs such
as cotton caused the company to reiterate its previous warning that prices could rise by around 8% in the near
future. Meanwhile, limited stock availability at stores provided a headwind, whilst looking out the impending age of
Richard Hunter, Head of UK austerity in the UK will provide further pressure. Given Next's continued strong performance in online sales, a line
Equities at Hargreaves which is already well established, the mention of bad weather was something of a red herring - the company itself
Lansdown Stockbrokers admitted to an overall neutral position following the snow as the Directory business continued its growth path.”

"The share buyback scheme has also helped performance, with the company confirming previously estimated profit
numbers for the year. This being said, Next's traditionally noncommittal guidance may have been reflected by the
performance of the shares, which have underperformed the wider FTSE100 significantly over the last three, six and
12 months (17%, 24% and 15% respectively). In all, whilst there are positives within the statement which may prove
positive in the longer term, the current market consensus remains stuck at no more than a hold."

ANALYSIS AND VIEWS

Domino's Pizza share price up on FTSE 250 as Q4 sales rise 18%

By IB Times

Shares in Domino's Pizza were up on the FTSE 250 in morning trading after the group reported double digit sales growth in the fourth quarter
ended 26 December 2010. The stock rose 0.99 percent and closed at 561.50p.

Domino's said that its system sales in the period increased 17.8 per cent to £132.5 million. In the year ended 26 December system sales were
reported as rising 19.2 per cent to £485.3 million. Like for like sales at Domino's 533 mature sales increased 10.3 per cent. During the year Domino's
opened 57 stores, up from 55 in 2009, taking the group's total number of stores to 665. The year also saw Domino's introduce an iPhone app to aid
its e-commerce sales, which rose 63 per cent last year to £128 million. The group will soon be launching an app for Android phones to boost e-
commerce further. Last year Domino's returned £18.3 million to shareholders through share buybacks and dividends.

"It's fantastic to be reflecting on another incredible year of growth - especially as 2010 saw Domino's celebrating 25
years in the UK. It has been a great year with a particular highlight being the opening of our new commissary, which
provides the base we need to continue to grow over the coming years.”

"For the last few years, we have been talking about our strong sales figures beating some tough comparatives - and
this year is no exception. We have set ourselves some challenging targets to beat in the coming year, but we believe
Chris Moore, Chief
that a great product, supported by exemplary customer service and innovative marketing, will continue to recruit
Executive of Domino's Pizza new and retain existing customers in 2011.”

"We have again finished the year with a like-for-like sales performance that is ahead of expectations and, together
with the improvements in our operational gearing, I am delighted to announce that the Company will deliver full
year 2010 profits ahead of current City expectations. We will update the market further on 15 February 2011 with the
publication of the Company's preliminary results."
The Intelligent Investor - U.K.

TOP STORIES

Construction activity falls surprisingly in Dec

The Markit/Chartered Institute of Purchasing and Supply's construction index fell to 49.1 from 51.8 in November,
suggesting the sector will make a small contribution to fourth-quarter GDP growth. British construction activity had
contracted first time since February 2010 due to bad weather. However commercial construction activity showed some
expansion, but the rate of growth was the slowest in almost a year. House building was its sharpest contraction since
April 2009 and civil engineering activity also declined. "Even allowing for the hit to activity coming from December's
severe weather, it is very clear that the economy cannot rely on a major contribution from construction going forward,"
said Howard Archer at IHS Global Insight.

Bad weather hits Christmas sales

Severe winter weather hit Britain retailers as two of biggest retailers in Britain reported a drop in sales in the run-up to Christmas. Apart from bad
weather, worries on rising taxes and public spending cuts cautioned shoppers from spending. Britain's No.2 fashion chain, Next estimated loss of 22
million pounds ($34 million) of full-price sales as a result of snow that swept across northern Europe in much of December. The company however
remained cautious about prospects for 2011 following an increase in VAT sales tax on Tuesday and with the rising cost of raw materials like cotton
likely to drive up clothing prices by around 8 percent in the first half. Even HMV said its full-year profit to be around the lower end of forecasts.

LDP supporters drop to new low: Poll

Britain's Liberal Democrat Party supporters sink to the lowest level since the party was formed in 1988, a "poll of polls" for the Independent
newspaper stated. According to the survey, if an election happens now, only 11 percent of people would vote for the Liberal Democrats. The party
received roughly 24 percent of the vote in last May's election. The reason for drop down is estimated to the U-turn on promises made by the junior
coalition partner to oppose higher university fees. The survey stated that only 38 percent rated Clegg's performance as satisfactory. David Cameron
had the highest approval rating at 48 percent, while new Labour Party Leader Ed Miliband was on 35 percent. The "poll of polls" survey is a
weighted average of regular surveys by ComRes, ICM, Ipsos MORI and YouGov.

2013 to see additional new businesses: Govt

The government said to focus on creating new businesses, an effort to promote private sector growth which is yet
to get impacted by big public spending cuts and job losses. The Conservative-Liberal Democrat coalition
requires the New Enterprise Allowance to fund up to 2,000 pounds and loans for the unemployed to start a
business, so to produce as many as 40,000 new firms over the next two years. Employment minister Chris Grayling
said that with the development of the private sector, the hope of economy to recover soon increases. However
economists still expect growth to slow this year as spending cuts and tax hikes bite.

Domino's Pizza positive on full year

Domino's Pizza UK, Britain's largest pizza delivery firm expects its 2010 pretax profit to beat market forecasts. The news led its shares to an all-time
high. The company has managed through the challenging economic environment as cash-strapped customers opt to stay in and order takeaways
rather than eating out. The company’s total sales increased by 17.8 percent in the fourth quarter to 132.5 million pounds ($206.1 million). For the
year as a whole, they were up 19.2 percent to 485.3 million pounds. Domino's Chief Executive Chris Moore said that the company’s like-for-like sales
performance is ahead of expectations and with the improvements in their operational gearing, the company is confident of delivering 2010 profits
ahead of current City expectations. Peel Hunt, Altium Securities and Numis recommended buy rating on the stock.

Panmure sees pipeline of deals in 2011

Panmure Gordon, British stockbroker said its results improved during the second half and its UK and the U.S. investment banking businesses have a
good pipeline of deals for 2011. The company which faced a takeover threat from rival Evolution Group last year said that its American division had
a substantial improvement in results during the second half, while its core British business was benefited from work on takeovers, fundraisings and
restructurings.

This report is produced by

International Business Times
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