LONDON (AFX) - Leading shares remained lower in midmorning deals, mirroring Wall Street's weakness on Friday, while disappointing trading news from Pearson and Cadbury and profit-taking in Shire and the miners also weighed, dealers said.
At 10.10 am, the FTSE 100 index was down 39.8 points to 6,122.1, while the broader indices were also lower.
Volume was moderate, with 383.6 mln shares changing hands in 60,360 deals.
In London, Pearson kicked things off today in a relatively quiet start to what is looking like a hectic week, with a raft of blue-chips due to report earnings over the next five days.
The publishing giant said it is on track to post 'highest profits ever' this year while reporting strong trading in its first nine months, in line with its expectations.
It added that its nine-month operating profit rose 26 pct and underlying profits rose 15 pct, on a total sales rise of 11 pct.
Pearson shares however, were down 8 pence at 773.
In reaction, Panmure Gordon reiterated its 'sell' advice and said headline profits came in broadly as expected but not enough to spark upgrades.
As a result, it is keeping its EPS forecasts of 38.3 pence this year and 43.2 pence next year unchanged.
This leaves the stock trading on 20.4 times and 18.1 times 2006 and 2007 price earnings -- a level the broker believes is 'grossly overvalued'.
Elsewhere in the sector, Reuters lost 9 pence to 442-1/2, while Yell lost 8 pence to 613-1/2 and Reed Elsevier fell 6 pence to 593-1/2.
ITV was also under pressure, down 2 pence to 104-3/4, amid weekend press reports that it is considering a takeover bid for Scottish ITV franchise holder and Virgin Radio owner, SMG.
UBS retained its 'neutral' stance and 105 pence target on the stock.
Shire was the top blue-chip faller, easing 35-1/2 pence to 931-1/2 on profit-taking after Friday's well-received third-quarter results.
Deutsche Bank reiterated its 'buy' stance, although it cut its target to 1,272 pence from 1,330 this morning.
Elsewhere, mining stocks were also hit by profit-taking after last week's strong gains.
Xstrata fell 35 pence to 2,230, while Vedanta eased 19 pence to 1,445 and Rio Tinto gave up 36 pence to 2,811 and BHP Billiton dropped 12 pence to 1009.
Kazakhmys was also slightly weaker, down 14 pence to 1,202 after a mixed production report, with copper output rising and gold production falling in the third quarter.
Cadbury Scheppes were also a drag, down 10 pence to 527, as investors were left disappointed by the confectionery and soft drinks group's new financial targets.
Cadbury reiterated it is targeting revenue growth of 3 to 5 pct per annum from 2007 and expects ongoing restructuring charges of about 1 pct of revenue from 2007.
But in response, UBS stuck to its 'neutral' advice and said Cadbury failed to upwardly revise its organic sales growth target of 3-5 pct per annum and abandoned its 50-75 basis points margin target in favour of 'growth in operating margins over time'.
Elsewhere, Home Retail Group shares were weaker, down 6-3/4 pence at 402, after JP Morgan started coverage on the group with an 'underweight' recommendation and 390 pence target.
The broker noted that the group's low EPS growth, returns and cash flow generation warrant a PE discount to the UK retail sector of at least 10 pct and believes these metrics also make HRG unattractive to private equity.
On the upside, Standard Life added 7 pence to 290, after the Sunday Express reported yesterday that French insurer AXA is considering making a 7 bln stg takeover approach for the recently floated insurance group.
In an unsourced report, the newspaper noted that Nicolas Moreau, the new UK chief of AXA, is keen to add Standard Life's UK life assets to its business, having recently failed in a bid to take over the life assurance arm of Lloyds TSB PLC's Scottish Widows for 8 bln stg.
Brokers were sceptical, however, with Merrill Lynch saying it believes the story is 'very unlikely,' while Cheuvreux described the report as having 'below average credibility'.
Utility stocks remained in demand, adding to Friday's gains as investors continued to welcome news that Morgan Stanley plans to invest 3 bln usd in the carbon trading market.
British Energy added 3 pence to 422-1/2, while Drax gained 13-1/2 pence to 817-1/2 and International Power moved 1-1/2 pence higher to 336.
Hanson shares were also higher, up 3 pence at 714, after Australian building materials group Rinker rejected a 12.8 bln usd bid from Mexican cement giant Cemex as inadequate.
Rinker shares jumped nearly 30 pct in Sydney as investors bet on an improved offer.
Hanson shares slumped on Friday as Cemex, its oft-rumoured suitor, confirmed that it had turned its attentions elsewhere.
On the second line, Wellington Underwriting was the top midcap performer, up 5-1/4 pence at 116-3/4 after fellow Lloyd's insurer Catlin Group unveiled a 591 mln stg cash offer for the group.
Catlin shares were down 15-1/2 pence at 493.
Shares in QinetiQ Group were also higher, up 6-3/4 pence at 187-1/4, after the Sunday Telegraph reported that the group is poised to beat BAE Systems to a 10 bln stg UK Ministry of Defence training contract.
On the economic front, UK investors will have a raft of secondary data to digest over the coming week, although nothing is expected to derail another interest rate hike from the Bank of England on Nov 9, which would take the key repo rate up to a five-year high of 5.00 pct.
In today's news, the Bank of England said M4 money, a broad measure of money supply, posted its biggest rise in 16 years on an annual basis in September, raising concerns about medium-term demand and inflation pressures.
In the US, Wall Street will also get a raft of economic data this week that should give investors a better glimpse about the economy's direction, including closely watched consumer confidence and unemployment numbers.
Later today, the Department of Commerce will release its personal income and personal spending data for September. newsdesk@afxnews.com gl/vs COPYRIGHT Copyright AFX News Limited 2006. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News. AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
© 2006 AFX News
