(updating with further details)
LONDON (Thomson Financial) - Leading shares opened lower as Wall Street closed at a new record high, while investors cautiously await UK CPI data and US PPI figures today, with Rolls-Royce a major casualty in the blue chips after a broker downgrade.
At 9.03 am the FTSE 100 index was 20.3 points lower at 6,6774, having closed yesterday down 19 at 6,697.7, while the FTSE 250 index was 44.3 points weaker at 11,873.
Volume was average with 423 mln shares changing hands in 45,526 deals.
'The blue chips are lower today on the back of broker downgrades. However, the FTSE is not down by much and there are investors still buying into the market on the dips,' said Chris Hossain, head trader at Blue Index CFDs.
Last night on Wall Street, stocks gave a mixed performance, althought the Dow advanced to a new record close on the back of M&A activity as reports of a potential 160 bln usd bid by Vodafone for Verizon Communication Inc.
The Dow Jones Industrial Average added 50.48 to 13,957.73, while broader indices declined slightly. The Standard & Poor's 500 index slipped 1.81 to 1,550.69.
In US economic news, PPI figures are due out today with analysts expecting index drop back to +0.1 pct for June, after a 0.9 pct rise in May.
Elsewhere, June US industrial production should be up 0.4 pct after stalling out with no increase in May. Capacity utilisation should be up slightly to 81.5 pct from 81.3 pct.
Nothing has happened to improve the outlook for US homebuilders and the predicted NAHB index for June is 27, down from 28.
On Asian markets, the Hang Seng Index ended the morning up 112.50 at 23,066.44. The Nikkei 225 index was closed down 21.68 points at 18,217.27.
In Asian trading hours, oil prices were little changed in late morning as investors trod water while awaiting the release of a weekly US report on energy stockpiles.
New York's main contract, light sweet crude for August delivery, was up a modest four cents at 74.19 usd a barrel from 74.15 usd in late US trade Monday.
Brent North Sea crude for September was two cents higher at 76.31 usd.
Back to the UK, on the macroeconomic front key inflation figures are expected to show the annual CPI measure dropping to 2.3 pct in June from 2.5 pct in May, driven by further falls in gas and electricity prices.
Though this would keep the rate well above the Bank of England's 2.0 pct target, it would mark the lowest CPI level in just over a year.
The figures are also expected to show the annual core CPI rate, which excludes energy, food, alcoholic beverages and tobacco, remaining at 1.9 pct.
The annual RPI rate, which is often used in pensions and pay deals, is also forecast to drop to 4.2 pct from 4.3 pct, while the RPIX measure excluding mortgage payments falls to 3.1 pct from 3.3 pct in May.
Turning to the UK blue chips, Rolls-Royce was the top faller, down 11-1/2 at 553, after Credit Suisse downgraded the group to 'neutral' from 'outperform'.
A broker downgrade also saw shares in Kelda edge back 14 at 881 after UBS cut to 'reduce' from 'neutral', citing expensive stock, while United Utilities was also weaker down 1-1/2 at 703-1/2 with UBS also reiterating a 'reduce' rating on the group with a 685 pence price target.
However, peer Severn Trent gained 11 at 1,366 and mid cap stock Northumbrian Water Group was up 7-1/2 at 319 after UBS upgraded the group to 'buy' from 'neutral' as part of the same UK water sector review today.
Elsewhere, BG Group was 5 lower at 852-1/2 with ING cutting to 'sell' from 'hold', citing valuation and recent share price performance.
'Our move is essentially housekeeping based on current valuation and recent positive stock performances,' said ING.
Nevertheless, the broker lifted its price targets on the oil companies, adding that it expects oil prices to be supported by a slightly better than expected economic backdrop in the second half of the year. However, it is anticipating 'softer levels' by the fourth quarter of 2007.
Its peers were also lower - Royal Dutch Shell was down 6 at 2,084 and BP was 1-1/2 weaker at 606-1/2.
In the miners, Lonmin extended its falls from yesterday, down 59 at 2,926 with Deutsche Bank and Goldman Sachs both cutting their price targets on the group to 3,790 pence from 3,880 and to 3,945 pence from 4,415 pence respectively, after the group warned yesterday of lower platinum sales and production.
And Wolseley was off 8 at 1,162-1/2 as Deutsche Bank cut its target price to 1,460 pence from 1,540 pence, having also cut earnings and growth forecasts.
In a note this morning, following a trading update from Wolseley yesterday, Deutsche Bank said it had cut its growth forecast for US plumbing & heating to 2.5 pct from 5 pct, and for US building materials to -2.5 pct, from 6 pct but added that the risk to the latter is on the upside.
There were few blue chip risers on the upside, with positive broker comment helping fuel shares in Tate & Lyle to become on the top riser, up 22 or 3.85 pct at 594 after Goldman Sachs upgraded the group to 'buy' from 'neutral'.
Turning to the mid caps, on the upside, Dairy Crest was the top riser up 38 at 729-1/2 following Panmure Gordon upgrading the group to 'buy' from 'hold'.
Also after broker comment, BlueBay Asset Management was up 11-1/4 at 461-1/4 after Credit Suisse initiated coverage in the UK asset management sector and upgraded its stance on BlueBay to 'outperform' from 'neutral'.
Credit Suisse said the UK market seems to be systematically underestimating the asset management sector's ability to generate value. It said a significant proportion of the sector's market capitalisation is attributable to assets already on the books, leaving a very low implied valuation of the firms' ability to gather assets in the future.
Its peer Aberdeen Asset Management was also up 1-1/4 at 207-1/2 with Credit Suisse is initiating on Aberdeen Asset Management with a target price of 243 pence as part of the same review.
In earnings news, Speedy Hire was 19 higher at 1,241 after the company reported a 30 pct increase in first-quarter revenue, partially helped by acquisitions.
And finally, N Brown edged 0-1/4 higher at 322-1/2 after an in-line trading update today with Citigroup reiterating its 'hold' stance and 340 pence price target in reaction to the news. tf.TFN-Europe_newsdesk@thomson.com jf/ajb COPYRIGHT Copyright AFX News Limited 2007. 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.
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