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Reuters: FTSE up as GUS charges, but Shell shows cracks: SHELL TROUBLED

Reuters: FTSE up as GUS charges, but Shell shows cracks: SHELL TROUBLED

“Royal Dutch Shell was the main drag on the market as the restructuring of the oil titan took effect but its two lines of stock both fell as tracker fund buying tapered off [nL20439638] and attention shifted back to more fundamental issues such as replacing its reserves and problems at its massive Russian Sakhalin-2 project.”

Wed Jul 20, 2005 5:09 PM BST

By Steve Slater

LONDON, July 20 (Reuters) – Britain’s top shares rose on Wednesday to halt a three-day losing run as retailer GUS (GUS.L: Quote, Profile, Research) was boosted by another set of bumper results from its Experian arm, but a restructured Royal Dutch Shell made a soggy arrival as Europe’s second biggest firm.

Mining stocks were buoyed by upbeat production numbers from Rio Tinto (RIO.L: Quote, Profile, Research), but GUS was the star performer with a 5.5 percent rally to a 3-month high after rampant growth at credit-checking unit Experian continued, with a 26 percent rise in its first quarter underlying sales. [nL20293448]

Some analysts now estimate Experian is worth over 4.5 billion pounds — or more than half of GUS’s market value. GUS plans to spin-off Experian, but did not provide an update on when the demerger will come.

GUS’s UK retail arms Argos and Homebase also fared better than expected, and retailers were also helped by minutes showing four of the Bank of England’s nine policymakers voted for a rate cut this month, making a cut next month more likely.

A cut could kick-start consumer spending and help retailers such as Next, (NXT.L: Quote, Profile, Research) which added 2.5 percent, although the prospect of a cut had a muted impact on the broader share market.

The FTSE 100 share index closed up 13.7 points, or 0.3 percent, at 5,215.2 for its first rise since Thursday, but it ended well down from its morning peak of 5,249 as dealers said the recent rally had lost momentum.

“The market is pricing in an even higher probability of a rate cut coming up, but is that good news or bad news for the market? It’s debatable, it shows the Bank is concerned about the near term outlook for growth, and that’s not great news for the equity market,” said Paul Niven, head of strategy at F&C Asset Management.

In contrast, U.S. Federal Reserve Chairman Alan Greenspan said the U.S. growth outlook was solid but that the Fed should keep raising interest rates, which helped put pressure on U.S. shares lower in early action.

SHELL TROUBLED

Royal Dutch Shell was the main drag on the market as the restructuring of the oil titan took effect but its two lines of stock both fell as tracker fund buying tapered off [nL20439638] and attention shifted back to more fundamental issues such as replacing its reserves and problems at its massive Russian Sakhalin-2 project.

“Index trackers have been buying RDS over a period of time,” Aberdeen Asset Management said. “Concerns over a liquidity squeeze seem unfounded with UK managers buying stock sold by Eurofunds which are now unable to hold the UK registered company.”

A dealer added: “Nobody was going to short it aggressively before the reweighting and there’s now a feeling that people will now be looking at the reserves situation again.”

Shell (RDSa.L: Quote, Profile, Research) “A” shares, which originate from the oil company’s former Dutch parent, lost 3.2 percent, while Shell (RDSb.L: Quote, Profile, Research) “B” shares, which spring from its former UK parent, opened higher but then slipped to end down 1.7 percent.

In contrast, Rio Tinto jumped 4.4 percent after the world’s second biggest miner reported record quarterly iron ore production. Other miners were also helped by data showing unexpected strength in China’s economy in the second quarter, fuelling hopes for sustained industrial demand. BHP Billiton (BLT.L: Quote, Profile, Research), Antofagasta (ANTO.L: Quote, Profile, Research) and Xstrata (XTA.L: Quote, Profile, Research) all rose about 3 percent.

Betting chain William Hill (WMH.L: Quote, Profile, Research) added 2.5 percent after Deutsche Bank upgraded its rating on the stock to “buy” from “hold”, while medical devices firm Smith & Nephew (SN.L: Quote, Profile, Research) firmed 2 percent after U.S. peer Stryker signalled an acceleration in growth in key areas such as hip and knee replacements. [nL20548533]

United Business Media (UBM.L: Quote, Profile, Research) was among the leading mid-caps with a 3.9 percent rise after it confirmed it will sell its stake [nL20642904] in British TV channel Five to television broadcaster RTL Group (AUDKt.BR: Quote, Profile, Research) for 247.6 million pounds.

Ports operator P&O (PO.L: Quote, Profile, Research) added 3.7 percent after it said the UK government was close to approving its plans for a 1.5 billion pound container port and business and logistics centre near London. [nL20558370]

(Additional reporting by Louise Heavens)

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