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Sunday Business: Air of optimism as the marketis big hitters prepare first-quarter results

Published: Apr 28, 2007

THE first-quarter reporting season has been lucrative for spread-betters in previous years, and 2007 is set to be no different. Some of the marketis biggest names publish results in the coming weeks, including Royal Dutch Shell, the oil giant, and Unilever, the Anglo-Dutch consumer goods group. And the hope is that the numbers will beat expectations, just as they already have in the US.

Some of the most keenly awaited results are from blue-chip mining companies, such as Antofagasta, which reports on 3 May, and Kazakhmys, which publishes its numbers on 30 April.

Kazakhmys operates copper mines in Kazakhstan and has been flying high on white-hot metal prices over the past two years. Revenues are likely to be strong and on target, and the companyis board may add to the rosy picture by giving a bullish update on expectations for the rest of the year.

It is this sort of strong performance that has prompted spread-betting clients to snap up Kazakhmysi stock when any temporary market dips pull back the share price. The company is well-placed to win further mining concessions throughout the central Asian country.

Turning to Royal Dutch Shell, the giant is expected to reveal first-quarter net revenues of $6.04bn (GBP3.021bn, E4.45bn), up from $5.612bn last year. Investors, however, are being cautious, despite the predicted numbers and crude prices moving upwards again.

One of the biggest perceived problems for the sector is the fear that oil companies are vulnerable to swings in government policies, such as the Russian authorities wresting back control of assets or even the North Sea oil tax in the UK.

Punters will also hope that Unilever, due to report on 3 May, will continue to chalk up stronger earnings. The company n owner of giant brands such as Dove, Persil and Knorr n saw sales slide in recent years, stunning investors in this once-dependable stock. As a result, the groupis complicated management structure was overhauled and Patrick Cescau, chief executive, is now getting the business back on track, largely by focusing on organic growth and developing markets.

Investors evidently have faith in the strategy; they seem no closer to offloading their positions at their current highs of around 1,570p. Another major incentive is that Unilever is regularly mentioned in dispatches whenever talk turns to the latest private equity target.

Recent history tells us that the tone for the first-quarter reporting season, be it good or bad, is normally set by the first few companies to step up to the plate. So if there are initial disappointments, clever investors will wait before committing to the buy side, as the market is likely to drift lower throughout the reporting period. And if the opening trend is toward the bullish, then even if the markets are flying it may pay spread-betters to get in on the move as soon as possible.

* Simon Denham is managing director of Capital Spreads, a spread-betting firm.

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