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Today’s market overview

Markets continue to be buoyed by positive economic news from the US yesterday and are pressing on upwards again this morning, but the recent gains are still not enough to convince The Trader Dominic Picarda to go ‘all in’.

IC TIP UPDATES:

Higher costs, exploration expenses and challenges in Nigeria have served to reduce Royal Dutch Shell’s (RDSA) half year earnings by 25 per cent. But the company continues to invest in future production and is committed to paying dividends so we keep it as a buy.

Sell recommendationAstraZeneca (AZN) posted a 4 per cent decline in revenues in the second quarter as it suffered from products losing their patent protection and core operating profit fell by 10 per cent to a little over $2bn.

Cairn Energy (CNE) has sealed a farm down agreement with US oil giant ConocoPhilips for three blocks offshore Senegal with Conoco taking a 25 per cent interest and Cairn retaining 40 per cent and operatorship of the blocks for the time being. We reiterate our buy recommendation.

Simon Thompson recommendationCommunisis (CMS) has published strong half year results showing a 19 per cent uplift in profits from operations from an 8 per cent rise in turnover. Recent contract wins and renewals also bode well for future performance.

Engineering consultant RPS Group (RPS) enjoyed a solid opening half to the year, which has allowed management to increase the dividend payout by 15 per cent, for the 20th consecutive year. Buy.

Costain (COST) has made its entry into the upstream oil and gas services industry through the acquisition of EPC Offshore for £9.6m and the creation of Costain Upstream. We keep our buy rating.

Indian renewable power developer Mytrah Energy (MYT) has decided to pull the plug on the proposed acquisition of 59.75MW of Indian wind assets on regulatory and due diligence concerns, but the funding remains in place so other prospects are being considered. Meanwhile the company expects to add 238.4MW of capacity to its portfolio by the end of this year through three construction projects. Buy.

KEY STORIES:

Lloyds Banking Group (LLOY) has announced a return to the black in its half year results, posting a statutory profit of £2.1bn. Impairment charges are also down and core tier 1 capital should be above 10 per cent by the year end. Talk of returning to dividend payments has also further triggered expectations that Lloyds will be returned to private hands soon.

Shares in Aggreko (AGK) are off more than 6 per cent after posting a 2 per cent decline in pre-tax profits for the six months to June. The local power business remains in good shape but trading in power projects is described as ‘subdued’.

BAE Systems (BA.) saw sales edge up by just 1 per cent in the first half of the year to £8.45bn and profits dipped due to delays in formalising the price escalation on its Salam Typhoon programme with Saudi Arabia. The order backlog is up to £43.1bn, although various parts of the business remain under pressure due to government spending cuts around the world.

Insurer RSA (RSA) has posted a 24 per cent increase in post tax profits at £190m with a combined ratio of better than 95 per cent for the first half of the year.

Smith & Nephew (SN.) continues to benefit from strong growth in emerging markets, which mitigates tougher conditions in its developed world markets. Half year group revenues were 3 per cent higher at $1.07bn but trading profit was just 1 per cent higher due to a little pressure on margins.

OTHER COMPANY NEWS:

The chief executive of Rentokil Initial (RTO), Alan Brown, has announced his intention to stand down. He will be replaced by regional managing director Andy Ransom.

Graphene Nanochem (GRPH) has announced a contract win with Philippine petroleum business Petron Fuel for the supply of its PlatAmber fuel additive.

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