Hot Small Caps: FTSE Small Cap Index up 1.9 pct

LONDON (Reuters) - Following is a round-up of key small cap movers on the London stock market on Wednesday.

12:42 GMT - FTSE Small Cap Index up 1.9 pct at midday

The FTSE Small Cap Index .FTSC climbs higher in midday trade, up 1.9 percent, as UK markets continue to rally, with the FTSE 100 Index rising 5 percent.

Managed Support Services (MSPS.L) surges 56.7 percent as it says first half trading has been good and as a result, the board currently expects that the full year results to comfortably exceed current market forecasts.

Tinci Holdings (TNCI.L) tumbles 67.7 percent as the China emission-cutting engineer warns 2008 profits will miss expectations as there are considerably fewer projects available for bidding.

12:51 GMT - Friends Provident drops after Tuesday's surge

Shares in Friends Provident FP.L fall as much as 17 percent as traders say the stock is readjusting back towards more normal levels after closing 28 percent higher on Tuesday, driven by two trades late in the session.

"On the close, Friends went from 52 to 65 pence," says one trader. "Quite simply it has readjusted."

"We don't know why, it could be a squeeze, there is all sorts of volatility and it is undervalued as a sector," the trader says.

Traders and analysts are unable to pinpoint the exact reason for the sudden pre-close rise, with one describing it as a "freaky movement". One of the two trades was for 782,005 shares, Reuters data shows.

The shares are 11.1 percent lower at 57.8 pence by 1237 GMT but still comfortably above Monday's closing price of 50.7 pence.

12:48 GMT- German heavyweights up on possible DAX reweighting

Shares in some of the largest bluechips on Germany's DAX index .GDAXI surge into positive territory, benefiting from the prospect that index-tracking funds may need to up their holdings in them after a reweighting of the index.

"The reweighting is perhaps the single strongest element affecting larger DAX stocks and is clearly pushing some of the largest to the top," says a Frankfurt-based trader.

Deutsche Boerse (DB1Gn.DE), operator of the Frankfurt exchange, said late on Tuesday it would cap the weighting of Volkswagen (VOWG.DE) shares to 10 percent from November3 after VW's shares leapt 82 percent to 945 euros, distorting the index.

"I have calculated a reweighting based on yesterday's closing prices, and companies such as Deutsche Telekom (DTEGn.DE), Bayer (BAFG.DE), Siemens (SIEGn.DE) and Allianz (ALVG.DE) would currently gain the most from a capping of VW," says index analyst Anke Platzek.

A second local trader adds E.ON (EONGn.DE) stock to this list.

The five stocks are between 9.8-21 percent higher as Siemens leads the DAX, which is largely flat. The DAX would be around 10.5 percent higher if VW, which is down 42 percent, were not calculated in the index.

Analysts and traders, stress, however, that as the weighting changes will be based on the VW closing price on Friday October 31, and VW shares are currently reversing gains, the 10 percent cap on the car maker's weighting may not have a big impact on the overall index composition.

"Yesterday, the weight of VW reached 27.22 percent after a strong rally of the shares from October 24 where VW had a weight of 6.8 percent. A sharp drop of the share price could normalise the situation making the cap on Monday superfluous," said market analyst Heino Ruland from Frankfurt Finanz.

11:22 GMT - Hochtief gains on Australia order

Shares in German construction giant Hochtief (HOTG.DE) rocket nearly 12 percent, making them the second-biggest gainer in Frankfurt's midcap index .MDAXI, after the company says its Leighton (LEI.AX) subsidiary has won a contract to plan, build and operate a hospital in Australia worth about 553 million euros.

"In the current environment, it is difficult, in general, to explain these big share price movements," says UniCredit equity analyst Karin Brinkmann.

"However, through the Australian contract, Hochtief is able to restore investors' confidence in the company," she adds.

Shares in Hochtief have dropped about 74 percent in the year-to-date, while the mid-cap index .MDAXI has lost 48 percent in the same period.

11:02 GMT - AMB Generali down on JPMorgan downgrade

Shares in German insurance company AMB Generali AMBG.DE fall 0.6 percent as the only decliner on Frankfurt's midcap index .MDAXI, after J.P. Morgan cuts its rating in the company to "underweight" from "neutral".

The brokerage lowers AMB Generali along with other European mid-cap insurers, due to "a weaker earnings outlook, particularly in life spread business" for the sector, J.P Morgan analysts write.

For European insurers they assume falling investment returns, as they believe "insurers will de-risk and switch to lower yielding govvies".

The DJ Stoxx European insurance index .SXIP is up 9.9 percent.

10:33 GMT - Ferrexpo dives as CEO quits, sales hit

Shares in Ferrexpo (FXPO.L) plunge over 20 percent after the company announces the resignation of its chief executive and warns that full year sales will be between 5 and 10 percent lower than it had been expecting.

"The major bad news is the CEO resigning but the trading update isn't good either," says an analyst at a major bank who asked not to be named. "I think it's very disappointing that he steps down at this time."

The company says in a trading update that it expects a reduction in orders for its iron ore pellets to lead to a sales shortfall.

10:20 GMT - Luxottica shines, results seen in line

Shares in Luxottica (LUX.MI) are up more than 4 percent in Milan with analysts saying a fall in third-quarter net profit and a cut in full-year guidance are in line with expectations.

The world's biggest eyewear maker on Tuesday cut its 2008 EPS forecast to between 0.96 euro and 0.98 euro, down about 13 percent from a previous forecast.

UniCredit says in a note the "profit warning (is) already in the price". It adds its 2008 forecasts are already in line with the low end of the new guidance.

Credit Suisse, which confirms its "outperform" rating, says the results were slighter better than its forecasts and the lowered full-year guidance was in line with estimates.

UBS trims its price target to 20.50 euros from 22.50 euros. "Although newsflow is negative in the short term, lowered guidance did not surprise consensus and our earnings expectations materially," it says in a research note.

Exane BNP Paribas cuts its target price 15 percent to 17 euros and keeps an "outperform". "We think the company is now offering a more realistic view on earnings momentum for this year," it says. "However further cuts are still ahead for 2009."

At 1023 GMT, the stock is up 5 percent to 14.99 euros, paring gains after opening up over 10 percent. The DJ Personal and Household Goods index .SXQP is up 3.14 percent while Milan's S&P Mib .SPMIB is up 6.39 percent.

10:20 GMT - Roth & Rau soar on positive 2009 view

Shares in Roth & Rau R8RG.DE, German manufacturer of technology for the solar industry, rise 16 percent to the top of Frankfurt's technology index .TECADX, after the company reports preliminary nine-month figures, saying it is "well prepared" for 2009.

"The high order backlog should ease concerns that the solar industry may experience a slump in demand in the near future," says an analyst.

The company says its orders on hand amount to 238 million euros as of September 30, 2008, up 64 percent year-on-year, while letters of intent are at about 90 million euros.

"Negotiations are at a very advanced stage for several major orders," the company's chief executive, Dietmar Roth, says in a company statement.

10:12 GMT - Daimler surges after Merrill upgrades to "buy"

Shares in German carmaker Daimler (DAIGn.DE) jump nearly 18 percent, making them the top gainers on Germany's blue chip DAX index .GDAXI, after Merrill Lynch upgrades the firm to a "buy" rating and on the prospect of a heavier weighting on the DAX.

Shares in Daimler, which have fallen around 65 percent this year, are up at 22.769 euros. Traders and analysts say the extent of Daimler's recent losses make it particularly susceptible to upwards swing across global equities.

"It seems likely Daimler can bounce by up to 20-30 percent ... sentiment has simply slipped too low," say Merrill Lynch analysts in a note, upgrading Daimler to "buy" while reducing their target price to 28 euros from 34 euros.

Market players also say that some of Germany's blue chip companies are rising on the prospect that index-tracking funds might need to up their holdings in them, following Deutsche Boerse's announcement that it will cap the weighting of Volkswagen (VOWG.DE) shares in the DAX index to 10 percent.

"The weighting that VW will lose will be dealt out to the other companies on the DAX, and so funds will have to buy these shares in order to mirror the index and reestablish the correct weightings," says Christian Schmidt, analyst at German regional bank Helaba.

10:17 GMT - Impregilo up after Libyan investment report

Shares in Impregilo (IPGI.MI) are among the main gainers in Milan after a newspaper report says Libya could take a 3-4 percent stake in the Italian building company in the first half of next year.

Libyans are not listed among shareholders with 2 percent or over, so any holdings they may have now are below this threshold.

Without quoting sources, MF newspaper adds the company will attend a meeting on Thursday at Italy's foreign ministry with a Libyan delegation.

Impregilo declined to comment.

Shares are up more than 8 percent at 1.72 euros at 0935 GMT. Milan's S&P Mib .SPMIB is up 5.87 percent.

"It is today's report but in a market that is rising more than 6 percent singling out individual stories has less sense," one trader says.

09:51 GMT - Worldspreads up on H1 figs; Broker says "buy"

Shares in spreadbetting firm Worldspreads WSPR.L rise 6.8 percent as it says first-half profits doubled, adding it is confident of exceeding full-year targets, prompting Collins Stewart to repeat a "buy" stance and 125 pence target price for the stock.

Collins Stewart says Worldspreads' interim results are ahead of expectations and are benefiting from its expanding product suite and increased market volatility which is driving customer volumes.

In reaction, the broker raises its revenue and pretax profit forecasts for 2009 by 25.7 percent and 28 percent, respectively.

Collins Stewart says Worldspreads' trades at a discount to peer London Capital Group (LCG.L), which Daniel Stewart maintained as a "buy" on Tuesday.

09:38 GMT - Elexis down after company cuts FY targets

Shares in German machine manufacturer Elexis (EEXG.DE) drop 3.6 percent to 6.90 euros and are one of the main decliners on Frankfurt's small cap index .SDAXI after the company reports nine-month results, cutting its full-year targets for sales and earnings before interest and taxes (EBIT).

"The company's guidance was aggressive from the beginning," says LBBW analyst Harald Rehmet.

"Looking forward, business can be expected to be weaker in the company's steel and printing business," he adds.

The company now expects full-year sales of between 172 million euros to 177 million euros ($215.2-221.5 million), down from a previous guidance of 180 million euros to 190 million euros.

It also lowers its EBIT margin guidance to between 14-15 percent, down from a previous 15-16 percent forecast.

09:20 GMT - African Eagle up on Zambia project progress

Shares in African Eagle (AFE.L) rise 4.8 percent after the minerals exploration and development company's joint venture partner on the Mkushi copper project in Zambia says the feasibility study on the project will be complete by the end of the month, with production on track to start by mid-2010.

"Many important milestones have been passed in the last year as part of the study work (on Mkushi), perhaps the most important being the granting of a full mining licence for the project ... further approvals will complete all the environmental approvals for the project to commence," says Seymour Pierce analyst Asa Bridle in a note.

09:12 GMT - 888 up as Daniel Stewart repeats "buy" stance

Shares in 888 Holdings (888.L), the online gaming company, rise 6 percent after Daniel Stewart repeats its "buy" recommendation and target price of 136 pence on valuation grounds.

Daniel Stewart says 888 shares, which have fallen 52 percent since August, have reacted to a weaker outlook and now trade at just 7.0 times estimated 2009 earnings per share.

However, the broker, which has downgraded 888's forecasts for 2008 and 2009, says the company has a resilient operating model and net cash of around 17 pence per share.

Daniel Stewart adds that 888's casino-led operation is seeing adequate active customers wagering, but at lower than expected yields.

08:56 GMT - Old Mutual, Aviva lead gainers

Shares in Old Mutual soar 23.6 percent at 48.2 pence, leading the FTSE 100 gainers and rallying after falling on Tuesday on U.S. fears.

Analysts say that the rise in insurers' share prices, with Aviva up 13.9 percent at 295 pence, reflects the sector magnifying general market movements.

"All the insurers that play in the US market went down by about 10 percent yesterday due to US economic data. Movements (in Old Mutual stock) are getting exaggerated because it is significantly depressed," says an analyst.

08:50 GMT - FTSE Small Cap Index up 1.3 pct early

The FTSE Small Cap Index .FTSC rises 1.3 percent in early trade, as UK markets rise after a massive rally on Wall Street overnight. The large cap FTSE .FTSE is up 4.8 percent.

Managed Support Services (MSPS.L) soars 41 percent after the company says first-half trading has been good and it expects full year results to comfortably exceed market expectations.

08:43 GMT - European shares surge, tracking U.S., Asia

European shares rise in early trade, after massive rallies in U.S. and some Asian stockmarkets as investors bet the Federal Reserve would cut interest rates in an attempt to spur economic growth.

The pan-European FTSEurofirst 300 index .FTEU3 rises 4.5 percent to 871.85 points, rising for a second straight session after a five-day losing streak.

Wall Street marked its second-best day ever on Tuesday, with major U.S. stock indexes surging about 10 percent.

Banks lead the European rally, with UBS (UBSN.VX) rising more than 11 percent, Standard Chartered (STAN.L) adding 7.8 percent and Royal Bank of Scotland (RBS.L) up 14.4 percent.

08:33 GMT - Volkswagen plunges after Deutsche Boerse cuts weighting

Shares in German car giant Volkswagen (VOWG.DE) drop 43.2 percent after Deutsche Boerse (DB1Gn.DE) -- the operator of the Frankfurt stock exchange -- says it would cap the company's weighting in the DAX index .GDAXI to 10 percent, effective next Monday.

In addition, Stoxx Ltd, provider of European equity indexes, also says it will reduce Volkswagen's free-float factor to 0.3732 from 0.4963, affecting indexes such as the Dow Jones EURO STOXX 50.

"First, yesterday's bubble was way too high, partly justifying today's slump," a trader says.

"Second, the reweighting also plays a role since it should take some pressure off investment funds," he adds.

Shares in Volkswagen nearly doubled on Tuesday, shortly rising above 1,000 euros per share, giving the company a market value of 296 billion euros ($370.4 billion).

08:26 GMT - SAS shares rise on Sterling demise

Shares in Scandinavian airline SAS (SAS.ST) surge more than 14.5 percent to 36.40 crowns after Denmark-based Icelandic budget airline Sterling says it will file for bankruptcy on Wednesday and has grounded all its aircraft.

Analysts say the demise of Sterling would ease price competition for SAS, which has struggled with rising costs and rivalry from budget airlines in recent years.

SAS told Danish broadcaster DR it would offer stranded Sterling ticket holders free flights back to Denmark from foreign destinations where possible over the next 48 hours.

"The share has been under pressure and is bouncing up like everything else here today. But also one competitor is disappearing and that could of course be positive in the short term," said Glitnir analyst Mats Hyttinge.

"That decreases pressure on prices on those routes where they have been competing, even though there might be others entering."

07:25 GMT - Europe stock futures leap after U.S., Asia shares soar

European stock index futures rise sharply after U.S. and Asian stocks soared overnight and as investors bet on a U.S. rate cut later in the day.

Futures for the DJ Euro Stoxx 50 add 4.8 percent, for France's CAC rise 5.3 percent, and for Germany's DAX .FDXc1 gain 2.8 percent.

Wall Street marked its second-best day ever on Tuesday, with major U.S. stock indexes surging about 10 percent. The U.S. Federal Reserve is set to announce its rate verdict at 1815 GMT. In a Reuters survey, primary dealers expect the Fed funds rate will be cut to 1 percent from 1.5 percent.

Japan also signalled on Wednesday it could cut interest rates this week. Tokyo's Nikkei average .N225 soared 7.7 percent.

Among a slew of results, investors will eye Bayer BAYG.DE after the German drugs and chemicals group posts a 4.2 percent fall in earnings before interest, tax, depreciation and amortisation and before special items but confirms its full-year guidance for 2008 and says it sees continued earnings growth next year.

06:57 GMT - Stoxx Ltd changes Volkswagen free float factor

Stoxx Ltd has announced to change the free float factor of Volkswagen (VOWG.DE) to 0.3732 from 0.4963.

"This decision reflects the changes in the shareholder structure of Volkswagen and results in a lower weighting of Volkswagen in the respective indexes," Stoxx Ltd says.

The affected indexes include the Dow Jones EURO STOXX 50 .STOXX50, Dow Jones STOXX 600 Large .STOXX, Dow Jones STOXX Total Market Large, Dow Jones STOXX Sustainability and its respective sub- and sector indexes.

The change will be effective as of the opening of trading on Friday, October 31, 2008.