UK/Euro Financial Market Daily Evening Briefing 01-02-2008

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London shares closed firmer off highs; NY firmer off lows; miners gain

At close, the FTSE 100 was up 149.4 at 6,029.2, having been as high as 6,044.9 earlier. The FTSE 250 index was up 304.8 points at 10,186.6. Volume was below average with 2.96 bln shares having changed hands in 932,488 trades.

"The FTSE has gained today following on from gains in the US last night and the Yahoo story, with strength in the mining sector after acquisition news," said Amit Thakar, strategist at Seymour Pierce.

"However, the UK market has seen some weakness since the non-farm payroll data," added Thakar. Over in the US, stocks were recovering from lows after Wall Street set aside anxiety over a weak government jobs report and focused on Microsoft Corp's bid for Internet company Yahoo Inc. and a possible rescue plan for the troubled bond insurance sector.

Investors also applauded a report showing a pickup in the nation's manufacturing sector in January.

At London's close, the Dow Jones industrial average was ahead 12 at 12,662.2. The Standard & Poor's 500 index advanced 4.57 to 1,383.12, while the Nasdaq composite index was down 2.13 at 2,387.73.

Back in London, miners were the major risers. Rio Tinto, which rejected a bid approach from BHP Billiton last year, was the biggest riser, up 644 pence or 12.99 pct at 5,600 after Chinalco and Alcoa Inc jointly bought a 12 pct stake in the company. Reports said they paid around 60 stg per share, a significant premium, but do not intend to make a full takeover bid.

The purchase boosted others in the sector. BHP Billiton was up 145 at 1,622, Anglo American rose 160 to 2,910, Vedanta Resources was up 160 at 1,960 and Xstrata gained 176 at 4,003.

Most property companies performed well, as investors went bargain hunting, while continued M&A speculation and rate cut hopes added to the interest.

Building materials group Wolseley was up 35 at 721 and housebuilder Taylor Wimpey rose 13.7 to 193. A broker upgrade helped shares in Standard Life gain 10-1/2 at 226 after JP Morgan upgraded its stance on the group to 'neutral' from 'underweight'.

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On the FTSE 100 downside, British Airways was a casualty, down 14 pence at 318 after it reported its third-quarter results.

The airline said profits for the nine months to December were up 35 pct at 788 mln stg, but said its annual fuel bill would top 2 bln stg for the first time.

In reaction, Merrill Lynch said the results were in line with consensus, with operating profit rising slightly ahead of its forecast. But the broker feels the outlook is uncertain and retains its 'neutral' stance.

British Land was 21-1/2 lower at 988-1/2 after Credit Suisse downgraded it to 'neutral' from 'outperform' and cut its target to 1,172 from 1,603, citing concern about the office property market in London.

The group set to announce its third quarter results next Thursday is expected to report a fall in net asset value.

Its peer Land Securities was 4 weaker at 1,589. Meanwhile, AstraZeneca fell 9 to 2,085 after HSBC downgraded the drug company to 'neutral' from 'overweight' on concerns over bipolar disorder and schizophrenia drug Seroquel.

Dresdner Kleinwort repeated its 'sell' view and 2,000 pence price target on the group.

Medical devices maker Smith & Nephew, which reports results next Thursday, gave back some of yesterday's gains and was down 26-1/2 at 655-1/2. Nomura Code downgraded the shares today to 'reduce' from 'neutral'.

On the second line, engineering group FKI soared 16-3/4, or 33.33 pct, to 67 after confirming it had received a takeover approach.

A broker upgrade boosted shares in Intermediate Capital, 142 higher at 1,563 after Merrill Lynch added the group to its influential Europe 1 list.

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Elsewhere, pub operator and brewer Greene King was up 9-1/2 pence at 754-3/4 after its trading update this morning, though both Landsbanki and Altium cut their ratings to 'hold' from 'buy' and 'add' respectively.

And, Mitie Group was up 9-1/2 at 250-1/4 following an in-line trading update in which it said the company remains on track to complete another "successful" year.

Meanwhile, Alliance Trust was up 7-1/2 at 344-1/4. The company stands a strong chance of being named on Monday as the replacement in the FTSE 100 for water company Kelda, which has been taken over. Alliance Trust's market value is nearly 2.3 bln stg. On the downside, Northern Rock was 11 lower at 96 as it awaits takeover bids.

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Paris shares close higher led by M&A speculation

The CAC-40 index finished up 2.22 pct or 108.27 points at 4,978.06. Among CAC-40 stocks, 36 closed higher and 4 closed lower.

On the broader indices, the SBF-80 index closed up 168.34 points or 3.06 pct at 5,677.78 and the SBF-120 ended up 2.33 pct or 82.11 points at 3,604.20. The euro was quoted at 1.4847 usd compared to 1.4483 usd at midday.

Steel maker ArcelorMittal led Paris' blue chip gainers, closing up 7.03 pct or 3.10 eur at 47.20 on sector M&A speculation after Chinalco and Alcoa acquired a 12 pct stake in Rio Tinto, a move that could dent BHP Billiton's chances of acquiring the smaller rival.

The news lifted the entire metals and mining sector, helped by market talk that the two companies had paid as much as 60 stg a share for their stake.

Societe Generale jumped 5.53 pct or 4.60 eur to 87.80. Speculation of a takeover bid for the bank continued to intensify, with newsflow pointing increasingly in favour of a domestic takeover scenario and carve-up of the troubled banking group.

Deutsche Bank added weight to the talk in a research note today, estimating that BNP Paribas could offer 90 eur a share for SocGen, or 100 eur if it sells the corporate and investment banking business to another player, most likely Credit Agricole.

French daily Les Echos fuelled the speculation this morning, claiming Credit Agricole has asked its Calyon unit and Lazard to advise it on a potential bid for SocGen.

The report came in the wake of yesterday's confirmation from BNP Paribas that the group is studying an offer for SocGen, "because all Europe's banks are considering it."

BNP was the leading blue-chip decliner Friday, closing down 0.84 pct or 0.55 eur at 65.28, while Credit Agricole rose 2.15 pct or 0.44 eur to 20.93.

Microsoft's 44.6-bln-eur offer for Yahoo! boosted sentiment across the board but especially among software and technology stocks, with Capgemini benefiting the most among Paris' blue chips.

Capgemini rose 5.69 pct or 2.06 eur to 38.26. Vinci gained 5.68 pct or 2.58 eur to 48.00 on above-forecast sales figures and an especially strong order backlog for 2008, which reassured investors concerned over an industry slowdown.

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German shares close higher, but off highs after US employment data

The DAX was up 116.92 points or 1.71 pct at 6,968.67 points at the close, having traded between a low of 6,896.19 points and a high of 7,037.16 points. The MDAX gained 284.51 points or 3.26 pct to 9,003.32 points, while the TecDAX advanced 35.67 points or 4.52 pct to 825.47 points.

DAX futures won 82.50 points or 1.19 pct to 7,007.50 points, while bund futures won 0.06 points or 0.05 pct to 116.65. The euro was trading at 1.4839 usd, down from 1.4908 usd in London afternoon deals. Infineon surged 0.43 eur or 6.35 pct to 7.20 eur, posting the biggest gain on the DAX.

ThyssenKrupp advanced 1.96 eur or 5.99 pct to 34.70 eur on the back of the share buy-back programme of up to 3 pct of its own capital, which it announced yesterday.

Siemens jumped 3.21 eur or 3.72 pct to 89.39 eur after Goldman Sachs lifted its recommendation on the engineering company to 'buy' from 'neutral', adding the stock to its 'Pan-Europe Conviction Buy List'. The brokerage cited the company's strong balance sheet and share buyback programmes.

Financial stocks bounced back from recent losses, with Commerzbank up 0.94 eur or 4.64 pct at 21.20 eur, while peer Deutsche Bank advanced 2.23 eur or 2.97 pct to 77.39 eur.

MAN AG rose 3.25 eur or 3.95 pct to 85.58 eur, after WestLB reiterated its 'buy' stance on the company with a price target cut to 128 pence from 147 pence.

On the other end of the German benchmark index, Deutsche Telekom lost 0.18 eur or 1.31 pct to 13.56 eur, as one of only three decliners.

Lufthansa slid 0.04 eur or 0.25 pct to 15.93 eur, while Volkswagen declined 0.29 eur or 0.19 pct to 151.50 eur.

Over on the MDAX, Praktiker jumped 1.42 eur or 9.98 pct to 15.65 eur, while Beiersdorf lost 0.31 eur or 0.60 pct to 51.24 eur.

TecDAX-listed Singulus Technologies jumped 1.36 eur or 15.76 pct to 9.99 eur after the company said it signed a contract with OC Oerlikon Corporation AG to acquire its Blu-ray equipment operations. At the other end, AT & S lost 0.30 eur or 2.31 pct to 12.70 eur.

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Amsterdam shares close higher on positive Wall St

The AEX closed up 10.28 points or 2.33 pct at 451.61 after opening at 445.07, touching a late morning low of 443.91 to then reach a late afternoon high of 454.06. Government bonds traded mixed while the euro stood at 1.4849 usd compared with 1.4817 usd late yesterday.

Heavyweight financials led the market higher, with ING 3.69 pct higher to 22.49 and Aegon rose 2.91 pct to 10.25. Fortis closed up 2.69 pct to 15.28 amid reports newly-acquired ABN Amro could be involved in the acquisition by Banco Comercial Portugues of its own shares without proper reporting. Portuguese stock market regulator CMVM declined to comment on the report in daily Publico.

Midcapper SNS Reaal closed 0.63 pct lower to 12.56. Corporate Express led AEX gainers, up 8.57 pct to 4.18. Unibail-Rodamco added 3.98 pct at 164.66.

ArcelorMittal put on 6.97 pct to 47.13, after the company said it has upped its stake in Argentine unit Acindar Industria Argentina de Aceros to 99.5 pct. The company also reached an agreement on CO2 quotas at its Liege plant and promised to restart its blast furnace on the condition of the granting of a

"polluter's permit", Agence France-Presse reported, citing Belgian government sources. TomTom put on 3.44 pct to 37.92 following a report in the Financial Times Deutschland saying the Dutch automobile navigation company has gained market share over competitor Garmin in the fourth quarter.

Among oils, SBM Offshore added 2.49 pct at 19.79 while Royal Dutch Shell came off its lows, closing down 0.33 pct to 23.97, amid indications OPEC will leave production unchanged. OPEC said however that there was a need for vigilant attention to the market amid the threat of a global recession. Ministers from countries including Iran said, however, there may be a need for a cut in output at the group's meeting on March 5. Midcapper Fugro traded down 0.94 pct to 45.16. KPN lifted 2.48 pct to 14.42, ahead of "sound" results expected Tuesday, analysts said.

Vedior strengthened 2.27 pct to 16.70 after the staffing company agreed to pay 4.25 mln eur to settle a dispute with investors who bought shares on the morning of Nov 30, shortly before the group revealed it was in takeover talks with Randstad. Dutch stock markets regulator AGM said it is still investigating into possible insider trading. Randstad closed up 1.21 pct to 25.88.

The only other AEX decliners was Heineken, closing down 0.35 pct to 37.47. CSM was the strongest midcapper, up 6.74 pct to 19.49, Boskalis soaring 5.56 pct to 38.16 on an upgrade from UBS.

BAM added 5.10 pct at 13.18 after the company said it will sell its cement production plant in Weert to cement producer Bruil. Nutreco was one of the very few midcap decliners, down 0.49 pct to 42.78 after the company completed its acquisition of Copaga's feed and meat operations for a total of 30 mln eur.

Among local issues, Arcadis lifted 2.59 pct to 42.0 after the company acquired LFR, a US-based environmental management and consulting firm, from a private investment group.

Kardan closed 1.04 pct lower to 9.49 after unit GTC Real Estate said it will purchase an additional land plot in Changzhou, China, located next to the land plot that was acquired earlier this year. Nieuwe Steen Investments shrank 1.90 pct to 17.55 after the company reached agreement with a Credit Suisse subsidiary to buy the Silvergate office building in Thalwil, a suburb of Zurich in Switzerland, for 27.4 mln eur.

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