UK/Euro Financial Market Daily Evening Briefing 02-08-2007

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London shares close firmer; NY up; BA gains ahead of Q1 results

Leading shares closed firmer but off highs as Wall Street remained higher after positive earnings news helped offset credit woes, with British Airways gaining in the blue chips ahead of Q1 results tomorrow.
   
By close, the FTSE 100 was up 49.7 at 6,300.3, off an earlier high of 6,319.3, while the FTSE 250 was up 44.1 at 11,233. Volume was average, with 2.87 bln shares having changed hands in 727,555 deals.
   
"Today it seems like there has been nothing wrong in the market following last week's falls, with another good day for the FTSE. The UK market has been supported by gains on the DJIA which opened higher on positive earnings news as well as news that the Bank of England decided not to raise interest rates," said Mark Priest, head of equity sales at Tradindex.
   
Across the pond by London's close Wall Street remained higher on a fresh set of largely positive quarterly earnings reports and solid jobless numbers tempering credit woes.
  
The Dow Jones Industrial Average index was 24 points ahead at 133,86.8 and the Nasdaq composite added 6.85 points to 2,560.78.
   
Traders were pleased that profits at companies such as Nokia came in better than expected, and that the Labor Department said jobless claims rose last week by a smaller number than economists predicted.
   
The report -- which comes before Friday's highly anticipated July employment report -- was a promising sign that the US job market is holding up.
   
In other economic data, US factories saw demand for their goods rise in June by 0.6 pct, up from a 0.5 pct drop in May but lower than expected.
   
Turning back to the UK, as expected today, the Bank of England left the base rate at 5.75 pct.
   
At close, British Airways was the top riser up 17-1/2 at 403-3/4 ahead of Q1 results tomorrow.
   
Barclays Wealth sees pretax profits of 188 mln stg versus 195 mln, but said the profit outlook "remains reasonably well underpinned, provided market conditions, security issues and baggage problems do not hit revenues more than expected."

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ABN-Amro also upgraded its stance on the carrier to 'hold' from 'sell' saying it expects impending Q1 numbers to be decent.
   
And, Unilever gained 64 pence to 1,568 pence, after reporting underlying sales growth of 5.8 pct, which was above the group's target range of 3-5 pct and around 100 basis points above consensus expectations.
   
Unilever also raised guidance for the full year and announced plans to accelerate change, including the disposal of its underperforming North American laundry business. Following the numbers, Collins Stewart upgraded Unilever to 'buy' from 'hold', as did Panmure Gordon.
   
Elsewhere, Barclays took on 8-1/2 to 686 after posting strong H1 numbers which showed a 12 pct increase in first-half profit, despite paying out 87 mln stg in compensation to customers who complained about overdraft charges.
   
Barclays said its pretax profit for the year to June 30 came in at 4.101 bln stg, up from 3.673 bln stg in the same period last year, reiterating a previous announcement on July 23.
      
In broker-generated news, Prudential took on 22 to 700 after WestLB raised its rating to 'hold' from 'reduce' following yesterday's Q2 strong results.
   
SABMiller was also higher, up 39 at 1,269 after UBS raised its rating in the drinks group to 'neutral' citing higher volume growth estimates as well as taking into account slightly weaker emerging market currencies.
   
Elsewhere, Vodafone gained 6.2 to 156.6 as British Sky Broadcasting Group said football fans in the UK and Republic of Ireland will for the first time be able to watch live English Premier League football on their mobile phones.
   
Sky Mobile TV is currently available on the Vodafone UK and Vodafone Ireland. Vodafone was also likely helped by positive read across following strong numbers by US peer Nokia.
   
Turning to the downside, the biggest faller among the blue chips was Mitchells & Butlers, down 35 pence at 713, after the company said its proposed property joint venture with R20, the investment vehicle of Robert Tchenguiz, is unlikely to be achieved until debt markets improve.
   
M&B said however, that it had not altered its plans, but would proceed with the deal when markets had stabilized. Blue Oar said: "If there's a 50 pct chance of the deal having permanently fallen over, then a share price of 625 pence would not be unreasonable." Cazenove added the situation is unlikely to be clearer until September at the earliest.
   
Whitbread lost further ground amid vanishing takeover hopes with the shares off over 300 pence in the last three weeks. The shares were down 65 at 1,588.

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Elsewhere among the laggards, oil issues continued to slide as oil prices fell back from a recent high of 78 usd a barrel which was fuelled by a plunge in US crude inventories. Royal Dutch Shell slipped 35 to 1,900, BG Group down 7-1/2 at 794 and BP came off 10-1/2 to 563.
   
Turning back to earnings news, Anglo-Australian mining group Rio Tinto was down 110 pence at 3,335 pence after its first-half net profit fell 14 pct from a year earlier to 3.25 bln usd due to cost pressures. Rio Tinto, the world's third largest miner, said underlying earnings, excluding one-off items, fell 6 pct to 3.53 bln usd.
   
Among the mid-caps, Alfred McAlpine surged 26-1/2 pence to 475 after confirming plans to break up its businesses and posting a 27 pct rise in first-half underlying pretax profit on higher turnover with strong business momentum continuing.
       
However, Mondi was the top riser, up 28-3/4 at 462-1/4 as Credit Suisse upgraded the group to 'outperform' from 'neutral', with a price target raised to 555 pence from 515.
       
Elsewhere, Cookson Group was 38-1/2 pence up at 725, after H1 results came in at the top end of expectations and the company raised guidance.
       
On the downside, Invensys was the top faller, down 38-1/4 at 341-3/4 after Q1 results lagged some investors' expectations. Detica Group fell back 26-1/2 to 338-1/2 after the firm issued a trading update which Panmure Gordon said was worse than it had expected.
   
And, Trinity Mirror fell 19 pence to 495-1/2 after warning that a protracted disposal programme will net the UK newspaper publisher some 150 mln stg less than it originally hoped.
   
The owner of Mirror national titles said the proceeds from the sell-off of the Racing Post and its regional papers in the Midlands and southern England would be "lower than our original expectations".

UK Diary of Events

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UK Small Cap Report

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Milan shares close higher; Generali up on share buy-back

The Mibtel index was up 0.52 pct at 31,150 points and the S&P/Mib up 0.78 pct at 39,710. Volume was an estimated 6.038 bln eur.
   
Brokers said second quarter results were supporting equities, while there are doubts on whether debt market and knock-on hedge fund problems are over. One broker said he believes today's rise was due to investors covering short positions and that in the long run the market can fall another 5-10 pct on debt and hedge fund issues.
   
On the other hand, the Italian market is below its level at the start of the year, while Germany's is strongly up, and this divergence could narrow in the next months, he said.
   
European Central Bank comments were in line with expectations for further rises in rates over the next year or so, brokers said.
   
Generali was up 2.26 pct to 29.41 eur after this afternoon's first half results above analyst expectations. Brokers said the sizable share buy-back programme was the main supportive factor.
   
Elsewhere in the insurance sector, Alleanza, which reported strong results yesterday, fell 0.11 pct to 9.175. Fondiaria-SAI was up 0.41 pct to 34.35 and Unipol up 0.92 pct to 2.4725.
   
Unicredito added 0.88 pct to 6.175 ahead of tomorrow's results. Brokers said they are confident current market problems will not upset second quarter expectations. Intesa Sanpaolo rose 0.91 pct to 5.525.
   
Heavy debt stocks made a come-back after recent falls, with Snam Rete Gas up 4.43 pct to 4.43 pct to 4.1575, AEM up 3.69 pct to 2.5175 pct to 3.69 and Telecom Italia up 2.24 pct to 1.962.
   
Seat PG rose 3.65 pct to 0.4095 on international buying. Deutsche Bank raised its rating to 'buy', from 'hold', on restructuring prospects. Brokers still see Seat PG shareholders selling their stakes even if the debt crisis has put the sale on hold, at least until after August.
   
On the negative side, Alitalia ended a volatile session down 3.20 pct to 0.7955. The share is reacting to prospects for the government privatisation. Parmalat lost 3.03 pct to 2.50. The stock is volatile, reacting to prospects for its extensive legal actions.
   
Fiat fell 2.57 pct to 20.49 with some disappointment it only matched the 10 pct market rise in Italy new registrations in July, rather than outperforming, suffering on rivals heavy discounting.
     
Oils were weaker following the sector-wide trend. Tenaris lost 2.09 pct to 17.03. Erg was down 4.30 pct to 16.20 ahead of results tomorrow and after a sharp rise yesterday.
   
Valentino added 0.03 pct to 34.71 after results. The stock is subject of a 35.00 eur per share bid from a Permira private equity bid.

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German shares close higher lead up by Fresenius Medical Care

The DAX closed 60.20 points or 0.81 pct higher at 7,534.13, having traded between 7,502.72 and 7,568.20. The MDAX advanced 36.82 points or 0.35 pct to 10,621.92, while the TecDAX lost 1.56 points or 0.17 pct to 903.76.
   
DAX futures were down 52.50 points or 0.69 pct at 7,533.00, while bund futures lost 0.20 points or 0.18 pct to 112.48.
  
Fresenius Medical Care gained 1.33 eur or 3.87 pct at 35.73, after the dialysis services specialist released solid second-quarter figures this morning, which prompted the company to raise its 2007 forecasts.
   
"The company's increase of its forecasts was not something I was expecting and is a positive surprise," said analyst Karl-Heinz Scheunemann at Bankhaus Metzler.
   
Deutsche Telekom added 0.34 eur or 2.72 pct at 12.86. Traders pointed to technical trading grounds for the advance. Volkswagen rose 3.39 eur or 2.53 pct to 137.60.
   
RWE gained 1.54 eur or 1.99 pct at 78.91, after WestLB upgraded its stance on the utility company to 'add' from 'hold', pegging its target at 84 eur per share ahead of the company announcing its earnings next week.
   
Financial stocks were mostly lower as anxiety regarding the effects of the US subprime crisis continued.
   
Deutsche Postbank dropped to the bottom of the index, losing 2.19 eur or 4.01 pct to 52.37. Hypo Real Estate declined 0.35 eur or 0.79 pct to 43.94, while Commerzbank fell 0.13 eur or 0.43 pct to 30.42.
   
Henkel expanded yesterday's losses, dropping 1.51 eur or 3.95 pct to 36.94, after its second-quarter numbers missed analyst expectations.
   
Over on the MDAX, Pfleiderer rose to the top, adding 1.19 eur or 6.29 pct to 20.12, after the German supplier of engineered wood, surface-finished products and laminate flooring released better-than-expected second-quarter figures, despite its having to slash its full-year EBITDA guidance.
   
At the other end, IKB Deutsche Industriebank plunged 4.87 eur or 28.35 pct to 12.31 due to continued concerns in regard to its exposure to the US subprime credit market. TecDAX-listed Rofin-Sinar added 1.50 eur or 3.16 pct to 49.00, while Aixtron lost 1.07 eur or 16.61 pct to 5.37.

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Amsterdam shares close up, off highs on choppy Wall St; Unilever leads

The AEX closed 3.31 points or 0.63 pct higher at 527.76 after opening at 530.16, reaching an early morning high of 530.49 and a late afternoon low of 525.21. Government bonds were lower and the euro stood at 1.3683 usd versus 1.3678 usd late yesterday.
   
Unilever was the strongest gainer on the AEX and the most heavily traded, closing up 3.97 pct at 22.50 after presenting higher-than-analysts earnings. Dutch broker Theodoor Gilissen upgraded the issue to 'buy' from 'hold' and upped its price target to 26 eur from 25.
   
TNT was another strong gainer, up 2.34 pct at 31.95, with Wolters Kluwer following in its wake, rising 1.70 pct to 21.48.
   
ABN Amro was another high volume issue, 1.85 pct higher at 35.24 after Barclays, the UK bank that has made one of two rival offers for ABN Amro, came out with well received earnings, with CEO John Varley saying he is confident Barclay's bid will succeed. Sources told Thomson Financial News today that the Barclays offer is set for EU clearance.
   
Among other financials, Aegon saw some trading volume, closing up 1.46 pct at 13.18. ING advanced 1.32 pct to 30.70 and midcapper Binckbank strengthened 3.37 pct to 13.48 while Fortis lost 0.31 pct to 28.59.
   
Vedior put on 1.49 pct to 19.12 after Dutch broker ING added the issue to its Small & Midcap Focus List, removing Randstad, which closed 1.24 pct lower at 46.80. Hagemeyer lifted 1.06 pct to 3.81 after peer Rexel raised its guidance.
   
Corporate Express soared in afternoon trade to close 0.40 pct higher at 9.95 pct, with one Amsterdam-trader pointing to non-specific takeover speculation as the reason the share rebounded from early morning losses following the release of disappointing second-quarter results.
   
Arcelor Mittal finished 0.39 pct higher at 46.88 after the company agreed to sell one of its steel plants.
   
Akzo Nobel edged 0.07 pct higher to 53.58 after takeover candidate ICI released second-quarter figures, with analysts mulling the impact on Akzo buy would have on ICI.
   
Nutreco advanced 0.71 pct to 53.71 on the back of well-received second-quarter figures and after Theodoor Gilissen upgraded the issue to 'buy' from 'hold'.
   
Unibail-Rodamco led decliners, slipping 2.04 pct to 167.90. Royal Dutch Shell lost 1.31 pct to 27.96 eur as oil prices came off yesterday's high, and amid news the company is selling its Berre-l'Etang refinery to Basell for 700 mln usd. Fellow oil SBM Offshore surrendered 1.08 pct to 29.33 eur and midcapper Fugro lost 2.33 pct to 46.47.
   
Vopak was off 0.23 pct at 43.0 after the company closed a 1 bln eur credit facility.

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