UK/Euro Financial Market Daily Evening Briefing 03-09-2007

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London shares close firmer, well off highs lacking NY lead; Barclays up

UK blue chips closed modestly higher today, albeit well below the morning peak in very thin trade reflecting the lack of any lead from Wall Street, shut for the US Labor Day holiday today, with receding credit market concerns supporting a rally by financials, led by Barclays.
   
At the close, the FTSE 100 index was 11.9 points higher at 6,315.2, well below the midmorning peak of 6,334.4 having opened at a low of 6,303.2.  All the broader FTSE indices ended stronger but off highs, with the FTSE 250 index up 49.2 points at 11,358.4. Volume was very light, with just 1.604 bln shares changing hands in 377,186 deals, lacking any US impetus.
   
And with interest rate decisions due from the BoE and the ECB this Thursday, and the key US jobs reports on Friday, traders expected equity markets to remain range bound for the early part of this week.
   
Barclays headed the blue chip leaders board today, 24-1/2 pence firmer at 638 after comments in the weekend press by Barclays Capital boss, Bob Diamond went some way to allay fears that Britain's third-largest bank faces a black hole in its accounts from exposure to the turmoil in credit markets.
   
In an interview with The Sunday Times, Diamond said: "There was an impression that we had hundreds of millions in unsecured exposure. So we said that the potential, conservative, loss could be 75 mln stg. We do not like having to say things like that, but there were enough questions to make it important for us to make that statement."
   
Other banks also moved higher in a relief rally today, with HBOS up 13-1/2 pence at 894, Standard Chartered ahead 26 pence at 1,556, and Royal Bank of Scotland, up 5-1/2 at 580.
   
Blue chip insurers were also higher as the outlook for equity markets picked up.
   
Standard Life, which reports interims tomorrow added 3-3/4 pence at 304, while Royal & Sun Alliance took on 2.6 pence at 14.1, and Prudential was up 9 pence at 710.
   
And positive broker comment provided the spur for ICAP shares, 13 pence firmer at 501 with Morgan Stanley raising its price target on the interdealer broker to 550 pence from 515.
   
The broker also hiked its EPS forecasts to reflect improved fundamentals at the group but maintained its 'equal-weight' rating on ICAP.

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Strength in selected heavyweight mining shares also propped up the blue chips as metal prices continued to strengthen.
   
Lonmin was a good performer, up 40 pence to 3,151 after Goldman Sachs raised its stance on the company to 'buy' from 'neutral' with an increased target of 4,120 pence from 3,945.
   
Elsewhere Kazakhmys shares took on 30 pence at 1,299, while Xstrata was up 48 pence at 2,953, but BHP Billiton shares missed out, losing 29 pence at 1,430.
   
Also on the downside, weakness in oil majors limited the FTSE 100 index's gains, with BP shedding 7 pence at 550-1/2, BG Group losing 12-1/2 pence at 781-1/2, and Royal Dutch Shell dropping 5 pence at 1,929.
   
And Punch Taverns also lost ground, off 4 pence at 1,095 as speculative interest faded ahead of a trading update from the pubs operator due later this week. 
   
Among the mid caps, HMV was a good gainer, up 9-1/2 pence at 132-3/4 after Deutsche Bank upgraded its rating on the company to 'buy' from 'hold' with a target of 135 pence.
   
The broker said it believes that the market is attaching little credibility to new CEO Simon Fox's plans to stabilise HMV and then grow medium-term profits.    

Elsewhere Euromoney shares jumped 40 pence higher to 580 as investors reacted positively to news of completion of a US disposal, with Altium Securities repeating its sector 'core holding' view on the stock.
    
Euromoney said it has completed the sale of its US subsidiary, Med Ad to Canon Communications for an initial sum of 6.7 mln stg in cash.
   
In reaction, Altium pointed out that although this is a relatively small scale transaction for Euromoney it emphasises the group's commitment to increasing its focus on electronic/subscription-based products.
   
Meanwhile vague talk that it could be a bid target for US retailer Best Buy pushed Carphone Warehouse shares 16-1/2 pence higher at 357-1/2.
   
And tour operator Thomas Cook Group added 13 pence at 299 after Credit Suisse upgraded its stance on the tour operator to 'neutral' from 'underperform', and Morgan Stanley initiated coverage with an 'overweight' recommendation and 375 pence target.

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Credit Suisse also raised its operating profit estimates by 8 pct on the back of better-than-estimated summer trading in Northern Europe and in the German Airlines division.
   
But on the downside, Intertek shares shed 28-1/2 pence at 953-1/2 on profit-taking after first half results came in in-line with consensus.
   
Intertek saw its first-half pretax profit rise to 48.4 mln stg, up from 45.2 mln a year earlier, on revenues of 360.8 mln stg, up 10.3 pct.
   
And shares in Taylor Nelson Sofres lost 1-1/2 pence at 228 after its first half results broadly met analysts' forecasts.
   
The world's second largest market research company said adjusted pretax profit for the six months to June 30 was 36.9 mln stg, compared with 34.1 mln a year earlier, broadly in line with the 37 mln stg analysts' average forecast.

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Paris shares close lower after hesitant session; GDF, Suez pull CAC down

The CAC-40 index finished down 11.43 points or 0.20 pct at 5,651.27. Among CAC-40 stocks, 26 closed higher and 14 closed lower.  On the broader indices, the SBF-80 index closed up 21.57 or 0.32 pct at 6,978.76 and the SBF-120 ended 5.39 or 0.13 pct lower at 4,122.19.
   
The long-delayed merger agreement between Suez and GDF was the main focus and took attention away from Friday's gains on Wall Street, where investors were reassured by comments on the suprime from Federal Reserve chairman Ben Bernanke and US president George Bush.
   
Suez and Gaz de France came under intense scrutiny in morning trade after the groups announced they had finally agreed the terms of their long-awaited merger. Under the approved plan, the French government will hold more than 35 pct of the combined company's capital and 65 pct of Suez Environment will be spun off to Suez shareholders. The parity for the merger has been set at 21 GDF shares for every 22 Suez shares, while synergies are seen at about 1 bln eur per year by 2013.

Suez and GDF shares reacted negatively to the news, with Suez in particular leading losses on the CAC-40, down 1.80 eur, or 4.31 pct, at 39.94. A Paris-based dealer pointed out that the share had risen more than 10 pct over the past two weeks on speculation surrounding the possible outcome of tie-up talks. "Some people were betting on the payment of a dividend (to Suez shareholders) rather than a spin-off of the environment business, while others were speculating that a collapse of the merger talks might make Suez a takeover target," he continued.

GDF was similarly impacted, falling 1.41, or 3.83 pct, to 35.39 after a three-day rally last week.

Elsewhere, a pre-weekend speech from Fed chairman Ben Bernanke provided a boost, helping to calm fears of an escalating credit crisis and raising hopes of a future rate cut. Speaking at the Fed's annual conference on Friday, Bernanke said the central bank will "act as needed" to keep the difficulties from hurting the national economy, leading a growing number of economists to predict the Fed will lower its key rate this year.

In Paris, selected bank stocks rallied, with Societe Generale adding 1.12, or 0.95 pct, to 119.49 and Dexia gaining 0.21, or 1.04 pct, to trade at 20.39. Second-liner Natixis climbed 0.30, or 1.92 pct, to 15.93. In contrast, Credit Agricole dropped 0.33, or 1.19 pct, to 27.37 following reports that clients have withdrawn 3.7 bln eur of assets from three absolute return funds over the past two months. BNP Paribas also underperformed its peers, trading down 0.17, or 0.22 pct, at 77.25.

Among other big risers, Vinci rose 0.97, or 1.86 pct, to 53.21 ahead of its first-half results tomorrow, while Michelin was up 1.52, or 1.64 pct, to 93.99 and Accor added 1.29, or 2.05 pct, to 64.30, extending last week's strong gains.

Seche Environnement surged 5.14, or 4.61 pct, to 116.69 amid speculation it could become a target for Veolia after Suez announced it is to spin-off its environment business as part of the GDF merger. An analyst at Aurel Leven was sceptical, however, pointing out that in Seche's case potential predators would have majority shareholder Joel Seche to contend with. "That removes some of the speculative appeal," he commented, adding that "(Joel) Seche would have to agree to sell."

On the downside, Altran slipped 0.29, or 4.58 pct, to 6.04 after reporting a first-half net loss of 4.5 mln eur on Friday, down from a profit of 8.1 mln eur a year earlier. Analysts at Exane BNP Paribas said the net result was "well below" their expectation of 9 mln eur profit, because of a 12.5 mln eur goodwill write-down and higher-than-expected interest and tax payments.

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German shares close higher as DaimlerChrysler, automotive stocks lead

The DAX closed higher 10.41 points or 0.14 pct at 7,648.58 after trading between a high of 7,677.67 and a low of 7,630.85. The MDAX added 72.27 points or 0.70 pct at 10,358.34 while the TecDAX rose 7.25 points or 0.79 pct at 924.55. DAX futures were lower 16.00 points or 0.21 pct at 7,664.00 while bund futures eased 0.14 or 0.12 pct to 113.54.
   
DaimlerChrysler rose 1.85 eur or 2.84 pct to 67.03 to lead the blue chip board advancers after last week's share buyback announcement triggered positive broker notes on the stock.
   
Deutsche Bank raised its target on DaimlerChrysler to 100 eur from 86 eur and reiterated its 'buy' stance, said traders this morning, as the broker foresees substantial shareholder returns over the next 12 months.
   
In a note published this morning, Deutsche Bank said that even after the announced share buyback, Daimler will still have significant funds available for distribution.
   
Bayerische Motoren Werke improved 0.45 or 1.01 pct at 45.08 as it confirmed a Sunday newspaper report that unit sales growth in August would be around 10 pct from the same month last year.
   
Volkswagen was up 1.31 or 0.86 pct at 152.91 on German media reports over the weekend that Porsche AG, which currently holds around 31 pct in VW, wants to increase its stakes to 51 pct.
   
Truck maker MAN added 1.77 or 1.68 pct at 107.06. Euro am Sonntag newspaper reported yesterday MAN has won a large contract worth around 50 mln eur from the Singapore-based shipping company APL for the manufacture and delivery of eight giant diesel engines.
   
Retailers were mixed, with Metro down 0.85 or 1.34 pct at 62.75, while Adidas added 0.23 eur at 43.38 eur. JP Morgan downgraded its stance on Metro to 'neutral' from 'overweight', but increased its target to 64 eur from 61 eur, traders said.
   
Adidas CEO Herbert Hainer said in a dpa interview that 2008 will be a "super year" for the company, adding the sporting goods maker aims to grow sales in a high single-digit range, adjusted for currency fluctuations.
   
Financial stocks rallied, with Commerzbank posting the biggest sector gain. It was up 0.27 or 0.90 pct at 30.36. Technology stocks were largely outperformers. Infineon was higher 0.18 or 1.58 pct at 11.60, SAP up 0.14 at 39.67 while Siemens fell 0.49 or 0.53 pct to 91.70.
   
Fresenius Medical Care bucked the trend, losing 0.54 or 1.50 pct at 35.52. Other pharma and chemical stocks were also on negative terrain.
   
On the downside too, utility stocks were weighed down by reports that Germany's environment minister wants to see Germany's 7 oldest nuclear power stations shut by late 2009, while across the border in France the merger of Gaz de France and Suez made progress over the weekend. RWE AG fell 1.05 to 81.49 while EON eased 1.15 to 122.00.
   
On the MDAX, Patrizia Immobilien was the biggest loser, down 0.42 or 3.65 pct at 11.08. SGL Carbon added 1.83 or 5.20 pct at 36.99. Carl-Zeiss added 0.91 or 6.53 pct at 14.85, making it the best performer on the TecDAX. Nordex lost 0.82 or 2.36 pct at 33.89.

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Amsterdam shares close higher; KPN continues lead on expanded buyback

The AEX closed 2.63 points or 0.50 pct higher at 525.36 after opening at 523.77 and trading in a range of 522.92-525.93. Government bonds traded lower and the euro stood at 1.3610 usd versus 1.3634 usd late yesterday.
   
KPN closed 2.62 pct higher at 11.66 eur after leading gainers for much of the day on news it has expanded its share buyback programme by 500 mln eur.
   
TomTom followed, gaining 1.80 pct at 48.62 eur while ABN Amro outperformed, rising 1.46 pct at 34.65 amid news that labour unions are launching a last-ditch attempt to stop the bank from being taken over and pushing for a standalone future for ABN Amro.

Among other financials, ING rose 0.68 pct at 31.21 while Aegon was flat at 13.39 eur and Fortis was unchanged at 26.90 eur. ASML climbed 1.24 pct to 22.00 eur and DSM added 0.45 pct to 37.70 while making news with the groundbreaking of a new headquarters in China that will also be its largest research facility outside Europe and the US. DSM's chemical peer Akzo Nobel meanwhile gained 0.45 pct at 58.03 eur.
   
TNT closed 0.68 pct higher at 31.21 while making news in Germany as its German postal unit and PIN Group AG have formed a new employers' association, claiming an existing association headed by Deutsche Post does not represent industry interests.
   
Unibail-Rodamco added 0.57 pct at 177.76, Arcelor Mittal rose 0.56 pct at 48.55 and Vedior gained 0.72 pct at 16.79 eur while among its staffing peers, Randstad declined 0.15 pct at 41.02 and midcap staffing group USG People gained 0.30 pct at 23.35.
   
Ahold closed flat at 9.86 eur after trading higher earlier in the day on a price target upgrade from ING.
   
SBM Offshore led decliners, closing 1.27 pct lower at 27.16. Earlier, the share was downgraded to 'reduce' from 'hold' at Petercam, with the brokerage saying it expects few positive surprises. Hagemeyer lost 0.64 pct at 3.09 eur and Unilever was off by 0.04 pct at 22.42.
   
Van der Moolen led midcap gainers, closing 6.82 pct higher at 3.76 while Aalberts gained 4.18 pct at 18.19 and BAM gained 3.27 pct at 20.53.  LogicaCMG put on 2.08 pct at 2.45 amid news that it has won an outsourcing contract from KPN that will have LogicaCMG taking over KPN's human resources and payroll from January. Among Logica's IT services peers, Ordina lost 1.55 pct at 14.64 and Getronics was up 0.16 pct at 6.14 eur.
   
Stork led midcap decliners, losing 2.52 pct at 46.36. The initial acceptance period for Candover's takeover offer for Stork ends tomorrow afternoon and analysts have cast doubt on the offer's success as Marel, a shareholder that rejects the offer, has now increased its stake in Stork to over 43 pct.
   
Corio lost 0.70 pct at 56.78 while real estate peer Wereldhave fell 1.18 pct to 86.85 while Oce dipped 0.70 pct to 15.69 and Univar shed 0.40 pct at 52.69.

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