UK/Euro Financial Market Daily Evening Briefing 04-10-2007

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London shares close higher; NY flat; Northern Rock top gainer

UK blue chips closed higher with Northern Rock benefiting from ongoing hopes of a rescue bid, although further uncertainty surrounding the state of the US economy left most investors sidelined.
   
At the close, the FTSE 100 index was up 12.7 points at 6,547.9, having recovered from a session low of 6,507.2, but well off a high of 6,593.3, with the broader FTSE 250 index firmer too, 10.3 points ahead at 11,370.5. Volume was solid, with 3.3 bln shares changing hands in 622,786 deals.
   
On Wall Street, by London's finish, the DJIA was off 0.7 points at 13,967.5, with the S&P 2.1 points ahead at 1,541.7, and the Nasdaq composite index up 3.54 points at 2,732.97.
   
US investors gained an insight into the state of the economy today following disappointing factory orders and weekly jobless claims.
   
Tomorrow sees the release of key non-farm payroll numbers, which will be judged against last month's figures which showed an unexpected fall of 4,000 jobs. However, for September, economists expect a return to growth with 115,000 new jobs.
   
Back on this side of the pond, both the Bank of England and the European Central Bank have decided to leave interest rates unchanged.
   
In London, financials helped support the blue chips, as M&A hopes helped lift the sector.
   
Northern Rock led the gainers, up 9.9 pence at 161.7, amid hopes for a rescue bid for the troubled mortgage lender.
   
Royal Bank of Scotland, meanwhile, which is leading the consortium vying with Barclays to buy ABN Amro, finished 15 pence ahead at 655, as the lengthy bid battle is set to come to a close.
   
Barclays's shares were given a further lift with analysts saying the UK bank's likely defeat could put it back in the sights of major American or European predators, with one London-based trader saying he'd heard that Bank of America is to come in with a bid at the 750 pence level. Barclays ended the session 15 pence ahead at 655.

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And talk of stake building in Lloyds TSB by the Qatari Investment Authority lifted the bank's shares 6-1/2 pence to finish at 571-1/2.
   
Among other blue chip gainers, oil major BP finished 5 pence firmer at 562-1/4 after Exane BNP Paribas double-upgraded the UK oil major to 'outperform' from 'underperform' in a review of the European oil sector.
   
Exane BNP Paribas raised its oil price forecasts for 2007-2010 by 26 pct from 55.5 usd a barrel to 70.3 usd, reflecting higher costs, a weaker dollar, tighter capacity and lower inventories.
   
The broker also raised EPS estimates across the sector and upgraded BP to reflect its earnings leverage to the oil price.
   
Turning to the casualties, the heavyweight mining sector proved the main drag on the FTSE 100 index at the close, with as commodity prices retreated amid worries over the growth outlook in the US.
    
BHP Billiton dropped 45 pence to end at 1,702, followed by Xstrata, which dipped 67 pence to 3,278, Lonmin which shed 67 pence to 3,555, and Rio Tinto, which dropped 74 pence to finish at 4,131.
   
And investors locked in profits for Icap, which closed at 16-1/2 pence weaker at 516-1/2, after a trading update.
   
Numis said given the recent recovery in the share price and limited new information today, investors may lock in profits, but views any price weakness as a buying opportunity.
   
Elsewhere, Barratt Developments closed 9 pence down at 798 after Panmure Gordon initiated the group with a 'sell' stance and a target of 700 pence.
   
On the second line, oil services firm Abbot Group was the biggest FTSE 250 riser, finishing 63-3/4 pence ahead at 355-1/2, a leap of just over 21 pct in value after the firm confirmed it received proposals which may lead to an offer being made for the company.
   
The Financial Times reported today that private equity group 3i Group is understood to have made a 375-pence-a-share indicative offer for Abbot.

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3i shares gained 34 pence to close at 1,063-1/2

Meanwhile among Abbot's peers, Expro International finished 50 pence firmer at 1,055, with Hunting closing 30 pence ahead at 715-1/2, and Petrofac ending 2-3/4 pence stronger, on the sector consolidation move.
   
Elsewhere on the M&A front, Bodycote International shares closed up 9-1/4 pence at 281-1/4, after press reports suggested the group is interested in persuading Swiss firm Sulzer to renew its bid interest.
   
But on the downside within the midcaps, chemicals group Victrex lost 10-1/2 pence to close at 690 after its trading update failed to impress investors.
  
Benfield, meanwhile, closed down 13-1/2 pence at 291, after it was revealed that Robert Bredahl, head of the reinsurance broker's advisory arm, sold his holding, the implication being that a friendly bid cannot be coming up, as was hoped for.

Diary of Events

For a diary of key financial and corporate events in the UK this week, click here

UK Small Cap Report

For a summary of today's trading on the FTSE 250 and the AIM, click here

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Paris shares end flat after expected ECB decision, ahead of US jobs data

The CAC-40 index finished down 1.79 points or 0.03 pct at 5,804.39. Among CAC-40 stocks, 20 closed higher, 19 closed lower and 1 was unchanged. On the Matif, October CAC-40 futures were trading at 5,819. On the broader indices, the SBF-80 index closed up 23.44 or 0.34 pct at 6,865.83 while the SBF-120 ended up 0.91 or 0.02 pct at 4,224.28.
  
As forecast by economists, the ECB left its main interest rate unchanged at 4.00 pct. The main reaction to the ECB statement was on the foreign exchange markets, the Paris dealer noted, with the euro weakening slightly against the dollar.
   
In Paris, banks extended their recent rally on growing hopes that the credit crisis is coming to an end. Dexia added 0.54 eur or 2.42 pct to 22.87, Societe Generale was up 2.51 or 2.02 pct at 126.86, and BNP Paribas was 0.61 or 0.76 pct higher at 81.15.
   
BNP and SocGen both reassured investors with presentations to Merrill Lynch's banking conference in London. BNP said its exposure to the US subprime market is now below 100 mln eur, while SocGen confirmed its earnings targets and its "limited" exposure to the subprime market.
      
But the bigger movers of the session were outside the CAC-40. Hermes International jumped 3.78 or 4.68 pct to 84.48, with traders citing vague rumours of interest from Belgian investor Albert Frere, as well as from rival French luxury groups PPR and LVMH.
   
A Paris-based dealer said he was hearing rumours that Albert Frere was considering a bid for the company, while another local dealer referred to talk of a block trade involving PPR and/or LVMH, which would have brought them above the 5 pct threshold in Hermes.
   
But another trader said he thought there was nothing in the rumours, arguing that Hermes has locked up its capital precisely in order to prevent a takeover. LMVH was up 0.43 or 0.50 pct at 85.92, while PPR was unchanged 135.00.
   
Safran climbed 0.52 or 3.05 pct to 17.56 on renewed speculation of an imminent tie-up with Thales. Les Echos reported today that Safran is days away from selling its broadband equipment operations, reigniting the merger talk as an asset sale is thought to be one of the pre-conditions for a tie-up deal.
   
Last week Challenges magazine claimed Safran's plan is to dispose of certain telecoms businesses and wait for the share price to rise to 20 eur, before pressing ahead with the Thales merger.
   
On the downside, a number of recent bluechip gainers saw profit-taking, led by Capgemini which fell 1.20 or 2.58 pct to 45.40.
   
France Telecom dropped 0.47 or 2.02 pct to 22.75, with a Paris dealer pointing to profit-taking after the stock had been a defensive play during the summer's market turmoil.
   
Construction stocks Saint Gobain -- down 1.14 or 1.48 pct at 75.96 -- and Vinci -- down 1.11 or 1.97 pct at 55.14 -- also pulled back after a recent run of gains, as did ArcelorMittal, shedding 0.64 or 1.18 pct to 53.75.
   
Alcatel-Lucent lost 0.14 or 1.90 pct to 7.21 as investors were hesitant over the likelihood of a hoped-for management shakeup.
   
Sanofi-Aventis, finally, added 0.67 or 1.12 pct to 60.75, helped by a positive note from SG Securities.

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German shares close flat after ECB decision and flat Wall Street opening

The DAX closed 10.31 points or 0.13 pct lower at 7,944.99 after trading between a low of 7,911.86 and a high of 7,966.81 today. The MDAX was down 33.37 points or 0.32 pct at 10,536.83, while the TecDAX added 1.10 points or 0.11 pct to 988.77. DAX futures were down 5.50 points or 0.07 pct at 8,013, while bund futures declined 0.29 points or 0.26 pct to 112.89.
   
Leading blue chips lower, Infineon fell 0.35 eur, or 2.98 pct, to 11.40 after Morgan Stanley released a chip industry coverage update yesterday which talked of "inventory correction", raising fears that another slowdown in the sector is on its way.
   
Thyssenkrupp dropped 0.79 eur, or 1.74 pct, to 44.71. Traders said worries about demand stagnation in the US market were hurting the shares.
   
SAP's shares fell 0.65 eur, or 1.56 pct, at 41.01 after Sanford Bernstein downgraded its stance to 'market perform' from 'outperform' as it believes the stock's recent gains will yield a less attractive risk/reward scenario.
   
Adidas was down 0.48 eur, or 1.04 pct, to 45.67.   

Bayer shed 0.27 eur, or 0.49 pct, at 55.28. Traders said worries surrounding the pharma company's blood-clotting drug Trasylol may still be plaguing the stock.
   
At the other end of the index, Deutsche Post World Net rose 0.42 eur, or 2.11 pct, to 20.37.
   
BMW gained 0.72 eur or 1.57 pct to 46.48.
   
MAN rose 1.48 eur, or 1.31 pct, to 114.28 as traders said speculation was gaining ground that Volkswagen might be trying for a partnership for its heavy truck operations with MAN and without Scania AB.
   
Rumours starting two days ago said the Volkswagen might be on the verge of making a bid for MAN. The three companies have been in one-off talks to come to some sort of agreement over a cooperation for their heavy truck operations.
   
Commerzbank gained 0.14 eur, or 0.47 pct, at 30.02. Peer Deutsche Bank announced yesterday its third-quarter net profit exceeded 1.4 bln eur, creating demand in the sector.
   
Over on the MDAX, Kuka was 1.34 eur, or 4.40 pct, lower at 29.11, as the worst performer on the index. Prosieben, meanwhile, added 0.61 eur, or 2.77 pct, at 22.60 at the other end.
   
TecDAX-listed Carl-Zeiss was the worst performer among tech stocks, down 0.75 eur, or 4.69 pct, at 15.25, while Pfeiffer Vacuum added 1.55 eur, or 2.44 pct, at 64.97 as the sharpest gainer.

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Amsterdam shares close up amid mixed European sentiment; Hagemeyer leads

The AEX closed 1.22 points or 0.23 pct higher at 541.75 after opening at 538.11 and trading in the range 537.76 - 542.93. Government bonds traded higher while the euro stood at 1.4130 usd versus 1.4161 usd late yesterday.
   
Hagemeyer surged 6.93 pct at 3.55 eur amid ongoing speculation of a possible takeover approach. French peer Rexel has been suggested in recent days as a potential predator.
   
Fortis finished 5.50 pct higher at 22.07 eur with heavy volumes on rising hopes that its bid for ABN Amro will succeed and with investors buying back into the stock to avail of its rights issue aimed at funding its bid, market sources said.
   
Trading in takeover target ABN Amro was suspended at 3 pm CET as the tender period for a rival takeover bid from Barclays ended. ABN Amro finished 0.61 pct higher at 37.72.
   
Peer financials also traded higher, lead by Aegon which gained 2.60 pct at 13.82 amid hopes among investors that the global credit crunch is now over. Earlier, reports emerged that the Dutch arm of Swiss Life, Zwitserleven, is to be auctioned off, with Aegon and non-listed Eureko named as the most logically interested parties. ING, meanwhile, climbed 0.13 pct higher at 31.98.
   
Akzo Nobel put on 0.39 pct at 59.75 as key shareholder Paulson said it will vote in favour of the company's planned acquisition of Imperial Chemical Industries at the Nov 5 EGM, revealing also that it has a 5.1 pct stake in Akzo Nobel.
   
TomTom fell 0.47 pct at 50.78, while midcap takeover target Tele Atlas gained 1.36 pct at 23.07 amid news FMR Group now owns a 6.56 pct stake in Tele Atlas. Analysts have been speculating on competing bids for Tele Atlas ever since Nokia launched a bid on Navteq.
   
SBM Offshore gained 2.12 pct at 27.90 eur amid reports that the Canadian government has approved a gas project off the coast of Nova Scotia.
   
Staffing stock Vedior rose 2.16 pct at 16.57 as analysts said it can take heart from UK peer Michael Page's upbeat comments on the state of its French operations. Vedior's AEX peer Randstad gained 0.71 pct at 42.50.
   
ASML led blue chip decliners, falling 3.14 pct at 22.86, as the technology sector came under pressure, hurt by a decline among chip companies following research and broker comment suggesting demand for semiconductors may be weakening.
   
Corporate Express shed 2.45 pct at 7.58 after being downgraded to 'hold' from 'buy' at ING with a lowered price target.
   
Philips fell 1.27 pct at 31.05 Earlier, SHL Telemedicine said it has agreed to sell its Raytel Cardiac Services and other operations to Philips for an upfront payment of 110 mln usd. Royal Dutch Shell shed 0.25 pct at 28.12 eur.
   
On the midcap, Fugro lead gainers, putting on 2.66 pct at 59.04, while SNS Reaal added 1.97 pct at 16.58.
   
Boskalis led midcap decliners, losing 2.90 pct at 35.78 with dealers pointing to profit-taking after recent strong gains. Wereldhave shed 1.70 pct at 83.06 after announcing it has sold an office in the Netherlands for 43.6 mln eur.
   
Univar ended 0.02 pct lower at 53.25 eur after trading was suspended at 3 pm as the extended 53.50 eur per share offer from CVC Capital Partners ended.
   
Locally, Imtech put on 4.05 pct at 20.32 after following the company's 3-for-1 share split after market close yesterday. Arcadis gained 2.63 pct at 55.47 after announcing a road works contract win in Poland worth 11 mln eur. Wegener closed 1.46 pct lower at 17.51 eur as trading was suspended as the tender period for the 17.70 eur per share offer from Mecom came to an end.

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