UK/Euro Financial Market Daily Evening Briefing 05-09-2007

For trading strategies, tips, education, a trader's diary and more click here.

London shares close down, financials weigh; NY slumps as home sales fall

Leading shares closed down, just off session lows, with financial stocks providing the main drag on the Footsie, while Wall Street made heavy losses after disappointing pending home sales data hit investor confidence.
   
At the close, the FTSE 100 index was down 106.1 points at 6,270.7, off an earlier low of 6,264.5, while the FTSE 250 index finished 210.1 points lower at 11,300.7.
   
Volume was thin, with 2.32 bln shares changing hands in 569,583 deals.
   
"In addition to the ongoing credit market woes, a mix of broker comments and lacklustre US economic data have all combined to drive equities lower through the session." said a trader from CMC Markets.
   
US stocks fell sharply today as a jittery Wall Street sold off on a report showing a large drop in pending home sales.
   
By the London close, the Dow Jones Industrial Average was down 182.70 points at 13,266.20, while the Nasdaq Composite was 22.54 to 2,607.70 and the S&P 500 index lost 20.20 to 1469.2.
   
The National Association of Realtors said pending sales of existing homes fell in July to the lowest level in nearly six years. Though the report did support the argument for an interest rate cut, it also worried investors who are nervous about the housing market growing so weak that it drags the economy into
recession.
   
Back in London, banking and insurance sectors were the main drag on blue chips midafternoon.
   
The banking sector was further further hit by news the London interbank offered rate had reached a nine-year high of 6.79 pct, making the cost of three-month borrowing between banks more than 1 percentage point more expensive than the Bank of England's base rate of 5.75 pct.
   
In an attempt to ease rate concerns, The Bank of England has raised its aggregate reserves target by 6 per cent.

You've probably heard about spread betting - but maybe the risks have put you off. The Finspreads Trading Academy, the most popular way into the world of spread betting, takes you through the whole subject from a keen amateur's point of view. So don't be startled by spread betting - get started. Click Here

Northern Rock was the worst blue chip performer, falling over 5 pct, or 39 pence to 693, after Lehman Brothers cut its rating to 'underweight' from 'equal weight' with a new target of 820 pence from 858 in a major review of the European banking sector.
   
Lehman raised its sector rating to 'positive' from 'negative' but cut targets across the board and also downgraded mid cap Bradford & Bingley to 'underweight' from 'equal weight'. The broker did upgrade its rating for blue chip HBoS to 'overweight' from 'underweight' but this was not enough to stop the shares falling away.
   
HBOS shares fell 12-1/2 pence to 892-1/2, and B&B lost 21-1/2 pence at 361-1/4.
   
Lehman highlighted uncertainties in asset-backed markets and cited rising wholesale funding costs as likely to affect earnings within the sector. The broker also cut its price target for blue chip Alliance & Leicester in the review, which saw its shares shed 47 pence to 1,011.
   
Banking sector peers also fell heavily, with Barclays down 17 to 620-1/2, Lloyds TSB falling 13-1/2 to 535 and Royal Bank of Scotland giving away 16-1/2 to 567. Meanwhile, insurers faired little better as Legal & General dropped 5.4 to 141.3 and Royal & Sun Alliance gave away 5.6 to 139.9.
   
Away from the financials, food producers were also weak on profit-taking after a recent rally.
   
Cadbury Schweppes lost 16 pence at 574, also impacted by an Investec target cut, while Tate & Lyle shed 25-1/2 pence at 536-1/2, and AB Foods dropped 19 pence at 846.
   
Only three blue-chip stocks ended the day up, with Vedanta Resources continuing to top the blue chip gainers, up 55 pence at 1,847, as Merrill Lynch added the stock to its Europe 1 list, while reiterating its 'buy' rating and upping its target to 2450 pence from 2000.
   
Sector peer Lonmin took on 12 pence at 3,227 and the only other riser was Shire, 8 ahead at 1,303.
   
On the second line, UK Coal shed 14 pence at 549-1/2 after in-line first half results prompted some profit-taking in the coal producer.
   
The UK's largest coal mining company posted a 143 pct jump in interim pretax profit, as gains in its property portfolio outweighed a loss at its deep mines operation, and announced that finance director Chris Mawe will step down.
   
Car hire company Avis Europe was down 3-1/2 pence at 46-1/2 after JP Morgan downgraded its rating to 'neutral' from 'overweight', the broker saying it believes internal issues at the company are contributing to its underperformance.

Trade Forex, Indices and Shares with zero commissions and 1% margin. Live dealing prices stream into GCI's state-of-the art trading software. Just click on a price to trade currencies, S&P 500, Dow Jones Industrials, DAX 30, Nikkei 225, IBM, Vodafone, Microsoft, and much more. To register for a free demo account Click Here

Among other mid cap gainers, Hochschild Mining shares took on 4-3/4 pence at 330 after Citigroup initiated on the stock with a 'buy' rating and a 400 pence price target.
   
In earnings news, Interserve added 18 pence at 492 after it posted a 37.6 pct increase in first-half underlying profit and said conditions in the group's key markets remained positive.
   
In a note, Panmure Gordon said the results were good and demand in the main markets remains strong. The broker said it expects to increase its forecasts by about 5 pct to reflect, among other things, stronger revenues. Panmure Gordon added that it was retaining its positive stance on the shares.
   
A note, Evolution Securities reiterated its 'buy' recommendation and 639 pence price target for Interserve shares.
   
Strong numbers also boosted Hikma Pharma shares, 16 pence higher at 433, with the group seeing buoyant medicines sales in the Middle East and acquisitions.
   
In reaction this morning, Merrill Lynch said Hikma's rise in sales was substantially above its 202 mln usd estimate; it believes the US business was stable and therefore the H1 success was driven by booming Middle East markets and strong injectable sales.
   
The broker added that it feels Hikma is uniquely positioned to benefit from the boom in the Middle East and North Africa region and will get an extra kick in injectables coming from a new factory and new product launches.

UK 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

Have your ISAs, PEPs, Unit Trusts or OEICs checked. Moneyspider will provide a unique performance rating for each of your funds, plus their rank and a current valuation in a single FREE report which is online and updated daily For more click here

Paris shares close sharply lower after Wall St drops on weak home sales

The CAC-40 index finished down 21.45 points or 0.38 pct at 5,672.72. Among CAC-40 stocks, 23 closed higher and 17 closed lower.  On the broader indices, the SBF-80 index closed up 43.33 or 0.64 pct at 6,842.09 while the SBF-120 ended 17.12 or 0.42 pct higher at 4,139.31.
   
A Paris-based dealer said shares were reacting to the US home sales data while there was also profit-taking on banks after yesterday's gains.
   
Carmakers were the biggest fallers on the CAC-40, dragged down by the US August car sales data overnight. Renault was 4.05 eur or 4.09 pct lower at 95.00 and Peugeot was down 2.31 or 3.89 pct at 57.13.
   
UBS said Renault will be hurt more than the German manufacturers if the likely further slowdown in US car sales materialises, arguing that a 10 pct fall in the US sales of Renault affiliate Nissan would imply a 11 pct cut in Renault EPS.
   
Peugeot and Renault had also fallen sharply yesterday as analysts reacted negatively to Peugeot's details on its recovery plan. Elsewhere in the auto sector, Michelin was off 2.72 or 2.90 pct at 91.14.    

Financials were mixed. Dexia was up 0.04 or 0.19 pct at 20.93, making it the only bluechip riser. Credit Agricole fell 0.30 or 1.09 pct to 27.15, while Societe Generale was down 3.57 or 2.93 pct at 118.40 and BNP Paribas was off 2.06 or 2.63 pct at 76.24.
   
The banks were partly reacting to a Lehman Brothers note in which it downgraded Societe Generale to 'underweight' from 'equal-weight' and Credit Agricole was upgraded to 'overweight' from 'equal weight'.
       
Total ended down 0.64 or 1.16 pct at 54.73. The oil giant fell back from an earlier rise, when it extended its gains from yesterday on the back of rising crude prices and positive reaction to comments at its mid-year review this morning.
   
Dealers welcomed the group's smaller-than-expected reduction in its production targets. Total also set a new compound average growth rate (CAGR) target of 4 pct, above some analysts' forecasts for 3 pct.
   
Vinci also fell back from an ealier rise, closing down 0.94 or 1.76 pct at 52.44. Analysts had welcomed the construction group's better-than-expected first-half EBIT last night and its announcement of a large buyback programme.
   
The company also moved to reassure investors about its exposure to the US sub-prime crisis and tightening credit conditions, notably highlighting the group's effective hedging policy and the quality of its investments.
   
Vinci's CFO said recent rumours over its sub-prime exposure probably stemmed from a 10 mln eur investment in a dynamic money-market fund that was recently closed.
   
EDF ended 1.26 or 1.74 pct lower at 71.24 after its CEO said the group would "certainly" be interested in Distrigaz if Suez were to sell off its 61 pct stake ahead of its merger with Gaz de France.
   
Suez closed off 0.95 or 2.39 pct at 38.76 and GDF shed 0.70 or 2.00 pct to 34.30
   
Elsewhere, Orpea added 0.59 or 1.43 pct to 41.81 after the French nursing-home group increased its full year sales guidance to 535 mln eur from 520 mln, having added 1,724 beds in the past six months to take its total across Europe to 19,738.

Save up to 50% on Jermyn Street style shirts and accessories, from silk ties to silver cufflinks, by shirt-maker Joseph Turner.
Click Here

German shares close lower, led down by Postbank, Linde

The DAX closed down 133.74 points or 1.73 pct at 7,588.03 after trading between a low of 7,588.03 and a high of 7,717.16. The MDAX fell 223.87 points or 2.14 pct to 10,239.07, while the TecDAX eased 17.25 points or 1.84 pct to 931.18. DAX futures were down 144.50 points or 1.87 pct at 7,600.00, while bund futures rose 0.58 or 0.51 pct at 114.06.
  
Deutsche Postbank ended up the biggest loser, down 1.91 eur or 3.48 pct at 53.02. Traders said Lehman Brothers had cut its target on the stock to 50 eur from 52 eur. Linde eased 2.73 or 3.17 pct at 83.44, with dealers saying Deutsche Bank had made a placement of 700,000 Linde shares at 84.10 eur per share.
   
Deutsche Lufthansa was off 0.60 or 2.77 pct at 21.08 on profit-taking after the recent increases in its share price.
   
Bayer, down 1.48 at 57.08, said it intends to file for delisting of its American Depositary Shares (ADSs) from the New York Stock Exchange (NYSE).  A statement said Bayer expects trading in its ADS shares on the NYSE to cease at the end of September or beginning of October 2007.
   
Commerzbank dipped 0.75 to 30.23 after Lehman cut its target to 35 eur from 38. Commerzbank chief executive Klaus-Peter Mueller said the bank will "significantly surpass" its full-year after-tax return on equity (RoE) target of 12 pct -- excluding one-off effects.
   
Muenchener Rueckversicherung fell 1.59 or 1.23 pct at 127.30. It said total insured losses from Hurricane Dean are seen at 1-2 bln usd and its own  exposure to the storm is likely to reach a medium to high double-digit mln eur sum before taxes.
    
Merck KGaA closed down 1.75 or 1.85 pct at 92.96. It said its Stimuvax cancer drug was shown to prolong the life of patients suffering from a certain type of non-small cell lung cancer (NSCLC) in a phase II study, confirming initial results published in February that prompted the company to enter into the third phase.
   
Among the outperformers, technology shares took a less steep fall, with SAP down 0.41 or 1.03 pct at 39.29 and Siemens off 1.01 or 1.09 pct at 91.97. SAP said a court hearing on a suit filed by Oracle Corp in San Francisco has been postponed until Sept 11. It was originally scheduled for today.
    
Interros said that Siemens has informed it that it wants to acquire the Russian holding company's 30.4 pct stake in the Power Machines turbine manufacturer, Interfax reported.
   
Deutsche Telekom was down 0.17 or 1.24 pct at 13.52. The Financial Times reported Deutsche Telekom is demanding 3.5 bln eur compensation from a joint venture controlled by Vivendi, claiming the venture impeded the development of a Polish mobile operator at the centre of a bilateral dispute.
   
Vivendi confirmed that the company made the demand but said that Telekom's allegations that Vivendi's Telco unit impeded the development of Polish mobile operator PTC were "completely unfounded."
   
On the MDAX, Altana was up 0.28 or 1.61 pct at 17.68, while Leoni followed close, gaining 0.37 or 0.91 pct at 41.00. Dresdner Kleinwort raised its target for Leoni by 6.7 pct to 48 eur.
   
Bilfinger Berger, down 0.29 or 0.47 pct at 62.06, said it has won two orders worth a total of 270 mln eur in Australia. Symrise lost 1.06 or 5.31 pct at 18.92.
   
On the TecDAX, GPC Biotech was the top perfomer, adding 0.48 or 5.52 pct at 9.18. United Internet dipped 0.85 or 5.91 pct at 13.54.

LOW-RISK, AWARD-WINNING, INVESTMENT STRATEGY
 
£2,000 to over £80,000 Tax-Free

Click Here

Amsterdam shares close lower, as Wall Street slumps

The AEX closed 7.98 points or 1.50 pct lower at 523.02, after trading in the range 522.92-530.24. Government bonds traded higher, while the euro stood at 1.3648 usd versus 1.3584 usd late yesterday.
   
Property stock Unibail-Rodamco led decliners, sliding 2.87 pct to 180.08 eur losing some of yesterday's strong gains.
   
Staffing company Randstad slipped 2.84 pct to 40.06 eur, while blue-chip peer Vedior fell 1.65 pct to 16.74 eur, with the stock's recent troubles continuing as analysts took a negative view of yesterday's staffing data, which one analyst interpreted as "weak".
   
Midcap peer USG People closed 3.22 pct lower at 22.52 eur as Petercam cut its price target on the issue to 30 eur from 38, maintaining its 'add' recommendation.
   
Takeover target ABN Amro was off 2.12 pct at 34.10 eur, while KPN fell 2.04 pct to 11.50 eur, despite an upgrade at ING to 'buy' from 'hold' with a price target increase to 13.5 eur from 13.0.
   
DSM fell 1.41 pct to 37.12 eur after saying has made a 2 mln eur equity  investment in Jurilab Oy, a Finnish company specialised in genetic research and  its application to healthcare.
   
On the midcap, Van Der Moolen dropped 2.73 pct to 3.56 eur on news its Van Der Moolen Specialists USA unit was served with a summons by Sea Carrier LP I and others to appear before the US District Court for the Southern District of New York.
   
Meanwhile, Stork lost 0.30 pct to 46.26 eur, after a report suggested a compromise on the future of the company is getting closer thanks to constructive talks between Candover Investments and Stork's largest shareholder LME, the Telegraaf newspaper reported.
   
TomTom was the only blue-chip gainer, up 1.65 pct at 49.39 eur, while Getronics rose 0.16 pct to 6.14 eur.

ADVFN Services