UK/Euro Financial Market Daily Evening Briefing 05-10-2007

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London shares closed fimer; NY remains higher; miners gain

Leading blue chips closed firmer as Wall Street remained higher after a better than expected jobs report with miners gaining in the blue chips on the back of higher commodity prices, offsetting falls in the
housebuilders.
   
By close, the FTSE 100 index was up 47.9 at 6,595.8, above its low of 6,547.9, and just off a high of 6,605.1. The broader FTSE 250 index gained 19.9 points to 11,390.4. Volume was light, with 2.57 bln shares changing hands in 532,400 deals.
   
"The market is ambling along with not a lot of momentum behind it. There are still a lot of good fundamentals behind it, but it will depend on the financial sector whether or not the worst of the credit crunch is over," said Ed Menashy, strategist at Charles Stanley.
   
"UK growth is forecast next to be between 2.5-3 pct which is slightly disappointing as growth is currently at 3.1 pct. The economic situation is likely to deteriorate with growth going to slow down and the housing market is in a delicate position. The market is likely to move sideways with caution," added Menashy.
   
In the US, stocks rose sharply in early trading after the government reported strong September job growth and revised August's weak data upward.
   
The Labor Department's report that employers added 110,000 jobs in September -- near the 115,000 increase that analysts had expected -- reassured Wall Street that the job market wasn't pulling back sharply but that an interest rate cut could still be a possibility when the Federal Reserve meets Oct. 30-31.
   
By London's close, the Dow Jones industrial average rose 88.7 to 14,062.4. Broader stock indicators also rose. The Standard & Poor's 500 index rose 10.63 to 1,553.48, and the Nasdaq composite index rose 38.33 to 2,771.79.
   
Turning to the UK mining stocks helped buoy the FTSE 100 index, against a background of firmer commodity prices and strong oil levels.
   
Kazakhmys gained 70 to 1,596, BHP Billiton climbed 43 pence to 1,745, and Rio Tinto gained 119 pence to 4,250, Antofagasta rose 26 pence to 826, and Anglo American took on 95 pence to 3,343. A positive sector note from ABN Amro also helped boost the sector.
   
Elsewhere, Cadbury Schweppes rose 15 pence to 600, with Sanford Bernstein reiterating its 'outperform' rating on the company ahead of a management statement next Wednesday.
   
The broker said that it is hoping for positive guidance on H2 sales momentum with the possibility of a hike in guidance to 6-7 pct. It also believes management may announce a final decision on the outcome for its US beverages business.

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And Yell also benefited from positive broker comment and gained 13-3/4 to 463-1/4 after Bear Stearns initiated the group with an 'outperform' rating with a price target of 540 pence.
   
The broker said that the market is still digesting Yell's April profit warning when guidance for US business organic growth this year was cut from 9 pct to 3 pct. Adding that it believes the share price is now over-discounted.
   
Elsewhere, a new twist on the takeover story surrounding Sainsbury lifted the grocer 3 to 582-1/2 after rumours emerged that M&S could link up with Delta II to bid 700 pence a share for the group. Traders were dismissive however, calling the chit-chat as no more than typical Friday banter.
   
SABMiller also benefited from market chatter, up 35 at 1,451, after rumours circulated that InBev might bid for Anheuser-Busch.
   
In M&A activity, InterContinential Hotels gained 40 to 1,055 on vague bid talk.
   
Turning to the financials, Barclays gained 5 to 660 after ABN Amro noted in a press release that the group had withdrawn its offer after failing to obtain at least 80 pct of ABN Amro shares after completion of its tender period yesterday.
   
Meanwhile, Royal Bank of Scotland was up 6-1/2 at 569-1/4 after sources said the group which also contains Spanish bank Santander and Belgo-Dutch bancassurer Fortis, will not confirm its 71.1 bln eur takeover until 'early next week'.
   
Turning to the losers, Northern Rock was down 3.2 at 158.5 as hopes for a rescue bid for the troubled mortgage lender were offset by news it had asked for a further 2.9 bln stg in emergency funding from the BoE.
   
Alliance & Leicester was the top faller, slumping over 6 pct or 58 pence to 794, after Deutsche Bank cut its stance on the company to 'sell' from 'hold' and slashed its target to 775 pence from 1,145, while a downgrade to 'hold' from 'buy' at ABN Amro knocked 11 off HBOS, leaving the bank at 948.
   
In the midcaps Bradford & Bingley fell almost 6 pct or 19-3/4 to 285, to become the top faller.
   
And builders remained under the cosh after negative broker comment this morning from ABN Amro who downgraded its sector stance to 'neutral' from 'overweight'.
   
The broker said its least-preferred play is Barratt Developments down 33 at 766 which it cut to 'sell' from 'buy' citing incremental market weakness which it thinks may result in above-average downgrades and greater scrutiny of the Wilson Bowden acquisition.

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ABN Amro also cut Persimmon, Taylor Wimpey and midcap group Redrow to 'hold' from 'buy', which fell 17 to 1,050, 7-1/2 to 293-1/2 and 13-1/2 to 407 respectively.
   
British Land shares also took a hit, down 40 pence at 1,124, after news late yesterday afternoon that it had stopped marketing its partial holding in Meadowhall Shopping Centre because of the current turmoil in the financial markets. The news pushed Liberty International 32 lower to 1,153 and Land Securities lost 56 to 1,687.
   
Barclays told clients that this highlights a problem facing the real estate sector at present, namely a lack of significant property transactions on which to base valuations.
   
Turning to the second line, easyJet's shares soared more than 4 pct, or 24 pence to 571-1/2, after the group said it expects full-year pretax profits growth to be at the top end of its earlier guidance of 40-50 pct, in a September traffic statistics announcement this morning.
   
And Severfield-Rowen gained 82 to 2,110 after the group said that shareholders have approved the proposed acquisition of Northern Ireland-based steel fabricator Fisher Engineering's holding company, Action Merchants Ltd, and Dalton Airfield Estate Ltd, which owns the group's headquarters.
   
Elsewhere, N Brown Group was up 8 at 303-1/2 ahead of first half results to released on Tuesday, the group is expected to report a 15 pct increase in pretax profit.
   
But Marston's shares fell back 2-3/4 pence to 367-1/2 after Citigroup cut its recommendation to 'hold' from 'buy' and slashed its target to 420 pence from 550, following the pub operator's warning yesterday that its full-year pretax profits are expected to be slightly below its original expectations.
   
Colt Telecom was also in negative territory following a broker downgrade, 5-1/4 pence weaker at 167, after Credit Suisse downgraded its rating on the company to 'neutral' from 'outperform', on valuation grounds, while keeping its target unchanged at 170 pence.
   
Finally a downgrade to 'neutral from 'buy' by UBS cut 10-1/4 from Ashmore Group to 291.

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Paris shares close higher as US jobs data lifts Wall Street

The CAC-40 index finished up 38.85 points or 0.67 pct at 5,843.24. Among CAC-40 stocks, 29 closed higher, 1 ended flat and 10 closed lower. On the Matif, October CAC-40 futures were trading at 5,842. On the broader indices, the SBF-80 index closed up 45.82 or 0.67 pct at 6,911.65 while the SBF-120 ended 28.27 or 0.67 pct higher at 4,252.55.

Renault was among the major climbers, adding 2.30 eur or 2.11 pct to 111.36, rebounding from profit-taking yesterday. A local dealer said Renault has underperformed rival Peugeot in the recent upturn, despite publishing a higher rise in car sales for the month of September. He also speculated that the French state might be pushing up Renault's share price in preparation for a partial sale of its 15 pct stake, as finance minister Christine Lagarde has made it clear the government is planning disposals to raise funds.
   
Peugeot ended up 0.24 or 0.40 pct at 59.94 while tyre maker Michelin also trailed the market, rising 0.19 or 0.20 pct to 97.43.
   
Steel maker ArcelorMittal ended as the biggest bluechip climber, up 1.45 or 2.70 pct at 55.20.
   
Banks mostly continued their rally of late as investors remained optimistic that the worst of the credit crisis is over. In an indication of this more confident tone towards banks, Merrill Lynch shares rose in the US, despite its warning of a third-quarter loss, as investors looked to return to more normal results in the current quarter.
   
Among French banks, BNP Paribas gained 1.26 or 1.55 pct to 82.41, Credit Agricole was up 0.31 or 1.09 pct at 28.76, while Societe Generale added 0.93 or 0.73 pct to 127.79. However Dexia shed 0.20 or 0.87 pct to 22.67 after acting as a defensive play in recent weeks compared to other financials.
   
Among other rising bluechips, Accor gained 1.05 or 1.58 pct to 67.55 as a positive note from Cheuvreux and optimism over the positive impact of the Rugby World Cup outweighed concerns over Marriott's poor results yesterday.   

Cheuvreux analysts today reiterated their 'buy' rating on the stock and 80 eur price target.
   
Luxury goods stocks remained in the spotlight after yesterday's rumours that Hermes International might be the focus of interest from Belgian investor Albert Frere, as well as from rival French luxury groups PPR and LVMH.
   
Hermes ended up 2.22 or 2.63 pct at 86.70, on top of its 4.68 pct jump Thursday. PPR climbed 2.55 or 1.89 pct to 137.55, while LVMH inched up 0.07 or 0.08 pct to 85.99.
   
Pernod Ricard also gained ground, adding 1.90 or 1.24 pct to 155.49, helped by the publication of its resolutions for its Nov 7 AGM, including proposals for a two-for-one share split to increase liquidity, and a request that the board be granted authority to issue equity or debt.
   
Separately, Les Echos today published an encouraging article on the idea of an Absolut acquisition, highlighting Pernod's successful track record with the purchase of Seagram in 2001 and Allied Domecq in 2005.
   
Among falling CAC-40 stocks, Alcatel-Lucent dropped 0.06 or 0.83 pct to 7.15. The Financial Times today claimed AT&T has considered dropping the group as a supplier of WCDMA third generation mobile telecoms equipment due to delivery delays, and may now give part of its contract to other suppliers.
   
Lagardere SCA ended as the biggest CAC-40 faller, down 0.87 or 1.47 pct at 58.48. The stock remains under pressure after Le Figaro reported the contents of an interim memo from markets regulator AMF about its inquiry into possible insider trading at EADS, in which Lagardere is a leading shareholder.
   
Capgemini continued to shrug off recent speculation-fuelled gains, giving up 0.65 or 1.43 pct to 44.75.
   
In contrast, fellow IT stock Business Objects rose 1.21 or 3.58 pct to 35.00, despite at downgrade to 'neutral' from 'outperform' at Credit Suisse.

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German shares close higher on Wall Street gains, US jobs data

The DAX closed 57.19 points or 0.72 pct higher at 8,002.18 after trading between in the 7,946.34 and 8,014.16 in the session. The MDAX was up 94.54 points, or 0.90 pct at 10,631.37 points, while the TecDAX added 8.74 points, or 0.88 pct, to 997.51. DAX futures were up 55.50 points or 0.69 pct to 8,073.00, while bund futures declined 0.59 points or 0.52 pct to 112.39.
  
Leading blue chips ended higher, Deutsche Boerse rose 4.66 eur or 4.64 pct to 105.15 eur on speculation that it and Volkswagen might soon replace Endesa SA and ABN AMRO Holdings NV in the Dow Jones EURO STOXX 50 index.
   
Volkswagen gained 7.05 eur, 4.38 pct, 167.97 eur.
   
Inclusion in the STOXX 50 could happen if current takeover bids for Endesa and ABN Amro Holdings are realised, removing the companies from the exchange. The STOXX 50's composition is reviewed annually in September, with inclusion occurring in October.
   
Acciona SA and Enel SpA's joint bid for Endesa SA has won 85.30 pct shareholder acceptance, stock market regulator CNMV said today.
   
A 70 bln eur takeover offer from a consortium of banks led by Royal Bank of Scotland is nearly certain after Barclays PLC has conceded defeat in the takeover battle for Dutch bank ABN AMRO.
   
Traders said inclusion in the index could help the share price as mutual funds, which base their holdings on the the index, would need to buy shares in Deutsche Boerse or Volkswagen, creating increased demand.
   
Deutsche Post shares added 0.34 eur or 1.67 pct to 20.71 eur as traders pointed to technical trading reasons.
   
SAP was 0.62 eur or 1.51 pct higher at 41.63 eur. The software company received an award for providing excellent service from the US-based Service & Support Professionals Association (SSPA).
   
Munich Re gained 1.30 eur or 0.97 pct to 135.70 eur after UBS raised the insurer to 'buy' from 'neutral' as part of a review of the European reinsurance sector.
   
At the other end of the index, Infineon fell 0.26 eur or 2.28 pct to 11.14 eur after technology researcher Gartner yesterday cut its 2008 global spending outlook for chip equipment to 43.7 bln eur, down 4.3 pct from its mid-July forecast of 45.7 bln eur.
   
Traders said a Morgan Stanley chip industry coverage update released earlier in the week, which talked of "inventory correction", was also raising fears that another slowdown in the sector is on its way.
   
Adidas was 0.56 eur or 1.23 pct lower at 45.11 eur.
   
Over on the MDAX, Premiere was 1.11 eur or 7.12 pct higher at 16.70 eur, while Kloeckner & Co fell 1.94 eur or 3.72 pct to 50.28 eur.
   
TecDAX-listed Software added 2.74 eur or 4.08 pct to 69.88 eur, while ADVA dropped 0.17 eur or 2.88 pct to 5.73 eur.

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Amsterdam shares close higher tracking Wall St; Hagemeyer soars

The AEX closed 4.85 points or 0.90 pct higher at the days's high of 546.60, after trading in a range of 542.29-546.50. Government bonds traded lower, while the euro stood at 1.4441 usd versus 1.4130 usd late yesterday.
   
Hagemeyer surged 11.83 pct to 3.97 eur amid continued M&A talk that competitor Rexel may put out a takeover bid. Dutch market authority AFM confirmed that it has contacted Hagemeyer about the strong share price gains of today.
   
Corporate Express added 4.09 pct to 7.89 eur while Arcelor Mittal rose 2.76 pct to 55.20 eur.
   
Fortis added 2.81 pct to 22.69 eur after Barclays withdrew its takeover bid on ABN Amro, ensuring that the RBS consortium -- of which Fortis is a member -- will succeed in its bid on the Dutch banking group. ABN Amro itself ended flat at 37.61 eur.
   
TomTom put on 1.95 pct to 51.77 eur after several days of losses over worries that TomTom may have to raise its bidding price on Tele Atlas, which added 0.69 pct to 23.23 eur, well above the 21.25 eur per share bid price from TomTom.
   
Wolters Kluwer rose 1.22 pct to 20.75 eur amid news that it has expanded a licensing agreement with Autonomy.
   
Royal Dutch Shell rose 0.43 pct to 28.24 eur amid news that is plans to divest company-owned retail gasoline sites in the US.
   
Decliners were few among blue chips. Philips lost 0.55 pct to 30.88 eur and Randstad shed 0.89 pct to 41.12.
   
Van der Moolen led gainers among midcap shares, adding 4.66 pct to 3.37 eur, while Wereldhave put on 4.60 pct to 86.88 eur.
   
Univar edged 0.04 pct higher to 53.27 eur as CVC declared its takeover bid on Univar unconditional. CVC said 97.2 pct of Univar shares have been tendered. Vopak shed 0.82 pct to 39.95 eur, Aalberts shed 1.15 pct to 17.12 and LogicaCMG dropped 1.34 pct to 2.21 eur.

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