UK/Euro Financial Market Daily Evening Briefing 06-09-2007

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London shares close firmer; miners, oil stocks higher

Leading blue chips closed higher, buoyed by strong gains from heavyweight miners on the back of M&A talk, and from oil stocks as oil prices spiked on new geopolitical tension.
   
At the close, the FTSE 100 index was up 42.6 at 6,313.3, rallying from a low of 6,217.5, and down from a session high of 6,327.3, with the FTSE 250 index also stronger, 30.1 points ahead at 11,330.8.
   
Rio Tinto was the top blue-chip riser at the end of today's session, up 191 pence at 3,716, with the latest speculation centring on BHP Billiton -- 56 pence firmer at 1,473 -- teaming up with Brazil's CVRD in a joint bid for Rio. The companies declined to comment on the rumour and many market players were sceptical.
   
Rio's shares were helped by an upgrade to 'outperform' from 'market perform' with a raised target of 2,900 pence from 2,700 at Sanford Bernstein on expectations of higher iron ore prices.
   
And oil stocks extended earlier gains as oil edged up to its all-time high of 78 usd, with dealers saying the spike came after reports of Syria firing on Israeli war planes.
   
Royal Dutch Shell finished 38 pence higher at 1,996, and BG Group was 38 pence firmer at 824-1/2, and BP was 6 pence ahead at 565-1/4.
   
On Wall Street, by London's close, the Dow Jones Industrial Average was 49.2 points higher at 13,354.7, with the Nasdaq composite index firmer too, up 5.51 2,611.46.
   
Earlier, the Labor Department said that claims for unemployment benefits dropped last week for the first time in seven weeks, which bodes well for tomorrow's key August employment record.
   
Back in the UK, financial stocks featured among the casualties, following much negative broker comment and downgrades in recent days, with Barclays ending the day down 12-1/2 pence at 608, and Northern Rock off 21 pence at 672. But the biggest faller was Drax, which ended 38 pence lighter at 637-1/2, amid profit-taking following in-line H1 results.

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Citigroup maintained its 'hold' stance for Drax but added that, unless coal prices moderate for the group, or gas prices rise, then downgrades to future earnings for Drax appear inevitable. Drax is set to lose its place in the FTSE 100 quarterly reshuffle next week.
   
In broker-generated news, William Morrison finished 5-3/4 pence lighter at 274-3/4 after Panmure Gordon cut to 'sell' from 'hold' with a target of 248 pence from 330 pence.
   
Its peer Sainsbury finished 5 pence weaker at 542.
   
Turning to the midcaps, Arriva closed 27 pence higher at 790 after the group said it was interested in bidding for John Laing's Chiltern Railways as it reported a slight rise in first half operating profit on continuing operations to 52.9 mln stg from 52.6 mln previously.
   
And AMEC added 30-1/2 pence to 685-1/2 after reporting record performance in its three core divisions and increasing overall expectations for full year pretax profit by 5 mln stg, mainly to reflect the strength of trading and the group's improved cash position.
   
In broker generated news, Aquarius Platinum was up 57 pence at 1,644, after Morgan Stanley upped its rating on the group to 'overweight' from 'equal-weight', and increased the target to 1,975 pence from 1,750.
   
The broker commenting that the outlook for platinum prices is increasingly bullish.
   
On the downside, Benfield was the biggest FTSE 250 loser at the close, down 16-3/4 at 289, after the reinsurance broker reported a 5.6 pct fall in first half pretax profit. Peer Hiscox Ltd was 6-3/4 lower at 264.
   
And finally, Abbot Group slid 14-1/2 pence to 273, after reporting a 30 pct rise in first half pretax profit on rising turnover, but cautioned that full-year results would be at the lower-end of expectations on higher interest costs.

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Madrid shares close off lows as Wall Street gains; Telefonica higher

The IBEX-35 index closed down 41.7 points at 14,198.4, after trading in a range of 14,050-14,345.
   
Equities opened higher, buoyed by a late partial recovery on Wall Street, but turned lower as investors dumped construction shares on worries about the economy.
   
Stocks maintained losses over the afternoon after the ECB held rates unchanged but cut its forecast for eurozone GDP growth, but pared losses to the close as Wall Street pushed higher, with all eyes on US jobs data tomorrow.
   
Investors dumped construction shares, with ACS heading losses to drop 1.16 eur or 2.95 pct to 38.10. Ferrovial lost 1.25 to 61.45, Acciona shed 4.60 to 177.40, and FCC slumped 1.20 to 61.30.
   
Cintra outperformed the weaker sector trend, slipping 0.09 to 11.19 after reporting robust August traffic figures from its north American motorway concessions.
   
Sacyr Vallehermoso bucked the trend, adding 0.27 to 27.38, rebounding from heavy losses yesterday.
  
Among heavyweights, Telefonica rose 0.08 to 17.85 after the telecoms group announced at a conference in Santander that it is targeting 35 mln new clients in LatAm by 2009.
   
Repsol YPF dropped 0.32 to 25.46, extending recent losses.
   
Santander reversed earlier losses to add 0.04 to 13.24, while BBVA shed 0.05 to 16.77.
   
Enagas led the IBEX-35 gainers, putting on 0.45 or 2.70 pct to 17.13, lifted by an upgrade to 'buy' from 'neutral' at Merrill Lynch.
   
Among broadcasters, Antena 3 added 0.28 to 13.93 and Telecinco put on 0.08 to 18.82, while Sogecable lost 0.01 to 26.81 amid reports it has refused to sit with Mediapro at a meeting with the Spanish football association to discuss their broadcasting rights dispute.

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Paris shares close up after volatile trade; investors look for direction

The CAC-40 index finished up 25.07 points or 0.45 pct at 5,576.62. Among CAC-40 stocks, 24 closed higher and 16 closed lower.
   
On the broader indices, the SBF-80 index closed up 17.34 or 0.26 pct at 6,731.13, while the SBF-120 ended up 17.22 or 0.42 pct at 4,069.60.
   
A Paris-based dealer pointed out an increase in interbank lending rates, notably in the UK, which signals that "banks don't trust each other's balance sheets in the current environment" and hints at a possible tightening of credit conditions.
   
Index heavyweight Total helped to counteract some of the negative sentiment, rising steadily throughout the day and ending up 0.96 eur or 1.75 pct at 55.69.
   
A stronger-than-expected fall in US oil stocks helped to push crude oil prices close to their record high today, while Total's earnings outlook yesterday also helped provide support.
   
In a note to clients this morning, Exane BNP Paribas analysts said Total's growth projection of 4 pct from 2006-2010 "remains the fastest among its peers" and added that "the share price is attractively valued."
   
Fellow oil-related stock Technip also fared well over the day, closing up 1.64 or 2.92 pct at 57.76, and correcting from yesterday's sharp falls.
   
Elsewhere, investors also sought solace in luxury goods, prompting strong gains throughout the sector.
   
LVMH closed up 1.12 or 1.40 pct at 50.87, Laurent-Perrier added 1.89 or 1.67 pct at 114.89 and Hermes International gained 0.81 or 1.03 pct to end at 79.81.
   
Christian Dior also rose 0.95 or 1.08 pct to 88.60 and Remy Cointreau added 0.37 or 0.73 pct to 51.30. A Paris-based trader said investors were cheered by strong statistics for Japanese tourism in Hawaii, a country which is generally seen as a good indicator for measuring trends in luxury goods.
   
On the downside, however, property and construction stocks suffered as yesterday's US data on pending housing sales added to fears of a major slowdown in the sector sparked by the sub-prime debacle.
  
The National Association of Realtors said Wednesday its seasonally-adjusted index of pending sales for existing homes fell 16.1 percent in July from a year ago and 12.2 percent from the prior month.
   
In Paris, Saint Gobain fell 0.99 or 1.30 pct to 75.42, Lafarge eased 0.48 or 0.43 pct to 111.80 and Ciments Francais plunged 4.24 or 2.84 pct to 145.01.
   
Unibail-Rodamco closed down 0.83 or 0.46 pct at 179.25, Kaufman & Broad fell 1.35 or 2.83 pct to 46.39 and Klepierre ended on losses of 0.68 or 1.70 pct at 39.21.

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German shares close higher on technology stocks, Wall Street gains

The DAX closed 33.69 points or 0.44 pct higher at 7,621.72, after trading between 7,510.77 and 7,644.43. The MDAX was at 10,258.67, up 19.60 points or 0.19 pct, while the TecDAX gained 7.68 points or 0.83 pct to 929.86 points.
   
DAX futures were up 16.00 points or 0.21 pct at 7,637.50 points, while bund futures were up 0.04 points or 0.04 pct at 113.70 points.
   
The DAX index lifted late in the day after having traded flat for most of the session, helped by St Louis Federal Reser Bank president William Poole's statement that the US economy "seems to be operating near full employment."
   
Shares in Infineon gained 0.58 eur or 5.03 pct to 12.12 eur to lead blue chips higher after Dresdner Kleinwort raised its stance on to 'buy' from 'reduce' and lifted its price target to 18 eur per share from 10 saying, that it expects the chipmaker's wireless semiconductor business to help drive a turnaround at the company.
   
SAP added 0.98 eur or 2.49 pct to 40.27 eur as traders said the shares having crossing the 40.00 per share level yesterday had created new upward pressure.
   
Further helping the shares, traders said positive comments at a conference held with Citigroup in New York last night were giving a boost.
   
Merck KGaA advanced 1.50 eur or 1.61 pct to 94.46 eur after Morgan Stanley resumed its coverage with a 'overweight' rating and a 112 eur per share price target which implies a 19 pct upside as it said the pharmaceuticals/chemicals company's numbers compare favourably with the broader pharma sector.
   
Shares in Metro climbed 0.74 eur or 1.21 pct to 62.05 eur after Morgan Stanley raised its stance to 'equal-weight' from 'under-weight' and lifted its price target by 18 pct to 66 eur per share saying that it believes the Haniel and Schmidt Ruthenbeck families will be more active in unlocking value having secured control of the retail giant.
   
Bucking today's positive trend, Continental fell 0.94 eur or 0.98 pct to 95.01 eur. Adidas declined 0.34 eur or 0.78 pct to 43.01 eur and Bayer was down 0.34 eur or 0.60 pct at 56.74 eur.
   
Automakers were a mixed bag, with Volkswagen slightly underperforming the market, nudging up 0.55 eur or 0.37 pct at 150.90 eur after Citigroup downgraded the automaker's shares to 'sell' from 'hold' as part of a review of the European auto sector. BMW gained 0.23 eur or 0.51 pct to 45.13 eur and DaimlerChrysler was up 0.88 eur or 1.31 pct at 67.91 eur.
   
Over on the MDAX, Leoni gained 1.52 eur or 3.71 pct to 42.52 eur, as the top performer on the index.
   
Techem added 1.05 eur or 2.32 pct to 46.27 eur after HSBC raised its stance to 'neutral' from 'underweight' while lowering its price target to 48.00 eur per share.
   
HSBC said Techem published third-quarter figures at the end of August, which were below its expectations. However, Techem confirmed its full-year targets with only one month left in the business year and that attention has now shifted to the next year.
   
IKB shares gained 0.27 eur or 1.97 pct to 13.99 eur after Cerberus, DZ Bank and several other banks expressed interest in buying the state and community financier. At the other end, Deutz slid 0.26 eur or 3.06 pct to 8.24 eur.
   
TecDAX-listed GPC Biotech was 1.72 eur or 18.74 pct higher at 10.90 eur after dealers said its shares had crossed a significant resistance barrier at 9.60 eur per share. At the other end, Solon declined 1.27 eur or 1.88 pct to 66.28 eur.

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