UK/Euro Financial Market Daily Evening Briefing 06-11-2007

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London shares close up, off highs, miners underpin gains; NY mixed

Leading shares closed ahead, off earlier highs, with mining stocks underpinning gains, while US stocks were mixed by the London close as investors again tussled with global credit concerns.
   
At the close, the FTSE 100 index was up 13.5 points at 6,474.9, off a high of 6,512.1, while the FTSE 250 index was up 20.5 points at 11,334.9. Volume was fair, with 2.086 bln shares changing hands in 550,450 deals.
   
In the US, stocks fluctuated, continuing the erratic pattern of the previous session, as investors tussled with renewed concerns about growing credit problems at big financial companies.
   
Stocks fell and the front end of treasuries saw offers cancelled as the rumours swirl that Goldman Sachs will undertake write downs. The chatter is that the firm will take a "provisional" 15 pct write down of its Level 3 assets which were 72 bln usd last reported.
   
By the London close, the Dow Jones industrial average was up 6.30 to 13,549.7, off a high of 13,613.9. Broader stock indicators were mixed. The Standard & Poor's 500 index rose 1.10, to 1,503.25, and the Nasdaq composite index lost 8.51 to 2,786.67.
   
Back in London, mining stocks clustered around the top of the FTSE 100 leaderboard, as copper and precious metal prices recovered some of their shine and investors sought beta rich stocks.
   
Rio Tinto added 137 pence to 4,334, BHP Billiton took on 75 pence to 1,775, and Anglo American rose 100 pence to 3,152.
   
Strength was also seen among oil stocks, as oil prices headed back towards record levels, with Brent for December trading at 91.65 usd a barrel, on expectations that data due tomorrow will show that US inventories have fallen.
   
Against this background, Tullow Oil jumped 20-1/2 pence to 668. It was aided by news that it is to join the Morgan Stanley Capital International Provisional (MSCI) Global Standard index, and also on Ghana production news, and on confirmation of a stake sale of a new offshore block in Cameroon.
   
Earlier, online trade journal Upstream cited a senior official from the Ghana National Petroleum Corporation (GNPC) as saying that it wants Tullow to begin production from the Mahogany/Hyedua discoveries by early 2009 at a rate of 60,000 barrels of oil per day.
   
Separately, Hungarian oil and gas group MOL Nyrt said it agreed to acquire a 40 pct stake in a new offshore block in Cameroon from Tullow Oil.

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In earnings news, Marks & Spencer gained 21 pence to 653, after reporting a better-than-expected 11.5 pct increase in first-half underlying pretax profit, despite the backdrop of unseasonable trading conditions, and during a period when many stores were undergoing refurbishment.
   
The retailer also hiked its interim dividend 31.7 pct and announced plans for a 1 bln stg share buyback.
   
Meanwhile, Sainsbury rebounded slightly, up 5 to 445, from yesterday's 20 pct slump triggered by the collapse of its planned 10.6 bln stg takeover deal, with JP Morgan upping its rating to 'neutral'.
   
Sainsbury was helped by news Dresdner Kleinwort upgraded its rating on the retailer to 'hold' from 'reduce' today.
   
However, sector peer Tesco lost 3 to 476-1/2 after it was downgraded by Dresdner, the supermarket group was cut to 'hold' from 'add', the broker citing competitive and valuation grounds.
   
In further broker related movements, Invesco added 6 pence at 798-1/2, with Morgan Stanley upgrading its stance to 'overweight' from 'equal-weight' and raising its target on the stock to 850 pence from 730, on the prospect of a multiple re-rating from the US re-listing in December.
   
Turning to the downside, housebuilders moved lower, as sub-prime fears continued to hit the sector, further hindered by Credit Suisse cutting price targets for all three FTSE 100 companies in the sector. Barratt Developments was 9-1/2 lower at 594-1/2, Persimmon fell 16 pence to 960, and Taylor Wimpey edged 4-1/4 pence lower at 227-1/4.
   
Meanwhile, Associated British Foods dropped 21-1/2 pence to 890-1/2 after the agriculture-to-retail group warned that reform of the EU sugar regime will have a "large negative effect" on profit for the coming year, while reporting full-year earnings which came in ahead of market expectations.
   
Elsewhere, InterContinental Hotels slipped 25 pence to 1,025, after reporting third-quarter profit in line with expectations.
   
In reaction, Merrill Lynch repeated its 'neutral' stance. It believes that Intercontinental shares have fallen back in recent weeks as market expectations of a takeover have receded and investors worry about a US slow down.
   
The broker feels management continues to deliver but it thinks this fairly values the stock for now.
   
Still on the downside, Tate & Lyle fell 5-1/4 to 433-1/4 on news Merrill Lynch has downgraded its recommendation to 'neutral' from 'buy'.

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The broker said it believes recent rises in input costs and a steadily weakening usd have taken a toll on Tate's profits.
   
Turning to the midcaps, Micro Focus topped the risers, jumping 61-3/4 pence higher at 355-1/2, after reporting it expects first-half revenues of about 107 mln usd, up from 79 mln usd a year earlier, and that it is confident of exceeding its earlier full-year revenue growth forecast. Evolution upped its rating to 'buy' from 'add'.
   
UK stock market operator the London Stock Exchange added 50 to 1,710 after it confirmed the state-backed Qatari Investment Authority holds 14.93 pct of the company.
   
On 250 downside, Wetherspoon eased 15-1/2 pence to 486-1/2, after issuing a cautious trading statement after the introduction of the smoking ban in England knocked sales.
   
Earlier today, the operator of some 680 managed pubs said uncertainty remained over the impact of the smoking ban, as it unveiled a 1 pct decrease in like-for-like sales for the first quarter.

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Paris shares close up in mild rebound; EDF leads CAC on MSCI reweighting

The CAC-40 index finished up 25.47 points or 0.45 pct at 5,710.09. Among CAC-40 stocks, 24 closed higher, 1 closed flat and 15 closed lower. On the Matif, November CAC-40 futures were trading at 5,718.5. On the broader indices, the SBF-80 index closed up 10.51 or 0.16 pct at 6,755.95 and the SBF-120 ended 16.91 or 0.41 pct higher at 4,155.87.
       
EDF ended up 2.61 eur or 3.19 pct at 84.52 after it emerged Morgan Stanley Capital International (MSCI) Barra is to give it a higher weighting on the MSCI Provisional Global Standard Indices as part of its semi-annual review. "This should add support to the stock as index trackers will adjust," one trader said, pointing to EDF's low available free float of around 11 pct.
   
Credit Suisse said in a note to clients that EDF is expected to gain some 4 basis points in weight, translating to 44.7 share buys or around 561 mln usd.  The utility is also due to report to nine-month sales on Thursday.
   
CGG Veritas, meanwhile, rose 8.82 or 4.04 pct to 227.12 as MSCI Barra announced that the geophysical services company will be added to its global indices on Nov 30.
   
Tech stocks also performed well, lifted by strong third quarter sales figures from Altran Technologies. The IT services group this morning reported 6.6 pct growth in sales for the period, driven by an improvement in its French business. Altran shares closed 0.24 or 4.78 pct higher at 5.26. Back on the CAC-40, Capgemini benefited from the news, rising 1.12 or 2.69 pct to 42.73.
   
Another major bluechip climber was Sanofi-Aventis, which ended up 1.43 or 2.37 pct at 61.67 after surging in afternoon trading as it emerged the US Food and Drugs Administration (FDA) has rejected a generic version of Sanofi's blockbuster drug Lovenox developed by Momenta and Novartis.
       
Elsewhere on the CAC-40, ArcelorMittal added 0.65 or 1.24 pct to 53.00 and Vallourec gained 3.77 or 1.98 pct to 194.37, spurred by a rebound in steel stocks in Asian markets and a positive sector note from Deutsche Bank, particularly concerning ThyssenKrupp.
   
In the auto sector, Peugeot added 0.64 or 1.06 pct to 61.12, helped by market speculation that BMW might be preparing a bid for the company. The consolidation talk also helped lift Renault, which rose 0.43 or 1.32 pct to 109.40.
   
Bank stocks remained under pressure, however, with midcap Natixis in the spotlight after Fitch warned of a possible ratings downgrade at its US subsidiary CIFG. The ratings agency said there was a "high" risk that CIFG might lose its AAA rating due to significant exposure to collateralised debt obligations (CDOs)
backed with subprime loans.
       
Natixis shares plunged 3.43 or 5.31 pct to 61.20. On the CAC-40, Credit Agricole fell 0.33 or 1.29 pct to 25.33, Societe Generale -- which reports third quarter results tomorrow morning -- lost 0.37 or 0.35 pct to 105.97, while insurer AXA gave up 0.33 or 1.12 pct to 29.19.
   
PPR ended the session as the biggest bluechip faller, down 1.86 or 1.41 pct at 129.68, as investors looked beyond consensus-beating third quarter sales to focus on a number of underlying negative trends, notably at Puma and in the luxury goods division.
   
Air France-KLM, meanwhile, continued to suffer from record oil prices, falling 0.31 or 1.28 pct to 23.87. Among major fallers, Imerys dropped 3.43 or 5.31 pct to 61.20 after announcing lower than expected third quarter underlying profit figures.

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German shares close off highs on mixed Wall Street, upcoming ECB meeting
   
The DAX closed 19.64 points or 0.25 pct higher at 7,827.19 after trading between 7,821.78 and 7,859.95 today. The MDAX added 101.02 points or 0.98 pct to 10,360.55 points, while the TecDAX was up 24.14 points or 2.41 pct at 1,026.77 points. DAX futures slipped 2.00 or 0.03 pct to 7,868.00, while bund futures edged up 0.14 or 0.12 pct to 113.93.
   
Leading blue chips higher, TUI added 0.52 eur or 2.55 pct to 20.88 eur, which traders traced to indications of increasing freight rates.
   
Deutsche Post gained 0.47 eur or 2.34 pct to 20.55 eur as traders pointed to reports that the logistics group is considering selling off vacant real estate worth 1-1.5 bln eur.
       
ThyssenKrupp added 0.83 eur or 1.94 pct to 43.68 eur as dealers pointed to strong steel prices and a positive broker note from Deutsche Bank which was boosting the shares.
       
Commerzbank gained 0.27 eur or 0.99 pct to 27.46 eur as traders said that lower-than-expected write-offs related to the US sub-prime mortgage crisis were offsetting third-quarter figures that by and large came in worse than expected.
       
Deutsche Telekom gained 0.14 eur or 1.01 pct to 14.05 eur after company sources told Thomson Financial News partner dpa-AFX the German telcommunications giant is in the process of selling its Media & Broadcast unit to French broadcaster Telediffusion de France TDF for 700-900 mln eur.
   
At the other end of the index, BMW lost 1.49 eur or 3.33 pct to 43.31 eur as analysts said the automaker's third-quarter numbers were slightly weaker than expected.
   
"The pretax was on the weak side; clearly disappointing. However, importantly for the company, it confirmed its outlook. BMW sees profits excluding one-offs boiling down to at least 3.7 bln eur; the consensus for full year stands at 3.88 bln," said an analyst at Sal. Oppenheim. The analyst cautioned that it was "too early to get invested" in the automaker's stock.
   
Bayer was down 0.39 eur or 0.68 pct at 56.62 eur, with dealers saying the stock had fallen victim to profit-taking after the pharmaceuticals and chemicals giant released third-quarter results that were slightly above expectations.
   
"Profit-taking is likely at play here as investors are consolidating gains and banking on the assumption the stock will not show significant advances soon," said a local trader.
      
Metro shares eased 0.74 eur or 1.17 pct to 62.29 eur, which traders said was a result of continued pressure after media reports said it has no plans to sell its hard-hit Kaufhof retail unit to MDAX-listed Arcandor AG.
   
Over on the MDAX, KUKA added 2.38 eur or 9.10 pct to 28.52 eur as the top gainer on the index after the bottling and packaging specialist reported third-quarter numbers that came in far above expectations while it also raised its 2007 operating margin outlook.
   
SGL Carbon gained 2.75 eur or 7.04 pct to 41.79 eur as the second top gainer.
   
HeidelbergCement was 1.63 eur or 1.51 pct higher at 109.79 eur after the company said said third-quarter net profit rose to 526 mln eur from 345 mln in the year-earlier period as strong growth in emerging markets continued.
   
At the other end of the index, Heidelberger Druckmaschinen fell 1.97 eur or 7.20 pct to 25.39 eur after the printing machine manufacturer posted disappointing second-quarter earnings, prompting WestLB to cut its price target to 32 eur from 30 eur.
    
Over on the TecDAX, Aixtron rose 1.54 eur or 18.67 pct to 9.79 eur after the company raised its full-year guidance for both sales and earnings. Draegerwerk was the index's worst performer, down 1.65 eur or 3.32 pct at 48.10 eur.

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Amsterdam shares close flat on erratic Wall Street; TomTom leads

The AEX closed 0.32 points or 0.06 pct lower at 533.70, after opening at 535.70 and trading in the range 533.17-536.49. Government bonds were lower, while the euro stood at 1.4558 usd versus 1.4465 usd late yesterday.
   
TomTom led gainers, adding 6.68 pct to 56.54 eur. The company today said it has yet to buy any shares in takeover target Tele Atlas, and a spokesman declined to confirm or deny reports that it is now able to purchase shares in the Dutch digital mapmaker. The company has until this Thursday afternoon to table a counter-bid to Garmin's 24.5 eur-per-share bid on Tele Atlas.
   
Philips added 1.46 pct to 29.95 eur as ABN Amro upgraded its recommendation to 'buy' from 'hold' and increased its target to 38.40 eur, from 31.60 eur.
   
Staffer Vedior gained 1.36 pct to 14.92 eur while peer Randstad added 0.41 pct to 37.03 eur. The company will likely announce a share buy-back or capital return during its investor meeting to be held later this week, analysts said.
   
ArcelorMittal closed 1.17 pct higher at 52.89 eur. Yesterday, shareholders of Arcelor approved the second stage of the planned merger with ArcelorMittal. The full merger is due to take effect on Nov 13.
   
KPN was up 0.23 pct at 12.81 as it said it controls 97.6 pct of Getronics and will launch a squeeze-out procedure, while DSM moved 1.15 pct higher to 38.69 eur after saying it will expand its engineering plastics compounding capacity at its site in Jiangyin, China, by 50 pct.
   
On the midcap, Boskalis moved 2.74 pct up at 42.07 eur, while Binckbank added 2.08 pct to 16.65 eur. Property company Wereldhave added 1.04 pct to 78.03 eur as Petercam upgraded its stance on the issue to 'hold' from 'reduce' while maintaining its 90 eur target.
   
Fugro gained 0.66 pct to 60.61 eur as it said it has won contracts in Australia and Indonesia with a total value of 68.5 mln usd. SNS Securities upped its price target on the stock to 68 eur from 61, but cut is rating to 'add' from 'buy' on valuation grounds.
   
Corporate Express fell 4.11 pct to 7.70 eur following weaker-than-expected third-quarter earnings.

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