UK/Euro Financial Market Daily Evening Briefing 08-02-2008

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London shares closed firmer near highs; NY flat off lows; miners gain

At close, the FTSE 100 index was up 59.9 points at 5,784, near a high of 5,805.3. The FTSE 250 was 43.3 points firmer at 9,807.5. Volume was below average, with 2.25 bln shares having changed hands in 699,416 deals.

Over in the US, Wall Street was flat off lows as investors sifted through a batch of corporate profit reports and outlooks and a higher-than-expected rise in US wholesalers' inventories gave investors little new evidence about the economy's health.

At London's close the Dow Jones industrial average was 2.8 lower at 12,244.7, Standard & Poor's 500 index gained 1.22 to 1,338.13, while the Nasdaq 100 index rose 19.74 to 2,312.74.

Back to the UK, blue chip miners continued to fill many of the positions on the leaderboard, with copper, gold and platinum prices up, amid concern of further disruption to supplies due to power outages in South Africa.

Antofagasta was the top riser, up 42-1/2 at 722-1/2, Lonmin added 147 to 3,100, Vedanta Resources gained 74 at 1,896 and Kazakhmys rose by 59 to 1,247. Anglo American was up 100 at 2,980 as a full-year update on 45 pct-owned De Beers was well received.

Anglo said De Beers produced 51.1 mln carats in 2007, maintaining the record production achieved in 2006. Although uncertainty over world markets could continue to affect consumer diamond jewellery sales through the first half of 2008, the company is confident on market fundamentals beyond 2008.

Gas explorer BG Group benefited from a UBS upgrade to 'buy' from 'neutral' with an increased price target of 1,340 pence compared with 1,240 previously, following the energy company's fourth-quarter results yesterday.

BG shares, trading near record high territory, were up 52 pence higher at 1,170 after UBS highlighted the group's better-than-expected adjusted net income and another very well received strategy review, both of which prompted the broker to raise its EPS and net asset value estimates.

Elsewhere, Compass Group remained among the top risers, up 12-3/4 at 326-3/4, after the world's biggest contract caterer said it had a strong first quarter with global revenues increasing organically in line with last year's growth levels. In response, Merrill Lynch and Investec Securities repeated their 'buy' stances.

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Meanwhile, London Stock Exchange was 45 ahead at 727, as sentiment improved after West LB upgraded peer Deutsche Boerse to 'hold' from 'reduce' and raised the German exchange operator's target to 116 eur from 114. It was also bolstered when UBS initiated Spain's Bolsas y Mercados Espanoles at 'buy' with a 45 eur per share target.

Turning to the downside, Yellow Pages publisher Yell was the top faller, down 17-3/4 to 262 still suffering after the group yesterday warned that its revenues will fall just short of expectations due to the toughening of UK market conditions.

Pharmaceuticals companies were also a major feature on the downside, with GlaxoSmithKline 8 lower at 1,070, extending the fall from yesterday, when it issued a pessimistic outlook for 2008.

After yesterday's news Dresdner Kleinwort downgraded GlaxoSmithKline to 'reduce' from 'add', SG Securities cut it to 'hold' from 'buy' while Deutsche Bank cut its price target to 1,265 pence from 1,345 and repeated its 'hold'.

AstraZeneca fell back in sympathy, down 32 at 1,947. And Shire lost 18-1/2 to 937-1/2 as Lehman Brothers downgraded the drugs firm to 'underweight' from 'equal-weight' and cut its price target to 865 pence.

Lehman said it had cut sales forecasts on the company's Vyvanse product, resulting in a 10-20 pct cut to 2009 estimated EPS and a 10 pct reduction in net present value.

Away from pharmaceuticals British Sky Broadcasting was off 6 at 552 as the group said it will carry out a private placing to raise 750 mln usd (384 mln stg) to refinance existing debt.

Kingfisher was 0.9 lower at 135.05 after UBS established a 'short-term sell' while maintaining its 'neutral' rating longer-term. It has reduced its like-for-like sales forecasts for B&Q for 2008-09 and also cut the price target on the stock to 145 pence from 160.

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Turning to the midcap fallers, Premier Foods, was off 11-1/4 pence or 9.38 pct lower at 108-3/4 as it said it is not contemplating a rights issue, refuting rumours which had gained intensity throughout the morning and had sent shares in the company down by nearly 20 pct.

The maker of Hovis bread and Mr Kipling cakes also said it is not in breach of its financial covenants, as at Dec 2007, and, based on its latest financial projections, does not expect to be in breach on an ongoing basis.

Elsewhere, DSG International was down 0-1/2 at 70-3/4 after UBS established a 'short-term sell' on the group and lowered its price target to 75 pence, from 80.

On the upside, Biffa was 41-1/2 or 12.65 pct higher at 369-1/2 after the waste management company said it has agreed to a takeover offer by WasteAcquisitionco.

The consortium will pay 350 pence, 16-1/2 less than the current price, in cash for each Biffa share, valuing the company's fully diluted share capital at about 1.231 bln stg.

But Seymour Pierce believes another bidder could emerge. It said the price, though it may appear generous, was not enough. Another waste management group, Shanks Group, added 5 to 228 on the read-across from Biffa's news.

And, Carillion was up 13-1/4 at 347-1/4 after the UK's Office of Fair Trading (OFT) said it has cleared the group's anticipated acquisition of support services group Alfred McAlpine also 18 higher at 547-1/2.

UK Diary of Event:
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Paris shares close down led by declines in Societe Generale, Credit Agricole

The CAC-40 index finished down 0.30 pct or 14.15 points at 4,709.65. Among CAC-40 stocks, 17 closed higher, 22 closed lower and one, Michelin, was unchanged.

On the broader indices, the SBF-80 index closed down 0.1 pct or 5.25 points at 5,393.29, and the the SBF-120 ended down 0.27 pct or 9.35 points at 3,411.67.

The euro was quoted at 1.4510 usd compared to 1.4472 usd at midday. With no major macroeconomic data out to provide direction, investors focused on a raft of annual results from French blue chips such as Alcatel-Lucent and Lagardere.

At the close, Societe Generale was down 3.47 pct or 2.79 eur at 77.72, while Credit Agricole was down 4.11 pct or 0.78 at 18.20.  BNP Paribas lost 2.02 pct or 1.22 eur to 59.08 while Dexia shed 1.55 pct or 0.24, closing at 15.23.

Elsewhere in the financial sector, disappointing fourth quarter sales figures for CNP Assurances weighed on sentiment, dragging insurance stocks into the red.

CNP plunged 13.45 pct or 10.41 eur to 67.00, while insurance giant Axa gave up 2.90 pct or 0.64 to 21.41. Media group Lagardere climbed 2.87 pct or 1.34 eur to 48.11, after full year sales came in ahead of forecast and the group issued an upbeat outlook statement.

EADS rose 2.90 pct or 0.46 eur to 16.31 after the Airbus parent company signed a deal with Kazakh titanium company UKTMP and a subsidiary of French mining company Eramet for the supply of titanium.

Outside the CAC-40, Neuf Cegetel fell 0.12 pct or 0.04 eur to 34.72 after the telecommunications service provider posted 2007 sales of 3.348 bln eur and reaffirmed its 2008 sales guidance.

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German shares close higher after volatile trading day

The DAX closed 33.56 points or 0.50 pct higher at 6,767.28 after trading between a low of 6,706.18 and a high of 6,851.78 today. The MDAX was up 53.73 points or 0.63 pct to 8,646.16, while the TecDAX added 6.38 points or 0.84 pct to 767.63.

DAX futures lost 29.00 points or 0.42 pct to 6,803.00, while bund futures added 0.50 points or 0.43 pct to 117.26.

The euro traded at 1.4511 against 1.4489 in afternoon London trade. Leading blue chips higher, Deutsche Boerse gained 4.46 eur or 4.07 pct to 114.06, which dealers attributed to a technical trading-inspired rebound and an upgrade to 'hold' from 'reduce' at WestLB.

MAN followed, rising 2.95 eur or 3.74 pct to 81.73, after Deutsche Bank raised its stance on the heavy truck manufacturer to 'buy' from 'hold' and reiterated its 120 eur a share target.

Software-maker SAP added 0.65 eur or 2.02 pct to 32.79. Deutsche Postbank rose 1.14 eur or 1.97 pct to 59.03, extending yesterday's gains, after Deutsche Bank chief executive Josef Ackermann said yesterday that Germany's largest bank is interested in acquiring its smaller peer should it be up for sale.

Fresenius Medical Care rose 0.60 eur or 1.81 pct to 33.75. At the bottom of the DAX, Hypo Real Estate lost 0.72 eur or 4.00 pct at 17.29 -- the session's worst performer -- as traders said investors were unsettled by rumours that the bank may be considering launching a new capital increase, despite strong evidence to the contrary.

Infineon shares were also in the red, falling 0.19 eur or 3.28 pct at 5.60, as they continued yesterday's slump after a brief moment in positive territory early this morning. Several major brokerages reduced their price targets but most still offered headroom after the chipmaker's recent plunge.

Henkel dropped 0.47 eur or 1.59 pct to 29.05, while Deutsche Telekom fell 0.11 eur or 0.82 pct to 13.23. Munich Re was also down 0.94 eur or 0.82 pct at 113.88.

Over on the MDAX, Aareal Bank added 1.13 eur or 5.31 pct at 22.42 as the top performer on the index. At the other end, Hugo Boss slipped 1.55 eur or 4.16 pct at 35.67.

TecDAX-listed Conergy's rebound after three days of losses was enough to put it at the top of the index, up 1.53 eur or 14.22 pct at 12.29. Meanwhile, Nordex lost 0.69 eur or 2.72 pct at 24.71.

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Amsterdam shares close flat, in line with hesitant Wall Street

The AEX closed 0.05 points or 0.01 pct lower at 432.10 after opening at 436.83 and trading in the 429.28-439.19 range. Government bonds traded mixed, while the euro stood at 1.4510 usd compared with 1.4537 usd late yesterday.

TomTom jumped 4.41 pct to 37.21 eur after UBS analysts said the shares are now good value, having plunged 45 pct from their peak, a 30 pct underperformance of the market. ArcelorMittal closed up 1.93 pct to 45.97.

Among oil stocks, SBM Offshore added 1.88 pct at 20.58 eur as crude oil price rose amid ongoing production disruption in Nigeria and expectations of higher fuel demand in the US because of colder weather. Heavyweight Royal Dutch Shell finished 0.22 pct higher to 23.14. Midcapper Fugro put on 2.82 pct to 44.84.

Unilever gained 1.62 pct to 21.37 eur as investors gave further reflection to yesterday's FY results, with ING reiterating a 'Buy' recommendation and 27.50 eur target.

On the midcap, Boskalis led up 2.84 pct to 38.05. Local issue Imtech rose 2.42 pct to 13.54 eur after the engineering company announced a 140 mln eur contract in Germany.

DSM led decliners on the AEX, falling 4.87 pct to 26.94 ahead of full-year results expected Wednesday, and as analysts downplayed the likelihood the company would resume coal mining activities. DSM owns coal mining licenses in the Netherlands to reserves which could be worth at least 120 bln eur, analysts said.

Corporate Express lost 2.86 pct to 5.09 eur amid profit taking on the week's 25 pct surge, which was spurred by merger speculation and the office supplies group's stronger-than-expected fourth-quarter results.

Financials were lower, wtih ING down 1.71 pct to 20.67, Fortis falling 1.52 pct to 13.65 and Aegon shedding 1.15 pct to 9.46. Midcapper Oce was the strongest decliner, off 1.62 pct to 12.12.

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