UK/Euro Financial Market Daily Evening Briefing 09-11-2007

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London shares close down, NY sharply lower on further credit woes

UK blue chips ended lower for a third straight session, as Wall Street slid nearly 200 points on continuing credit crisis concerns after the nation's fourth largest bank Wachovia warned it will take quarterly loan losses due to its debt portfolio.
   
At the close, the FTSE 100 index had slipped 77 points to 6,304.9, in a volatile session, which saw a high of 6,442.9, and a low of 6,268.9, with the FTSE 250 index off 172.9 at 10,859.1.
   
Volume was below average with 2.961 bln shares changing hands in 809,892 deals.
   
Chris Hossain, head trader at Blue Index CFDs said: "We're very bearish. When it comes to a situation when one of the world's biggest miners is bid for, and the market's going down, then there's a problem."
   
Over in the US, stocks opened lower after Wachovia, said in a filing with the Securities and Exchange Commission that credit market volatility could cause a 1.1 bln usd writedown for October alone. The problem stems from its asset-backed securities, such as collateralized debt obligations, that have lost
value on sinking investor demand.
   
The market was also still on edge after Federal Reserve Chairman Ben Bernanke said Thursday that policy makers expect the economy to "slow noticeably" this quarter.
   
On Wall Street, by London's close, the Dow Jones Industrial Average dropped 183.9 points to 13,082.4, while the Nasdaq composite index off 59.19 points to 2,636.81, and the S&P 500 index lost 21.54 points to 1,453.23.
   
Turning to UK equities, the reverberations from the Wachovia news were felt among the financials.
   
Investors were also rattled by Barclays news. Earlier rumours flew around that the UK's biggest bank was set to announce an asset write-down of up to 10 bln usd, something which Barclays has denied.
   
"There is no substance to the rumour," a Barclays spokesman said. The spokesman also denied separate rumours that Barclays chief executive John Varley is preparing to resign, and that the bank is preparing an emergency rights issue.

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Barclays shares ended the session down 11-3/4 pence at 474-1/4.
   
Its peers also slipped, with Alliance & Leicester 12 pence lower at 659-1/4, and HBOS down 16 at 752-3/4.
   
In the insurance sector, Friends Provident closed down 11.5 pence at 148.7, as UBS trimmed its target to 175 pence from 210 after resuming coverage on the pension group with a 'neutral' rating.
   
Elsewhere, shares in Yell fell amid vague talk Morgan Stanley is placing shares in the directories group, with the shares ending down 6-1/2 pence at 415-1/4. No details of the placing were immediately available.
   
Meanwhile, BT Group, eased 11 pence to 290-3/4, after UBS cut its target to 285 pence from 295 following yesterday's interims.
   
And a broker downgrade provided the spur for shares in Rentokil Initial, which dropped 7.1 pence to 158.55, after Exane BNP Paribas downgraded the group to 'neutral' from 'outperform' after the company's third-quarter results yesterday.
   
Turning to the gainers, commodities were in focus, with M&A activity helping to drive the sector.
   
Rio Tinto ended the session up over 6 pct, or 328 pence to 5,624, following rumours that a Chinese consortium was counterbidding for the group in a deal worth 150 bln usd after yesterday's rejected 3 for 1 share offer from BHP Billiton.
   
Analysts do not expect BHP to go hostile, despite Rio rejecting its initial offer. They think it is more likely to raise its share offer to around 3.5-for-1. BHP Billiton closed down 28 pence at 1,627-1/2.
   
Meanwhile, BG Group finished up 16 pence at 1,005 after extremely positive test results from the Brazilian Tupi prospect operated by Brazilian state-owned energy group Petroleo Brasileiro, in which it holds a 25 pct stake.    

In light of the results -- which could yield 5-8 bln barrels of recoverable oil -- Credit Suisse raised its rating to 'outperform' and its price target to 1,100 pence, while Deutsche Bank reiterated its 'buy' rating and upped its target to 1,090 pence.

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And, British Energy closed 10 pence firmer at 521-1/2 following recent weakness brought on by the closure of nuclear reactors due to corrosion and helped by positive broker comment from Goldman Sachs.
   
Elsewhere, Land Securities ended 14 pence higher at 1,504 after The Times reported that the group is planning to demerge its Trillium outsourcing business into a separate company worth about 1 bln stg.
   
Among midcaps risers, a broker upgrade helped boost shares in SSL International finished 12-3/4 pence ahead at 505, with Goldman Sachs lifting its recommendation to 'buy' from 'neutral'.
   
Also benefiting from positive broker sentiment was Dairy Crest, up 17 pence at 607-1/2, with UBS lifting its rating on the group to 'buy' from 'neutral'.
   
On the downside, Misys slipped 14-1/4 to end at 223 after UBS downgraded the software group to 'sell' from 'neutral' and cut its target to 220 pence.

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German shares close flat withstanding lower Wall St opening

FRANKFURT - German shares closed flat, withstanding a lower Wall Street opening and a lower-than-expected preliminary November consumer confidence index compiled by the University of Michigan.
   
The DAX was down 7.07 points or 0.09 pct at 7,821.40 after trading between a high of 7,918.92 and a low of 7,792.82  The MDAX slipped 160.27 points or 1.57 pct to 10,041.16 while the TecDAX was down 19.79 points or 1.92 pct at 1,011.99.
   
DAX futures lost 57.00 points or 0.71 pct to 7,853.50 while bund futures gained 0.40 or 0.34 pct to 114.64. The euro was trading at 1.4651 usd against 1.4673 usd in afternoon London trade.
   
Leading blue chips higher, Deutsche Post added 0.72 eur, or 3.43 pct, at 21.73, on the back of yesterday's third-quarter figures which analysts said largely met investors' demands for more transparent reporting and more realistic outlooks.
   
RWE added 2.05 eur, or 2.19 pct, at 95.61. Greek electricity utility Public Power Corp (PPC) said that it is in early talks with Germany's RWE and is working on signing a memorandum-of-understanding with the company for cooperation.
   
Peer EON rose 1.82 eur, or 1.35 pct, to 136.35. Siemens gained 0.75 eur, or  0.73 pct, at 103.77, on the back of yesterday's full-year figures which showed a net loss of 74 mln eur mainly due to a 1 bln
eur tax expense related to the sale of its VDO unit to Continental AG, but more importantly all nine segments reached their margin target ranges in the fourth quarter.
   
Continental was 0.94 eur, or 0.96 pct, stronger at 98.44, after its shares were initiated with a 'outperform' rating and a 135 eur target at Credit Suisse. Continued pressure on the banking sector saw Deutsche Postbank lose 1.84 eur, or 3.71 pct, at 48.15 as the worst performer on the DAX.
   
Traders also said rumours had cooled slightly over a possible sale by its parent company Deutsche Post AG. M&A speculation pushed the share price up 11 pct yesterday. Hypo Real Estate was 1.20 eur, or 3.25 pct, lower at 35.67. Commerzbank lost 0.87 eur, or 3.23 pct, at 26.09, while Deutsche Bank eased 1.71 eur, or 2.03 pct, at 82.59.
   
Over on the MDAX, Rheinmetall lost 5.31 eur, or 8.36 pct, at 58.19, as the worst performer as its shares corrected from strong gains yesterday on the back of a receiving a portion of 3 bln eur tank order from the German army.
   
At the other end of the mid-caps index, Arques Industries gained 1.17 eur, or 4.82 pct, at 25.43. TecDAX-listed GPC Biotech was down 0.24 eur, or 6.19 pct, at 3.64 as losses continue after the company said yesterday its third-quarter loss widened on surging costs, while investors continued to worry about prospects of the company's drug.
   
Rofin Sinar added 2.51 eur, or 4.74 pct, at 55.51, as the top gainer on the index after the company posted fourth-quarter results that beat expectations.

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AMSTERDAM - Shares in Amsterdam closed sharply lower after the release of lower-than-expected US economic data and amid a negative Wall Street.
   
The AEX closed down 12.52 points or 2.39 pct at 510.69, after opening at 524.07 and reaching a low of 506.74 at 4.43 pm. Government bonds were flat to higher while the euro stood at 1.4654 usd,
from 1.4695 usd late yesterday.
   
An ING analyst said the preliminary reading of the University of Michigan sentiment index for November fell more than expected to the lowest reading in 25 months.
   
Corporate Express was the strongest AEX decliner, down 6.23 pct at 6.77 eur after US peer Office Depot said it will re-state earnings following an independent review of vendor-programme accounting.
   
Randstad was off 5.70 pct at 32.57 after ING reduced its price target to 46 eur from 48, followed by Corporate Express, which slumped 6.09 pct to 6.78 eur after US peer Office Depot said it will re-state earnings following an independent review of vendor-programme accounting. Peer Vedior shed 2.52 pct to 13.90 and midcapper USG People slipped 3.72 pct to 17.84.
   
ArcelorMittal lost 5.37 pct to 50.43. Among financials, Fortis was down 4.05 pct at 17.54, ING slid 3.41 pct to 27.23 and Aegon fell 2.12 pct to 12.91. Among tech related issues, Philips weakened 2.35 pct to 29.03, Ordina fell 4.66 pct to 11.86 and LogicaCMG lost 2.39 pct to 2.04.
   
TomTom fell 1.62 pct at 54.10 after the company said it will postpone its Nov 13 EGM on the Tele Atlas offer until December and as Theodoor Gilissen initiated coverage at 'hold'. Tele Atlas, which cancelled its Nov 14 EGM, was 0.77 pct lower at 32.72.
   
Royal Dutch Shell traded 1.66 pct lower at 28.45 while SBM Offshore bucked the general trend and rose as sole AEX gainer by 0.47 pct to 27.74 after the company said late yesterday that it received new orders and contracts in Canada and China valued at 950 mln usd. Midcapper Fugro was also up, rising 0.18 pct to
61.06.
   
TNT shed 1.06 pct to 27.05 after it said it will start a share repurchase program of up to 200 mln on Monday as part of its previously announced 500 mln eur share buyback programme. Brewer Heineken traded briefly in positive territory to close 0.17 pct lower at 46.17, still outperforming the market as the issue recovered from recent losses following InBev's weak third quarter results yesterday.
   
Heijmans fell 1.27 pct to 23.38 ahead of the company's trading update expected Wednesday after it issued a profit warning recently, analysts said. while local issue peer Grontmij dropped 5.53 pct to 27.17 eur as SNS cut it to 'hold' and Rabo cut its price target to 31 eur.
   
Three local issue property stocks reported earnings results this morning:  VastNed Retail fell 0.96 pct to 67.15 after the company lowered its full-year guidance while reporting an unchanged 9-month direct investment result. VastNed O/I was down 5.44 pct at 22.79 after the company reported an improved direct investment result, but lowered its full-year guidance.
   
EuroCommercial Properties lost 3.86 pct to 36.32 after the company reported strong rental income growth at 14 pct, a Petercam analyst said, noting however that the property issue's direct result only increased slightly due to higher oeprational costs and interest expenses.
   
Among the few midcap gainers, BAM lifted 0.43 pct to 16.51 amid news its German unit won two contracts worth a total of over 85 mln eur. CSM added 1.28 pct to 23.67, and Vopak put on 0.21 pct to 39.08.

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Paris shares close lower on EU's warning over economic concerns

The CAC-40 index finished down 107.45 points or 1.91 pct at 5,524.18. Among CAC-40 stocks, four closed higher and 36 closed lower. On the Matif, November CAC-40 futures were trading at 5,519.00.
   
Midway through the session, the European Commission announced that it was cutting its 2008 growth forecasts for the euro zone to 2.2 pct from the 2.5 pct given in May, and set a 2.1 pct growth forecast for 2009.
   
For France, the commission said it now expects GDP growth of 2.0 pct versus 2.3 pct previously, followed by 1.8 pct for 2009. At the same time, EU economic and monetary affairs commissioner Joaquin Almunia gave a clear warning over downside risks.
       
Meanwhile European financial stocks were hit by a string of negative rumours with shares in Barclays in the UK tumbling even after the group categorically denied a market rumour that it is about to announce an asset write-down of up to 10 bln usd and shares in Italy's Banca Monte dei Paschi di Siena plummeting after yesterday's announcement of the 9 bln eur acquisition of Banca Antonveneta from Banco Santander led to a series of downgrades.
   
In France, financial stocks suffered some of the CAC-40's heaviest losses: Dexia was down 0.77 or 4.02 pct at 18.39, Credit Agricole lost 0.98 or 4.02 pct to close at 23.42 and Societe Generale was not far behind, falling 3.92 pct or 3.77 pct to 100.00.
   
Vallourec, however, led CAC-40 losses, ending 12.50 or 6.19 pct lower at 189.60 after shedding all of yesterday's speculation-fuelled gains. UBS cut its recommendation on the seamless tube-maker to 'neutral' from 'buy' saying that the group may struggle to pass on rising raw material and energy costs to customers given price pressures in the US market.
   
Meanwhile, on the upside, two of the CAC-40's four gainers were energy stocks as investors sought to take positions in the defensive utilities sector: EDF rose by 1.33 eur or 1.62 pct to close at 83.25, while Suez was up 0.03 or 0.07 pct at 44.28.
   
Tyre-maker Michelin rose 0.59 or 0.69 pct to 86.35, after Credit Suisse initiated coverage of the stock with an 'outperform' rating.
   
Outside the CAC-40 Beneteau retreated from early gains on the back of a 30.7 pct jump in full-year net profit to 93.6 mln eur. The yacht builder's stock closed 0.23 or 1.19 pct lower at 19.16. Soitec lost 0.97 or 8.52 pct to close at 10.41. CA Cheuvreux slashed its EPS forecasts by around 50 pct and lowered its target to 10 eur in the wake of the semiconductor components maker's first-half results yesterday.

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