UK/Euro Financial Market Daily Evening Briefing 10-01-2008

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London shares close lower as BoE rate stays at 5.5 pct and US stocks fall

At the close, the FTSE 100 index was 50.0 points lower at 6,222.7, off an earlier high of 6,314.5, while the FTSE 250 index was down 163.4 points at 9,800.6. Volume was moderate with 2.804 bln shares changing hands in 873,842 deals.

In the US, stocks fell after a profit warning from Capital One Financial Corp, but came off their early lows after a new reading suggested the economy might not have been as weak in the fourth quarter as originally thought.

By the London close, the Dow Jones industrial average was down 36.9 points at 12,698.4, while the Standard & Poor's 500 index lost 8.35 to 1,400.80 and the Nasdaq composite index fell 18.85 to 2,455.7.

In UK equity movements, the retailers were again in the spotlight as Sainsbury's offered some badly needed re-assurance to the sector with a positive third quarter trading update this morning. Sainsbury shares ended the day up 23 at 388 and fellow food retailer Morrison Supermarkets ended 1-1/4 higher at 308-1/4.

However, despite Sainsbury's news much of concerns over the Christmas trading period remain and shares in Marks & Spencer, who said yesterday it had worse-than-expected trading, were down 14 at 395, while sector peer Next lost 37 to 1,294.

Elsewhere, the BoE's decision not to cut rates sent housebuilder Taylor Wimpey stock 4.7 lower to 157.1. Midap peer Redrow could not hold onto the gains made after its in-line trading statement this morning, with shares falling back 6 to 261.

Man Group was a conspicuous faller, down 21-1/2 at 507, as it said funds under management at end-December are estimated to be 71.7 bln usd, up from 68.6 bln at end-September, while third-quarter sales came in at 4.2 bln usd.

Oil stocks weighed on the index. BP continued yesterday's fall, after confusing comments from the oil producer were interpreted by analysts as guiding forecasts lower. The shares fell another 5-1/2 to 605. Tullow Oil was the top Footsie faller, down 33-1/2 at 594, while BG Group lost 32 to close at 1,055.

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Meanwhile, BSkyB was down 9-1/2 at 549 after News Corp said it does not have any immediate plans to add to its minority ownership stake in the firm, while Dresdner Kleinwort repeated its 'sell' stance on the stock over concerns demand for Sky fell in the Christmas period.

On the upside, Carphone Warehouse, which reports Christmas sales numbers next week, was up 6-1/2 at 306-1/4. British Land ticked up 2 to 876-1/2 after a Singaporean government fund said it has bought 3 pct of UK property giant.

Chatter continued that Songbird Estates, which runs Canary Wharf in London, was preparing to offer 220 pence per share for Minerva whose shares rose 16-3/4 to 157-1/4.

In other M&A news, Scottish & Newcastle (S&N) gained 5-1/2 to 724-1/2 as the brewer rejected an improved 780 pence offer from the Carlsberg-Heineken consortium. S&N hinted it might consider another offer in the 800 pence region.

Theodoor Gilissen analyst Jan Meijer said it's good news for the consortium that S&N is open for talks at a price of 800 pence. Looking at the midcaps, Premier Foods ended down 13.15 pct, or 24-3/4, at 167, after traders said Citigroup was placing 16 mln shares at 167 and with investors cautious after an update revealed trading profit weakness this morning.

William Hill was down 32-1/4 at 401 as the group said it expects full-year pretax profit before exceptional items to be around 285 mln stg, for the 53 weeks to Jan 1. Informa lost 25-1/2 to 394-1/4 after market sources said Citigroup is placing 8 mln shares at 392 pence per-share.

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On the upside, Wellstream Holdings was the top FTSE 250 riser, adding 115 to 1,255 as the group said it sees full-year results significantly ahead of analysts' expectations on strong operational performance.

SIG was up 47 at 752 as the group said it believes the demand for insulation products will increase in 2008 and expects pretax profit for the year ending Dec 31, 2007, to come in around 28 pct up on last year. Shares in Burberry gained 17-1/2 to 485 as JP Morgan upped the group to 'overweight' from 'neutral'.

UK Diary of Event:
For a diary of key financial and corporate events in the UK this week, click here

UK Small Cap Report:
For a summary of today's trading on the FTSE 250 and the AIM, click here

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Paris shares close down, tracking Wall St; ECB rate decision as expected

The CAC-40 index finished down 34.99 points or 0.64 pct at 5,400.43. Among CAC-40 stocks, 13 closed higher and 27 closed lower. On the Matif, January CAC-40 futures were trading at 5,421.5. On the broader indices, the SBF-80 index closed down 91.08 or 1.57 pct at 5,711.95 and the SBF-120 ended 29.70 or 0.76 pct lower at 3,872.15.

The euro was quoted at 1.4738 usd compared to 1.4668 usd late yesterday. A number of shares saw profit-taking after performing relatively well in recent weeks. Vallourec was the biggest bluechip faller at the close, dropping 8.67 eur or 5.30 pct to 155.04, followed by Essilor International, down 1.35 or 3.08 pct at 42.42, and ArcelorMittal, off 1.42 or 3.04 pct at 45.27.

Tech stocks came under pressure amid ongoing concerns over the impact of slowing US demand. STMicroelectronics fell 0.16 or 1.85 pct to 8.49, GFI Informatique slipped 0.19 or 3.86 pct to 4.73, and Sopra Group slumped 2.79 or 5.84 pct to 45.01.

But Atos then plunged in the early afternoon, hit by talk that investment fund Pardus is selling its stake in the IT services group due to financial difficulties, before paring its losses to close down 0.26 or 0.83 pct at 30.92. Dassault Systemes ended down 0.59 or 1.65 pct at 35.09 as US concerns outweighed Morgan Stanley's upgrade.

Engineering group Alstom also had an erratic session. It posted early gains on news that a Canadian court has upheld its claim that it should be able to bid for a 1.2 bln cad contract to replace the train fleet of the Montreal metro, which was previously awarded to Bombardier without a tender.

But the shares, which rose sharply last year on the back of speculation about consolidation in the nuclear sector, then resumed their downward trend so far this year, closing 3.19 or 2.55 pct lower at 122.03. Oil giant Total also dragged on the market, dropping 0.99 or 1.69 pct to 57.75, as investors took profits following a dip in crude prices.

On the upside, recent heavy fallers staged a tentative rebound, with auto stocks among the strongest gainers. Renault rose 1.77 or 2.14 pct at 84.55, Peugeot added 0.80 or 1.73 pct to 46.96. Vinci also continued its rally after falling sharply in the opening sessions of the year. The construction stock headed the CAC-40 by rising 1.67 or 3.74 pct to 46.27.

European defence and aerospace group EADS was one of the biggest risers, up 0.50 or 2.65 pct at 19.35, lifted by comments from CEO Louis Gallois. Among other risers, Franco-Belgian bank Dexia added 0.39 or 2.23 pct to 17.86, buoyed by continuing talk that Warren Buffet could acquire US unit FSA.

Elsewhere on the CAC, Danone shed 11.61 or 2.61 pct to 60.19 as investors claimed profits after recent highs, while also reacting to a slide in shares of UK peer Premier Foods as it revealed profit weakness in a trading update.

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German shares close lower on fears US recession may derail global economy

The DAX was down 69.62 eur or 0.89 pct at 7,713.09 points, having traded between 7,700.85 points and 7,830.95 points today. The MDAX lost 182.60 points or 2.05 pct to 8,709.93 points, while the TecDAX was down 21.36 points or 2.40 pct to 869.69 points.

DAX futures dropped 111.50 points or 1.41 pct to 7,779.50 while bund futures were 0.13 points or 0.11 pct higher at 115.26. The euro was trading at 1.4739 usd, against 1.4740 usd in afternoon London trade.

Leading large-caps lower, ThyssenKrupp fell 1.83 eur or 4.94 pct to 35.22. The stock tracked a drop in steel companies after South Korea's POSCO, the world's fourth-largest steelmaker, said operating profit in the fourth quarter fell 20 pct amid a drop in stainless steel prices.

Chemicals giant BASF was down 5.04 eur or 4.81 pct at 99.78 eur and industrial-gas specialist Linde declined 2.86 eur or 2.98 pct to 93.26 eur. TUI dropped 0.72 eur or 4.28 pct to 16.11, after Standard & Poor's Ratings Services said its 'BB-' corporate credit rating and negative outlook on the company is unaffected by the launch of 450 mln eur in equity-linked financing, backed by the sale of part of TUI's shareholding in its largest subsidiary TUI Travel PLC.

Adidas declined 1.23 eur or 2.64 pct to 45.43. On the upside of the DAX, Metro rose 3.19 eur or 6.25 pct to 54.27 eur after the company issued a strong trading statement, easing concern that fourth-quarter sales may disappoint, following weak figures from UK peer Marks & Spencer yesterday.

Daimler advanced 0.68 eur or 1.20 pct to 57.38 eur, having recently reported 2007 unit sales at the Mercedes Benz Cars unit rose 2.0 pct, and BMW added 0.34 eur or 0.81 pct to 42.09, after saying December unit sales jumped 18.2 pct. Automotive supplier Continental AG gained 0.94 eur or 1.26 pct to 75.83 on the news.

EON advanced 1.22 eur or 0.80 pct to 152.80, after EON AG has come out in support of the UK government's decision to build new nuclear power stations in the UK, saying that it will have a "real impact" on the battle against climate change. EON, which already owns and operates nuclear power stations in Germany and in Sweden, plans to invest about 1 bln stg a year in the UK in a mix of cleaner coal, gas and renewable power stations. Any further investment in nuclear will be over and above that.

Over on the MDAX, Praktiker lost 1.93 eur or 12.81 pct to 13.91, after the company issued a disappointing fourth-quarter trading statement, showing that Germany's home-improvement market has not yet started recovering.

The German DIY store operator said fourth-quarter sales jumped 22.1 pct on the acquisition of the Max Bahr chain of home-improvement stores in Germany and the addition of new stores in eastern Europe, while same-store sales slipped 3.6 pct, weighed down by weak sales in its home market of Germany.

Norddeutsche Affinerie gained 0.89 eur or 3.58 pct to 25.74, being the top advancer on the mid-cap index. TecDAX-listed Solarworld plunged 2.27 eur or 6.05 pct to 35.27, in line with general weakness among solar energy stocks that traders attributed to possible short positions by hedge funds. Draegerwerk was the top gainer, rising 1.85 eur or 3.92 pct to 49.00.

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Amsterdam shares close lower as Wall St slips

The AEX closed down 7.64 points or 1.55 pct at 484.10, after opening at 494.54 and trading in the range 483.46-494.54. Government bonds traded mixed, while the euro stood at 1.4742 usd versus 1.4663 usd late yesterday.

Akzo Nobel led blue chip decliners, falling 5.19 pct to 49.11 eur, while TomTom continued yesterday's fall to close off 3.95 pct at 40.62 eur. Oil-services company SBM Offshore was down 3.47 pct at 19.76 eur, while Shell fell 1.84 pct to 28.20 eur, as oil prices fell.

Brewer Heinken was 3.16 pct lower at 42.32 eur as Scottish & Newcastle rejected the revised 780 pence a share proposal offer Heineken put forward with consortium member Carlsberg, but said it would be willing to talk at 800 pence.

KPN was 1.37 pct down at 12.98 eur. The company said today it has signed a mobile virtual network operator (MVNO) agreement with the UK's Euphony.

Property giant Unibail-Rodamco slid 1.80 pct to 142.80 eur as it and Rodamco Europe said they intend to sell parts of their Dutch and Belgian real estate portfolio, adding that discussions with interested parties are ongoing.

Retailer Ahold lost early gains to close down 1.37 pct at 12.98 eur. The stock rose in early trade amid improvement at the company's US supermarket chains, and the rising possibility of the company being split by private equity investors, Theodoor Gilissen said in a note to clients.

DSM was 1.14 pct lower at 30.36 eur, as UBS cut its target on the issue to 33 eur from 35 eur while upgrading it to 'neutral' from 'sell'. On the midcap, LogicaCMG fell 5.56 pct to 1.36 eur following a rating downgrade to 'equal-weight' from 'overweight' at Morgan Stanley.

Blue chip gainers were thin on the ground, with TNT gaining 0.31 pct to 25.91 eur, Hagemeyer up 0.21 pct at 4.72 eur and ING 0.08 pct up at 25.45 eur.

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