UK/Euro Financial Market Daily Evening Briefing 10-03-2008

London shares close down as Wall St slides; miners and housebuilders fall

At the close, the FTSE 100 index was down 70.8 points at 5,629.1, while the FTSE 250 index fell 183.0 to 9,670.7. Volume was light, with 2.192 bln shares changing hands in 723,630 deals.

In the US, by the London close, the Dow Jones industrial average had lost 51.1 points to 11,842.6, while the Standard & Poor's 500 index fell 9.85 at 1,283.5, and the Nasdaq composite index gave away 18.04 to 2,194.48.

Back in the UK, heavyweight miners weighed on the FTSE 100, against a background of weak metals prices and as ongoing US recession concerns hit the sector. The top blue-chip faller was Antofagasta, 58-1/2 lighter at 728, ahead of its final results tomorrow, BHP Billiton was down 93 at 1,497 and Rio Tinto dropped 336 pence to 5,258.

Elsewhere, weakness was seen among housebuilders as investors focused on Bovis Homes' gloomy outlook statement which accompanied in-line full-year results this morning. Bovis Homes was the top 250 faller, dropping 12.38 pct, or 71-1/2p, at 506, while FTSE 100 peer Taylor Wimpey shed 11.2 to 161.5, and Persimmon dropped 30-1/2 to 677.

Still among the fallers, Compass Group lost 15-1/2 at 320, after Goldman Sachs downgrading the catering company to 'sell' from 'neutral' on fears over rising food prices. Also suffering after a broker downgrade was Amec, off 27-1/2 at 761, after UBS cut the group to 'neutral' from 'buy', with a price target cut to 875 pence from 905.

On the upside, gains were seen among oil stocks, as crude prices steadied near 105 usd a barrel and remained within touching distance of last week's record highs. BP took on 5-1/2 to 534 and Royal Dutch Shell was 7 firmer at 1,675.

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Elsewhere, Imperial Tobacco and British American Tobacco rose 37 at 2,381 and 52 to 1,875 respectively, as investors were attracted to their defensive nature and encouraged by news Imperial Tobacco has disposed of its 49.95 pct stake in Spain-based airport duty free retailer Aldeasa SA.

M&A talk helped send shares in Friends Provident higher, up 0.9 at 119.0, with the Sunday Express newspaper reporting that private equity group JC Flowers is gearing up to launch a 3.5 bln stg offer for the group. Friends is scheduled to update the market with final results tomorrow.

In broker-generated news, HSBC was 11 firmer at 769-1/2 after Keefe, Bruyette and Woods upped its recommendation on the group to 'outperform' from 'market perform'. Turning again to the second liners, Telecity slumped 12.03 pct, or 29p, to 212 as investors reacted negatively to its full-year results today, while Citigroup cut its price target to 250p from 280 in reaction.

In M&A news, Petrofac lost 38-1/2 to 527-1/2, as Ayman Asfari, chief executive of the company, said the oil services group has not received any takeover approach. The company also released in-line full-year 2007 results. Spirax-Sarco reversed recent strong gains, losing 71 at 950, as investors took profits following the company's strong full-year results this morning.

On the upside, well received full-year results sent Brixton 10 higher at 330, prompting Citigroup to repeat its 'buy' stance. M&A talk gave IMI a lift, up 13 at 440 with Saturday's Financial Times pointing to Honeywell bid speculation.

Elsewhere, Intertek climbed 35-1/2 to 931-1/2, following strong full-year results and a bullish outlook statement this morning, while Seymour Pierce upgraded its view to 'buy' from 'outperform' in reaction. A broker upgrade helped send shares in Hays higher, up 2-1/4 at 112-1/4, with Goldman Sachs raising the group to 'buy' from 'neutral'.

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Amsterdam shares close lower pulled down by depressed Wall Street

The AEX closed down 7.13 points or 1.64 pct, at 427.96 after opening at 432.38, reaching a midday high of 434.14 to then touch a pre-close low of 425.94. Government bonds traded mixed, while the euro stood at 1.5337 usd, compared with 1.5418 usd late Friday. DSM led decliners, down 4.50 pct at 26.75 eur, followed by ArcelorMittal, which shed 4.11 pct to 47.58.

Financials turned lower, with Fortis 3.11 pct lower at 14.31, Aegon off 2.72 pct at 8.93 and ING off 1.29 pct at 20.72. SNS Reaal slipped 1.23 pct to 12.85 and BinckBank shed 0.91 pct to 7.65 eur after the issue was initiated at 'buy' at Petercam.

Akzo Nobel slid 1.28 pct to 51.86 following reports CEO Hans Wijers said the group was not considering any big acquisitions in 2008, only smaller add-on deals. The CEO reiterated Akzo Nobel will focus on integrating the recently acquired Imperial Chemical Industries this year.

Publisher Wolters Kluwer was down 0.64 pct at 17.19 after comments from its CEO that the company is seeking bolt-on acquisitions in its main markets. Peer Reed Elsevier weakened 1.31 pct to 12.05. Tele Atlas was off 0.26 pct at 26.83 after the company said it signed a deal to extend its relationship with Microsoft Corp to power its mapping and location platform services.

Decliners on the midcap were led by AMG, falling 6.32 pct to 46.70 and Heijmans, off 4.38 pct at 23.12. BAM lost 4.21 pct to 13.20 amid news it won a contract to develop a neighbourhood in Middelharnis and that it bought an area to be developed, part of a disused industrial site in Alkmaar. USG People was down 2.03 pct at 13.03 as Rabo cut its price target to 20 eur, but kept the stock at 'buy' together with ING.

Boskalis closed down 0.55 pct at 34.56 after initially soaring following news insurers awarded the company 167 mln eur compensation for damage to a vessel following a collision in China last year. TomTom was the strongest gainer but off earlier highs, up 0.60 pct at 28.34 eur as the issue rebounded from recent sharp losses, while Petercam upped the stock to 'add' from 'hold'.

Ahold went 0.55 pct higher to 9.11 after Rabo Securities upped its target for the issue, saying Ahold was "the stock to play in the sector." TNT was up 0.45 pct at 24.59 eur after a Berlin court ruled in the company's favour in a longstanding dispute with the German state on minimum wages. Heavyweight oil group Royal Dutch Shell turned higher, closing up 0.22 pct at 22.48.

Local issue Smit Internationale gained 3.67 pct to 61.82 eur after the issue was upgraded to 'buy' from 'hold' by ABN Amro. The broker said he did not believe Boskalis would easily give up trying to buy Smit's Terminals operations. Nieuwe Steen rose 3.77 pct to 17.90 eur after the company bought eight Dutch properties for 143 mln eur. Petercam reiterated the stock at 'add'.

UK Diary of Event:
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UK Small Cap Report:
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Paris shares close lower on US, oil fears; Veolia falls further 

The CAC-40 index finished down 51.97 points or 1.13 pct at 4,566.99. Among CAC-40 stocks, nine closed higher and 31 closed lower. On the Matif, March CAC-40 futures were trading at 4,570. On the broader indices, the SBF-80 index closed down 99.55 or 1.86 pct at 5,240.66 and the SBF-120 ended down 40.97 or 1.22 pct at 3,309.21.

The euro was quoted at 1.5342 usd, easing slightly after Friday's fresh record highs of over 1.54 usd. Veolia gave up 1.98 eur or 4.00 pct to 47.52, on top of its 9.93 pct slide in the previous session.

Deutsche Bank cut its price target by 7 pct to 52 eur, retaining its 'hold' stance, commenting that the outlook for Veolia looks uncertain and margins appear to be suffering. Cheuvreux, meanwhile, cut its price to 59 eur from 70.5, to reflect a reduction in its 2008 and 2009 gross profit forecasts.

Gaz de France headed the CAC-40 at the close, adding 0.87 or 2.36 pct to 37.74. Merger partner Suez was also in positive territory, up 0.56 or 1.37 pct at 41.39, as was France Telecom, 0.19 or 0.89 pct higher at 21.42. EDF retreated from morning gains to inch down 0.02 or 0.03 pct to 60.85. Oil major Total, meanwhile, also outperformed the market by giving up just 0.03 or 0.06 pct to 48.13, supported by the record crude prices.

Dexia was one of the few other bluechip risers, up 0.01 or 0.07 pct at 14.89. The Franco-Belgian bank was buoyed by a positive note from Cazenove, which raised its 2008 and 2009 earnings per share (EPS) forecasts by 4 pct for the Franco-Belgian bank.

Back on the downside, Air France-KLM was among the major fallers, off 0.72 or 4.38 pct at 15.73, as it was penalised by investors because of soaring oil prices. The carrier also reported a 3.4 point drop in its load factor to 75.5 pct last month, as it was affected by a strike by air traffic controllers in Paris. The market was also awaiting the possible announcement of a binding offer for Alitalia following a meeting of the Franco-Dutch group's board today.

Cyclical industrial stocks also suffered from economic worries, with Alstom shedding 6.31 or 4.53 pct to 132.94 and ArcelorMittal slipping 2.05 or 4.13 pct at 47.59. The steel giant was also hit by losses for mining and raw material stocks in Asia as metals prices slumped in Asian trade.

Outside the CAC-40, mining group Eramet fell even further, tumbling 53.78 or 10.17 pct to 475.22. The shares, which have soared by 250 pct over the past year thanks to takeover interest and soaring manganese prices, deflated speculation by saying it will ask shareholders to approve new measures to defend it against a bid.

Thomson SA dropped 0.52 or 10.92 pct to 4.24, amid rumours the audiovisual equipment maker is planning to scrap its dividend to carry out a capital increase. Also among midcaps, property group Gecina plunged 11.32 or 10.94 pct to 92.15. Elsewhere, Teleperformance rose 0.82 or 4.23 pct to 20.19 ahead of tomorrow's full-year earnings from the call centre operator. Havas, which reports its results after the market closes this evening, rose 0.06 or 2.18 pct to 2.810.

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German shares close lower, led down by Hypo Real Estate on profit warning

The DAX ended down 65.91 points, or 1.01 pct, at 6,448.08 having traded in a 6,414.52-6,537.39 range. The MDAX eased 286.27 points, or 3.25 pct, to 8,528.43, while the TecDAX fell 14.43 points, or 1.93 pct, to 732.23. DAX futures were down 27.50 points, or 0.42 pct, at 6,462.00, while bund futures added 0.47 points, or 0.40 pct, to 118.03.

The euro was trading at 1.5348 usd compared with 1.5333 in early afternoon London trading. Hypo Real Estate led blue chips lower after its chief executive Georg Funke said in a letter to employees that this year's financial targets are still achievable but more difficult to meet due to continuing uncertainties in the financial markets. The shares lost 2.25 eur or 13.55 pct to 14.35.

Automotive supplier Continental AG was the second biggest loser, down 3.62 or 5.94 pct at 57.34. Its chief executive Manfred Wennemer told WirtschaftsWoche the company is not ruling out the possibility of merging some of the production facilities of Siemens VDO, which it acquired last year.

TUI finished down 0.79 or 4.60 pct at 16.38. Dresdner Kleinwort downgraded TUI to 'reduce' from 'add' and reiterated its 15.50 eur per share price target ahead of full-year figures due March 18.

Bucking the trend, Volkswagen was higher 2.50 or 1.65 pct at 154.25. Focus magazine reported that luxury automaker Porsche AG plans to increase its 31 pct shareholding in Europe's largest carmaker to 75 pct. Porsche denied the report. Adidas added 0.61 or 1.53 pct, to 40.60, as dealers spoke of vague, renewed rumours that Nike Inc might be mulling a takeover bid for the German sports equipment manufacturer.

Daimler was down 0.36 or 0.67 pct at 53.49. Daimler board member Andreas Renschler said he expects unit sales of trucks will stage a recovery this year but growth forecasts in the truck industry depend largely on the development of US business. Renschler said he could not give a reliable forecast on the North American business until the second half of this year.

ThyssenKrupp fell 1.28 or 3.51 pct to 35.22 in tandem with losses of steel producers' stocks in Asia this morning, dealers said. "Overall the fear seems to be that steel sales are likely to contract this year, in addition there seem to be worries coming from China that the country might raise interest rates and slow factory construction, thus further limiting demand," a Frankfurt dealer said.

Deutsche Post fell 0.27 or 1.25 pct to 21.36 after a German court said the minimum wage introduced in the postal service sector does not conform with relevant laws, handing a victory to competitors of Deutsche Post, like Axel Springer's Pin Group.

On the MDAX, Arques Industries lost 1.27 or 10.90 pct to 10.38 while ProSiebenSAT.1 added 0.21 or 1.58 pct at 13.47. Hochtief was the second biggest loser, down 5.31 or 7.54 pct at 65.08 after its Australian unit Leighton saw losses of around 4 pct in Sydney this morning. On the TecDax, Carl-Zeiss fell 0.54 or 5.72 pct to 8.90. Solarworld rose 0.34 or 1.18 pct to 29.26.

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