UK/Euro Financial Market Daily Evening Briefing 10-10-2007

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London shares close at day's high; NY down; miners, Northern Rock gain

Leading blue chips closed higher, recovering from lows as Wall Street remained lower with the miners up on higher commodity prices and Northern Rock helping the gainers after Jon Woods bought a 4 pct stake in the group
   
By close, the FTSE 100 index was 17.6 points ahead at 6,633 at the day's high, recovering from a low of 6,587.7, while the FTSE 250 index was up 84.3 points at 11,512.1.
   
"We expect there to be more bouts of nervousness in the market, but the general trend should be upwards," said Tim Rees, fund manager at Insight Investment.
   
On Wall Street shares fell modestly in early trading, giving back some of the prior session's advance that came on renewed optimism about lower interest rates.
   
Investors appeared largely unfazed by profit warnings from International Paper Co. and Chevron Corp. A pullback was to be expected after the rally Tuesday that sent the Dow Jones industrial average and the Standard & Poor's 500 index to new closing highs, dealers said.
   
At London's close, the Dow Jones Industrial Average index was down 42.3 points to 14,122.3. Broader US stock indexes were narrowly lower. The S&P 500 index dipped 4.25 to 1,560.9, and the Nasdaq composite was ahead 5.01 at 2,808.92.
   
Turning to the blue chips gainers in London, miners were in demand following a note by Credit Suisse which said the mining sector is poised for a rally in the fourth quarter as the broker expects US copper prices to reach new highs.
   
Kazakhmys was up 61 at 1,524, Antofagasta gained 33 at 836-1/2, Rio Tinto added 173 at 4,408 and Xstrata edged 146 higher at 3,455.
   
Vedanta Resources climbed 35 pence to 2,187-1/2, after the group posted better-than-expected production figures for copper, aluminium and zinc in the second quarter, with Citigroup maintaining its 'buy' recommendation and 2,350 pence price target on the miner.
   
And FTSE 100 newcomer Carphone Warehouse experienced a lift too, up 9-1/4 pence to 352, after a mixed trading update that included a dramatic acceleration in its profitable unbundled broadband rollout.

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The mobile phone retailer said in a trading update for the 13 weeks to Sept 29 that total retail connections rose 19.2 pct to 2.8 mln, reflecting a 26.8 pct jump in pre-pay, but reported a lower-than-expected 9.3 pct rise in higher-margin subscription connections.

Elsewhere, Daily Mail & General Trust gained 13 at 676-1/2 after the group said it sees full-year revenues at its local media division, Northcliffe, at 448 mln stg for the year to Sept 30, 2007, and operating profits of "not less" than 92.5 mln stg.
   
Meanwhile, Cadbury Schweppes rose 15-1/2 pence to 616, after confirming its intention to demerge its US beverages business as it reported strong third-quarter growth from the confectionery division.
   
The group was forced to abandon plans for an outright sale of the beverages business due to the crisis in the global credit markets.
   
However, Northern Rock led the gainers, up over 32 pct, or 66-3/4 at 273-1/2 as banks lending stock in the stricken mortgage lender made life difficult for hedge funds looking to short the stock, as moves from the BoE and Jon Wood forced a short squeeze.
   
Added to this, the Times newspaper said today that the Bank of England eased a sale of Northern Rock yesterday by relaxing the types of security it will accept in return for the unlimited emergency credit it extended to the bank.
   
Turning to the downside, a broker downgrade helped send HBOS shares lower, down 29-1/2 pence at 926, with Lehman Brothers downgrading the banking giant to 'underweight' from 'overweight', expressing doubts about the UK mortgage market.
   
Its peers were also lower. Barclays was off 10 at 655-1/2 and Lloyds TSB fell 7-1/2 at 563-1/2.
   
But Experian Group, the world's largest credit reference checking company, was the top FTSE 100 faller, as profit-takers moved in after its positive first-half update, while US sub-prime mortgage fears also continued to bite, prompting Seymour Pierce to keep its 'hold' rating on the stock. The shares were 38 pence lower at 505.
   
Elsewhere, ITV fell back 1.6 at 104.3 after Goldman Sachs cut its rating to 'neutral' from 'buy', while lowering its price target on the broadcaster to 108 pence from 125, citing slowing advertising momentum.
   
Shares in Royal Dutch Shell fell back 1 pence at 1,976, amid vague reports the group is calling analysts asking them to trim their forecasts for the oil group. Its peer BG Group was down 8 at 843.

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Turning to the second line gainers, a broker upgrade provided the spur for Go-ahead Group, up 124 at 2,555 after Deutsche Bank upgraded the group to 'buy' from 'hold'.
   
And Trinity Mirror gained 12-1/2 at 409 after ABN Amro lifted its rating on the newspaper publisher to 'hold' from 'sell', saying the shares look cheap on a 2007 price earnings ratio of 9.8 times, supported by a 5.4 pct dividend yield.
   
Elsewhere, UK Coal was 23-1/2 higher at 528 after the group said it has agreed to supply about 6 mln tonnes of coal to electricity producer EON AG over the next five years to January 2012.
   
Ahead of earnings news, WH Smith gained 12-1/2 at 420 as investors expect the group to report a 25 pct increase in underlying pretax profit and could announce a share buyback programme when it publishes full-year results tomorrow.
   
On the downside, Burren Energy shares weakened, down 20 pence at 1,160 following yesterday's bid-inspired run-up, with investors opting to take profits and wait until a formal offer emerges.
    
Burren yesterday said it rejected a number of takeover approaches, including one from Italian oil and gas giant Eni SpA which valued the UK group at up to 1,100 pence a share.
   
And, finally Ladbrokes were 6 lower at 427 amid talk UBS were placing 16.7 mln shares in the gaming group at a price of 425 pence each, according to dealers.

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Paris shares close lower on profit-taking

The CAC-40 index ended 23.44 points or 0.40 pct lower, at 5,838.49. Twenty-two CAC-40 stocks ended down, 16 were up and two were unchanged. On the Matif, October CAC-40 futures were trading at 5,831.50.
   
French mobile telecoms operators closed higher after news that Iliad unit Free had lost its bid to acquire France's 4th 3G licence and take a position in the mobile market. Iliad closed 2.25 or 3.15 pct higher at 73.74.
   
Earlier today, France's telecommunications regulator ARCEP said it had rejected Free's request for a fourth 3G mobile telecom licence, saying it had not met the required financial conditions.
   
Traders and analysts said the news was positive for existing mobile operators as it removed the threat of potential competition from a new market entrant.
       
Bouygues closed up 1.57 or 2.52 pct at 63.97. Vivendi gained 0.47 or 1.57 pct to end at 30.48, while France Telecom ended the session unchanged at 23.14.
   
Elsewhere, EADS performed strongly, ending the session 0.35 or 1.56 pct higher at 22.80. Its Airbus unit announced a 3.5 bln usd deal with Wizz Air to buy 50 narrowbody aircraft, with an option on 25 more, while Tiger Airways confirmed an earlier letter of intent to buy 30 narrowbody aircraft, with a further 20 options. In addition, Airbus confirmed that it still has at least two active bids for each of the factories it is selling, after Germany's Voith pulled out of the race.
   
Fellow aerospace stock Safran ended the day 0.04 or 0.23 pct higher at 17.75, after hitting a two-month high in morning trade following the release of nine-month sales figures that were welcomed by analysts.
   
Capgemini was the CAC-40's strongest performer, ending the session 1.74 or 3.88 pct higher at 46.64 after news that CEO Paul Hermelin had confirmed full-year targets calmed fears over the group's sub-prime risks, and added to already positive sentiment sparked by M&A speculation in the sector.
       
On the downside, Carrefour was still suffering after yesterday's downgrade to 'underperform' from 'neutral' by Exane BNP Paribas. The stock led losses on the CAC-40, ending 1.21 or 2.45 pct lower at 48.21.
   
Renault suffered in afternoon trade on the back of rumours that it had issued a profit warning. The company said it had not issued any statement and added that it does not comment on market rumours. The stock came off earlier lows to close down 1.60 or 1.41 pct at 111.84.
   
One trader said the "bizarre" progression of the Renault stock since mid-September "is to do with Christine Lagarde's comments at the end of September about possible disposals from the government portfolio", adding that Renault is, in his opinion, a likely candidate for divestment.
   
French Finance Minister Christine Lagarde said at the end of last month that the government has identified potential disposals among its equity portfolio totaling up to 5 bln eur in 2008.
       
Renault's fellow auto stocks performed more strongly, with Michelin ending the session 0.16 or 0.16 pct higher at 98.55, while Peugeot closed 0.31 or 0.51 pct up at 61.26.

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German shares close higher in calm trading, led by TUI

The DAX ended 6.13 points or 0.08 pct higher at 7,986.57 after trading between between 7,955.93-8,009.34 today. The MDAX gained 25.00 points or 0.24 pct at 10,656.50 while the TecDAX was up 3.05 points or 0.30 pct at 1,006.45.  DAX futures were down 43.00 points or 0.53 pct at 8,042.50 while bund futures fell 0.11 or 0.10 pct to 112.38.
   
Leading bluechips higher, TUI shares added 0.81 eur, or 4.11 pct, at 20.54 as traders said they were continuing to hear rumours of the travel and shipping conglomerate possibly raising its guidance and as rumours persisted investor Guy Wyser-Pratte intends to raise his stake in the company. Henkel rose 1.08 eur, or 3.15 pct, to 35.34.
   
Deutsche Boerse gained 2.09 eur, or 2.00 pct, at 106.74, rebounding from a small dip yesterday as the German stock market operator's shares looked ready to continue their prolonged upward surge. Traders pointed to indications that it might replace ABN-Amro on the Eurostoxx 50 index.
   
MAN gained 2.13 eur, or 1.80 pct, at 120.67 on persistent rumours of a possible takeover from Investor AB, Scania or Volkswagen AG.
   
Lufthansa added 0.28 eur, or 1.34 pct, at 21.22 after the airline reported strong monthly figures for September that showed a 1 pct gain in passenger load factor to 80.1 pct on high demand for air travel in Europe. Passenger traffic, as measured by the number of booked seats multiplied by kilometres flown, surged 25.2 pct.
   
Shares in Hypo Real Estate were up 0.61 eur, or 1.41 pct, at 43.89 after the bank announced a reshuffle of several units as part of planned restructuring following the purchase of peer DEPFA.
   
Merck KgaA shares rose 0.47 eur, or 0.52 pct, at 90.21 after news that the company replaces the head of its liquid-crystals business Paul Breddels with Walter Galinat offset yesterday's downgrades from Citibank and WestLB as well as worries a comparative study of its Multiple-Sclerosis drug Rebif showed it has no more effect than Teva, a rival drug produced by Copaxone.
   
On the downside, Metro slid 1.54 eur, or 2.45 pct, to 61.29, while Deutsche Postbank shed 1.09 eur, or 2.00 pct, at 53.30.
   
ThyssenKrupp eased 0.53 eur, or 1.19 pct, at 44.12 after MDAX-listed peer Kloeckner & Co issued a profit warning Monday night.
   
Traders said losses were kept in check amid takeover speculation due to a report in the Financial Times in which the CEO of Korean steel specialist Posco said that he is keen on a sizeable merger in Europe or the US if the merger terms are right and it improves their competitive position.
   
BASF lost 0.82 eur, or 0.85 pct, to 95.26, while EON lost 1.03, or 0.80 pct to 127.68.  
   
Over on the MDAX, Wincor Nixdorf gained 3.39 eur, or 5.37 pct, at 62.53 as the index's top gainer.
   
Premiere, meanwhile, lost 1.70 eur, or 11.67 pct, at 12.87 after Deutsche Bank cut its rating to 'hold' from 'buy' and pegged its price target at 16.50 eur. The brokerage said there is an increased risk that the pay TV channel will have to overpay to show German football matches after it lost its exclusive rights to broadcast live Bundesliga games.
   
Adva gained 027 eur, or 4.59 pct, at 6.15 as the top advancer on the TecDAX. Epcos lost 0.34 eur, or 2.55 pct, at 12.99 at the other end.

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Amsterdam shares close higher, led by TomTom

The AEX closed 3.85 points or 0.70 pct higher at 554.57, after opening at 551.26 and trading in the range 549.35-557.03. Government bonds traded lower while the euro stood at 1.4154 usd versus 1.4099 usd late yesterday.
   
TomTom added 3.58 pct to 53.52 eur, boosted by an upgrade at ING, while Fortis put on 2.56 pct to 23.20 eur as the RBS-led consortium said that its bid for Dutch peer ABN Amro was "wholly unconditional". Jean Paul Votron, chief executive officer of Fortis, said the Belgo-Dutch bancassurer expects to put in "a lot of work" in integrating ABN Amro's Dutch retail banking business and asset management, which it will run following the acquisition.
   
Brewer Heineken added 1.95 pct 45.56 eur as brokerage Rabo Securities said the US beer sector consolidation will have little impact on the company in the short-term, although the brokerage said the long-term effect of SABMiller and Molson Coors blending their US operations is harder to predict.
   
Philips climbed 1.91 pct to 32.03 eur on news it will net 1.55 bln eur from the sale of 46.4 mln shares in its LG Philips LCD joint venture. Philips said the sale represents 13 pct of LG Philips LCD issued share capital and reduces its holding in the company to 19.9 pct.
   
ArcelorMittal gained 1.28 pct to 55.50 eur after saying it will rebuild an integrated steel plant in Liege due to stronger-than-anticipated demand, and is currently realising the investments required to refire the blast furnace at the site.
   
ABN Amro closed up 0.24 pct at 37.93 eur. Earlier, company CEO Rijkman Groenink said he is to resign during the yet-to-be-announced extraordinary general meeting of shareholders. Separately, Euronext said the stock will be removed from the AEX -- Euronext Amsterdam's bluechip index -- effective close of business today.
   
Unilever closed 1.56 pct higher at 22.08 eur. It was announced today that workers across all Unilever's facilities are set to strike for a period of 40 hours beginning at 10.00 pm this evening, Dutch labour FNV Bondgenoten said.
   
Oce led midcap leaders, up 2.69 pct at 15.67 eur amid positive comments from ABN Amro, which reiterated its 'buy' rating on the share.
   
ASML was one of a handful of bluechip decliners, off 1.55 pct at 22.19 eur, while Hagemeyer fell 1.06 pct to 4.74 eur. Dutch shareholder association VEB said it believes the 4.25 eur-per-share takeover bid by Sonepar is at least 1 eur too low.

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