UK/Euro Financial Market Daily Evening Briefing 10-12-2007

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London shares close higher off lows; NY remains firmer; Yell Group gains

At close, the FTSE 100 was 10.5 points higher at 6,565.4 recovering from a low of 6,523.7 and off a high of 6,596.7, while the FTSE 250 index was down 2.6 at 10,630.3.

"The FTSE has been spending the day wobbling either side of zero in a quiet day. All eyes are on the Federal Reserve interest rate meeting tomorrow with a rate cut already expected, the only question is whether it will be a quarter or a half," said Jim Wood-Smith, head of research at Williams de Broe.

In the US, Wall Street rose in early trading as expectations for an interest rate cut from the Federal Reserve helped offset concerns about another round of subprime mortgage-related losses.

At London's close, the Dow Jones industrial average was ahead 95.4 points at 13,720.5, while the Standard & Poor's 500 index was up 11.33 points to 1,515.96 and the Nasdaq composite index gained 16.1 points at 2,722.26.

Back in London, Yell Group was the top riser, moving 23-1/2 higher at 419-3/4 after Friday's reassuring investor day, with Merrill Lynch reiterating its 'buy' stance and 520 pence price target.

Elsewhere, Lloyds TSB recovered from earlier losses, gaining 16-1/2 at 504-1/2. Earlier, the UK's fifth-biggest bank said it is on course to meet analysts' expectations for a 12 pct increase in full-year profit, and confirmed that the impact of the credit crunch on its results will be "relatively limited".

Deutsche Bank reiterated its 'buy' stance on the group. Its peer Alliance & Leicester was up 18-1/2 at 713-1/2 and HBOS was 12-1/2 higher 829. The banking sector dropped this morning after UBS issued a profit warning.

Meanwhile, UK housebuilders were in favour following recent weakness ahead of tomorrow's US rate decision, with analysis forecasting a further 25 basis point cut to help prevent a US housing downturn.

Persimmon added 36-1/2 to 830-1/2, Taylor Wimpey rose 9 to 223-1/2 and Barratt Developments was 10-3/4 higher to 477-1/2. The latter two are expected to disappear from the senior index as part of the quarterly reshuffle later this week. And retailer Kingfisher ticked up 6 to 165.2 after being initiated as a 'buy' at ING.

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Also in broker generated news, Compass Group gained a 10-1/2 at 326-1/4 as Lehman Brothers initiated the group with an 'overweight' stance. The broker said the food services group is one of its top picks in the leisure sector for 2008 due to its defensive characteristics, strong new management team and strong upside potential.

Insurer Aviva gained 10 at 696 as JP Morgan put the group in its top picks for 2008, its peer Prudential was 20 higher at 716-1/2. On the downside, oil stocks were hit after there was a dip in oil prices: Royal Dutch Shell lost 27 at 1,969, BP fell 3-1/2 at 616 and Tullow Oil gave away 4-1/2 at 655-1/2.

Earlier, oil edged lower as the dollar strengthened slightly against the euro and as worries over the demand outlook were renewed following falls in Asian and European equity markets. And, Scottish & Newcastle fell back 9 at 739-1/2 amid fears that the consortium stalking the UK brewer may walk away if its board refuses to enter into talks, and after Dresdner Kleinwort cut its rating to 'hold'.

Turning to the midcaps, Alfred McAlpine added 34 to 525 after its board recommended Carillion's 572 mln stg cash-and-shares offer, following an approach it made in October. Carillion shares lost 13-1/2 to 349-3/4.

Meanwhile, Admiral Group gained 49 at 1,086 as it announced it would increase 2008 UK motor premium retention to 27.5 pct compared to 22.5 pct. UK Coal also ticked up, 19-1/2 higher at 416-1/2, after the group announced it had won a significant new contract with EDF, and Landsbanki reiterating its 'buy' stance and target of 670 pence.

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Also on the upside, Ashtead gained 4-1/2 at 83 ahead of first half results tomorrow. The group is expected to report a 31 pct increase in first-half pretax profit tomorrow with analysts focusing on current trading and any news on the company's exposure to the US construction market.

And, easyJet rose 23 to 585-1/2 following a broker upgrade by UBS to 'buy' from 'neutral'. On the 250 downside, engineering group FKI plunged 13 to 64-3/4 after warning its Logistex unit's operating profit would be hit as a result of lower sales.

In broker generated news, BlueBay Asset Management fell back 20 to 358 as Citigroup downgraded to 'hold' from 'buy' on valuation grounds.

UK Diary of Events;

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UK Small Cap Reports:

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Paris shares close up, tracking Wall St; Lafarge leaps on Orascom buy

The CAC-40 index ended up 32.17 points or 0.56 pct at 5,750.92. 30 CAC-40 stocks closed up and 10 were lower. On the Matif, December CAC-40 futures were trading at 5,790.92. The euro was quoted at 1.4682 usd compared to 1.4652 usd late Friday.

French cement manufacturer Lafarge led the market higher, surging 14.08 or 13.08 pct at 121.75 over the session, after unveiling an 8.8 bln eur deal to acquire Orascom Cement. The group said it now expects earnings per share to reach 15 eur in 2010, almost twice the figure for 2006.

Analysts and dealers welcomed the news, with Natixis Securities saying that expected synergies of 150 mln eur in 2010 are three times higher than the industry standard. The news also lifted sentiment throughout the sector, driving gains of 5.34 or 4.52 pct for Ciments Francais at 123.59.

Saint-Gobain added 1.56 or 2.28 pct at 70.05. Among other focuses of M&A talk, Air France-KLM jumped 1.06 or 4.29 pct at 25.79 on continuing hopes it will take a stake in Italian carrier Alitalia. The auto sector was also the focus of M&A talk, with Renault rising 4.62 or 4.67 pct at 103.63, after Friday night's news it is taking a 25 pct stake in Russia's Avtovaz, maker of Lada cars.

Elsewhere in the sector, Peugeot climbed 2.69 or 5.01 pct at 103.63, after Societe Generale Securities upgraded the group to 'buy' from 'hold'. Among utilities, Suez fell 0.66 or 1.41 pct at 46.03, while Veolia Environnement shed 1.34 or 2.04 pct at 64.31.

In the food sector, Danone fell 0.44 or 0.72 pct at 60.75, also hit by news it has lost the latest round in its legal battle with its Chinese joint venture partner Hangzhou Wahaha Group.

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German shares close higher led by financial, car stocks

The DAX was up 39.29 points or 0.49 pct at 8,033.36 after trading between 7,955.19 and 8,057.69 today. The MDAX added 93.33 points or 0.94 pct to 10,050.30 while the TecDAX was 8.25 points or 0.84 pct higher at 992.84.

DAX futures were up 49.50 points or 0.62 pct at 8,049.50, while bund futures were down 0.66 or 0.58 pct at 113.54. The euro was trading at 1.4716 usd, against 1.4709 in late afternoon trade in London.

Financial stocks derived support from bargain hunting by investors who are seeking some good buys after prices have fallen to such low levels, traders said. The blue chip board DAX was also supported by technical factors after it breached Friday's intraday high at 8,010 points.

Commerzbank was the top performer among financial stocks after an article in Euro am Sonntag said the bank is looking to raise its return on equity in its private banking operations to 23 pct from the current 15 pct by 2010.

Commerzbank closed up 0.57 eur or 2.07 pct at 28.07, Deutsche Postbank added 0.87 to 59.71, Deutsche Bank finished 1.24 higher at 91.39 while Hypo Real Estate added 0.37 to 38.52. Adidas was the biggest gainer, rising 1.00 or 2.19 pct to 46.71.

Car stocks were also largely higher, with BMW up 0.83 at 41.85, Daimler up 1.04 at 70.25 but Volkswagen fell 0.87 or 0.55 pct to 156.12. Automotive supplier Continental AG was up 0.18 or 0.20 pct at 92.10. Lufthansa, up 0.25 at 18.68, and TUI -- up 0.19 or 0.98 pct at 19.60 -- were helped by easing oil prices.

On the downside, Linde led with a loss of 2.17 or 2.37 pct at 89.50. Utilities were weaker after a report in the Frankfurter Allgemeine Zeitung said the country's four largest utilities may be forced by the German Federal Cartel Office to reduce their stakes in suppliers to improve competition.

EON fell 1.03 or 0.72 pct to 142.70 while RWE fell 0.71 or 0.73 pct to 97.19. On the MDAX, GAGFAH led the way up among gainers, adding 0.64 or 5.31 pct to 12.60 while Symrise fell 0.59 or 3.01 pct to 18.98. Premiere closed higher 0.46 or 3.81 pct at 12.54. Earlier in the day it was lifted by speculations -- which faded towards close of trading -- that French media giant Vivendi SA is preparing a bid for the group.

ADVA, up 0.29 or 6.71 pct at 4.61, was the biggest gainer while Carl-Zeiss lost 0.60 or 4.20 pct to 13.70.
Morphosys gained 1.23 or 2.42 pct to 52.00. It said it has taken steps to broaden the scope of anagreement with Japanese partner Genefrontier to work on therapeutic target sourcing.

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Amsterdam shares closes up on positive Wall Street; Philips shines

The AEX closed near highs, up 3.25 points or 0.63 pct at 516.84, after opening at 512.00 and trading in a range of 511.98-518.24. Government bonds traded lower, while the euro stood at 1.4717 usd, versus 1.4651 usd late on Friday.

Philips was the strongest AEX gainer and recorded the most volume, rising 3.58 pct to 29.49 eur after two hedge fund shareholders teamed up to provide the company with feedback on Philips's performance and structure.

Publishers did well, with Wolters Kluwer adding 2.70 pct at 22.44 and Reed Elsevier strengthening 1.09 pct to 13.04. European property developer Unibail-Rodamco put on 1.80 pct to 161.0 after the company said it will launch a squeeze-out offer for the remaining shares in Rodamco Europe that it does not already own by the end of this week.

Randstad closed the day up 1.53 pct to 29.25 while Fortis recorded the highest trading volume after Philips, ending the day 1.52 pct higher to 19.34. Banking stocks in general closed strong after taking early losses following a 10 bln usd writedown at UBS over sub-prime mortgages. ING rose 1.33 pct at 27.43 and Aegon gained 0.56 pct at 12.48.

Corporate Express gained 1.17 pct at 6.03, amid reports it has come under investigation by the Dutch markets watchdog AFM for being late in reporting that Alliance Bernstein had taken an almost 10 pct stake in the company.

ArcelorMittal went 1.06 pct higher to 50.68 after the company said it will raise its prices for long steel products in the countries in the Middle East, Mediterranean and Black Sea regions from Jan 1.

On the midcap, Ordina gained 4.70 pct to 13.15 and BAM rose 3.76 pct to 16.28 after the company said a joint venture between its unit BAM PPP and investor Dutch Infrastructure Fund DIF is now established and has acquired four UK projects from BAM PPP.

VastNed Retail advanced 1.35 pct at 67.79 as it said it has received non-binding offers of interest for a takeover of the company, without naming the parties that have shown an interest. Among AEX decliners, SBM Offshore closed down 3.60 pct at 22.78 as its modest 2008 outlook outweighed news of two possible contract wins in its turnkey division, with some analysts calling the outlook a profit warning.

Shares in TNT fell 1.06 pct at 28.94 after a downgrade at Bear Sterns and amid reports Axel Springer is mulling winding up its PIN operations amid the potential imposition of a minimum loan among postal workers in Germany.

Royal Dutch Shell slid 0.68 pct to 27.72 while midcapper Fugro lost 1.74 pct to 53.05 after ordering two new ships for its fleet Van der Moolen was off 1.19 pct at 3.31.

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