UK/Euro Financial Market Daily Evening Briefing 11-07-2007

London shares close weaker but off lows; NY up; commodity stocks lower

Leading blue-chips closed weak but were recovering from lows as Wall Street remained higher with the commodity sector in the blue chips lower following a broker downgrade.
   
At close the FTSE 100 index was down 15.8 points at 6,614.1, while the FTSE 250 index was off 65.3 at 11,666.8. Earlier, the FTSE 100 had been as low as 6,574.2, and was in negative territory all morning.
   
Volume was average, with 2.81 bln shares having changed hands in 618,098 deals.
   
"It is a typical summer for the UK market with fears of the global property market going into melt down, offset by bid rumours for Whitbread and Unilever. We do not see a downward trend for the FTSE 100 but we expect it to continue to trade between 6,500 to 6,700 for the rest of the summer," said Jim Wood-Smith, head of research at Williams de Broe.
   
On Wall Street, stocks edged higher in early trade, coming off a sharp decline a day earlier, but refraining from big moves ahead of two major second-quarter earnings reports.
   
Investors shaken by earnings warnings earlier in the week appeared to be taking a cautious stance as they awaited profit reports from biotechnology company Genentech Inc and fast-food chain operator Yum Brands Inc. Genentech and Yum, which was recently upgraded by a UBS analyst, are expected to release their results after the market closes.
   
By London's close the Dow Jones industrial average was up 56.4 points at 13,558.3. Broader indices werer also higher. The Standard & Poor's 500 index rose 5.45 points to 1,515.57, and the Nasdaq composite index gained 6.75 points to 2,645.54.
   
Higher oil prices are also still in focus for many traders. Brent for August delivery, although it has slipped back slightly, is trading at around 76 usd a barrel, still relatively close to its record high.
   
On the macro front, there are few key data releases later in the session, with speeches by Philadelphia Federal Reserve Bank president Charles Plosser and European Central Bank president Jean-Claude Trichet likely to provide only a minor distraction for traders.
   
Turning to the UK blue chips, higher oil prices failed to translate into gains for the oil majors, partly due to downgrades by Goldman Sachs. Royal Dutch Shell was off 29 at 2,107 after being downgraded to 'sell' from 'neutral', while BP eased 6-1/2 to 605 after the same broker cut its rating to 'neutral' from 'buy'.
   
Elsewhere, cruise company Carnival, was a victim of higher energy prices, down 17 pence at 2,258. The decline came despite Collins Stewart reiterating its 'buy' stance on Carnival shares, after saying conversations with the company gave no explanation for recent share price underperformance.
   
Oil also continued to affect British Airways, off 7-1/4 at 418-1/2, while its mid cap peer easyJet was 12 lower at 501.

Learn two very profitable UK & US swing trading techniques that get you in early for maximum profits. From a professional momentum investor, Alan Rich.

Click here to register and also claim your free downloads.

Shares in home improvement retailer Kingfisher were off 1 to 219-1/2 still impacted by yesterday's profit warning from US peer Home Depot, and with Credit Suisse cutting estimates while maintaining its 'neutral' rating for the DIY retailer
   
On the blue chip upside, Whitbread was boosted by rumours the leisure group is to be taken over at 2,400-2,500 pence a share by US real estate group Starwood Capital. The shares were 128 higher at 1,946, making it the best performer in the FTSE 100.
   
According to reports in the Daily Telegraph this morning, a sizeable trade was placed in yesterday's closing auction at 1,835, even though the shares had closed during normal trading hours at 1,818.
   
UK satellite giant British Sky Broadcasting Group traded 28 higher at 700 as investors cheered the broadcast group's "strong" fourth-quarter update, in particular falling 'churn' rates.
   
BSkyB reported weaker-than-expected growth in broadband users in its fiscal fourth quarter, as it flagged a surprise fall in the number of people cancelling their TV subscriptions.
   
Broker comment also lifted AstraZeneca, up 64 at 2,695, after Morgan Stanley raised its rating to 'overweight' from 'equal-weight' and reiterated its target of 3,150 pence.
   
The broker said it believes the market is currently underestimating the short-term and long-term cash flow the company is set to generate as well as earnings.
   
M&A buzz continued to surround Unilever, up 36 at 1,683, precipitated by further sector consolidation yesterday with rumours of possible interest from Colgate-Palmolive doing the rounds among city dealing rooms.
   
BG Group added 21 to 842 after Goldman Sachs upgraded its stance to 'buy' from 'sell' with a new target of 910 pence from 680. Goldman said it believes BG is the stand-out, premium delivery company within the European integrated oil sector, adding that it does not face the same decline rate and reserve booking problems seen by the remainder of the sector.
   
WM Morrison ticked up 8-1/2 to 313-3/4 after being upgraded to 'buy' from 'hold' with an increased target of 363 pence at ABN Amro.
   
On the second tier, M&A talk helped shares in Pennon Group gain 14 at 623-1/2 after rumours Aguas de Barcelona was bidding for the group.
   
Elsewhere, Luminar was up 10 at 723 after KBC Peel Hunt reiterated its 'buy' stance on the group and target of 900 pence.

..in St Lucia's UNESCO's World Heritage Site.  Superb buy to let opportunity in a breathtaking location with immediate income and dramatic capital appreciation.  For more information click here.

A trading update helped construction company Kier Group rise 14 to 2,036-1/2 after saying it expects to report full-year profits ahead of current market expectations and "substantially more" than last year's result.
   
The contracting, services, housebuilding and property group said cash balances during the year have been strong, ending the financial year at more than 145 mln stg net of borrowings, against 111 mln stg last time.
   
Elsewhere, bus group Arriva, a major gainer yesterday after a franchise win, rose a further 13 to 783 after JP Morgan upgraded the firm to 'buy' from 'sell', but cut National Express, off 28 to 1,080, to 'sell' from 'neutral'.
   
The broker said National Express is currently the most expensive stock in the bus and rail subsector, while Arriva has been an underperformer in the year to date.
   
Ultra Electronics ticked up 11 to 1,109-1/2 after Credit Suisse raised its rating to 'neutral' from 'underperform', believing the company is a potential bid target.
   
On the midcap downside, St. James's Place fell back 5-1/2 at 418-3/4 after Goldman Sachs initiated coverage on the group with a 'neutral' rating, and said it sees more attractive returns elsewhere in the sector.
   
Oil producer Tullow Oil fell 4 to 522-3/4 after reducing guidance for the year to 72,000-75,000 boepd from 80,000 boepd due to delays in its UK drilling projects.
   
Luxury goods company Burberry Group was 9-1/2 lower at 665-3/4 despite an update in which it said total revenues rose 30 pct in the first quarter, with retail sales rising by 25 pct driven by new and existing stores.
   
And finally, Bovis Homes Group continued its downward trend 26-1/2 lower at 805 after the group released a downbeat trading statement on Monday.

UK Diary of Events

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

£105,000 profit! spread betting UK shares with the Intelli-Trend system!
Click Here to find out more.

Paris shares close lower on Wall St jitters, but M&A talk limits losses

The CAC-40 index finished down 18.13 points or 0.30 pct at 6,001.09. Turnover for the day was 7.5 bln eur. Among CAC-40 stocks, 9 closed higher and 31 closed lower. On the Matif, July CAC-40 futures were trading at 6,006 points.
   
The CAC-40 fell as low as 5,944.88 points during the day, as the market reacted to a sharp overnight fall on Wall Street, where investors were rattled by profit warnings from companies including Home Depot and the move by rating agencies to downgrade hundreds of mortgage-backed bonds.
   
But takeover speculation spread rapidly in the afternoon, helping push the CAC back above the 6,000 point barrier.
   
Accor -- up 3.65 eur or 5.27 pct at 72.96 -- and Vallourec -- up 11.50 or 5.22 pct at 232.00 -- starred in afternoon trading as rumours circulated about takeover bids for the companies.
   
Dealers reported talk that private equity firm KKR could be preparing an 80 eur a share bid for Accor. While the rumour was vague, market-watchers viewed it as plausible given that Accor is attractively valued and does not have a locked capital.
   
Blackstone's takeover deal with Hilton Hotels last week has sparked general speculation about the hotel sector, while Accor has also attracted investor attention after Colony Capital became the French group's largest shareholder by raising its stake to 10.3 pct.
   
Vallourec, meanwhile, soared amid renewed speculation that ArcelorMittal is considering a takeover, with a 280 eur per share price being cited. Steel maker ArcelorMittal is one of several companies -- also including Gazprom -- recently put forward as possible bidders for tube maker Vallourec. The rumour helped push ArcelorMittal up 0.60 or 1.26 pct to 48.31 at the close, coming off an earlier drop.
   
Air Liquide and Vinci were the other significant bluechip risers, also benefitting from M&A talk. Air Liquide, up 2.15 or 2.22 pct at 98.99, was lifted like yesterday by speculation a private equity group could bid for the company.
   
Vinci added 1.04 or 1.91 pct to 55.48 as investors continued to react to yesterday's news that businessman Romain Zaleski's investment vehicle, Carlo Tassara, has built up a stake of more than 2 pct. Daily La Tribune had speculated that Zaleski could work with fellow Vinci shareholder Francois Pinault.
   
Carrefour was one of the few other bluechips in positive territory -- up 0.48 or 0.90 pct at 53.89 -- as the market welcomed better-than-expected second-quarter sales figures, which prompted an upgrade to 'hold' from 'sell' at Citigroup.
   
On the downside, financials suffered from worries about the housing market, with Axa down 0.38 or 1.19 pct at 31.56, Dexia off 0.26 or 1.12 pct at 23.00, Societe Generale 1.28 or 0.95 pct lower at 133.73, Credit Agricole shedding 0.27 or 0.92 pct to 29.11 and BNP Paribas dropping 0.79 or 0.91 pct to 85.80.
   
Property company Unibail-Rodamco was similarly penalised by housing worries, giving up 2.00 or 1.07 pct to 185.30. The biggest bluechip faller was Alstom, down 2.38 or 1.87 pct at 125.03 ahead of its second-quarter sales report tomorrow.
   
Schneider Electric ended down 0.16 or 0.16 pct at 100.60. The stock had gained around 1 pct shortly after after an EU court ruled it should be compensated because the European Commission illegally blocked its merger with Legrand.
   
Outside the CAC-40, ADP fell 1.28 or 1.44 pct to 87.43 after France's Council of State scrapped the increase in tariffs that the airport operator charged airlines between May 2006 and March 2007, on the grounds that it did not supply adequate financial information to the regulatory bodies.

LOW-RISK, AWARD-WINNING, INVESTMENT STRATEGY
 
£2,000 to over £80,000 Tax-Free

Click Here

German shares close down, off lows as Wall St gains dampen euro woes

The DAX closed 66.22 points or 0.83 pct lower at 7,898.54 points, having traded between 7,799.93 and 7,922.23. The MDAX was 91.79 points or 0.82 pct lower at 11,163.11 points, while the TecDAX lost 10.07 points or 1.04 pct to 956.71 points. DAX futures were up 35.50 or 0.45 pct at 7,963.50, while bund futures slipped 0.17 or 0.15 pct to 110.65.
   
Auto stocks were a weak feature on concern the strong euro could hurt sales abroad. DaimlerChrysler fell 1.06 eur or 1.55 pct to 67.36 eur, but off intraday lows as vague rumours that the sale of the automaker's US Chrysler unit might not go through evaporated.
   
BMW fell 0.61 eur or 1.27 pct to 47.58 eur and Volkswagen slipped 1.30 eur or 1.07 pct to 120.74 eur.
   
Analyst Robert Heberger from Merck Finch said that while German manufacturers protect themselves from changes in the exchange rate through the help of derivatives, these are only temporary stopgaps as the duration of the derivatives is limited.
   
RWE and EON outperformed the market as traders said investors may be turning to utilities as "safe ports in the storm." RWE lost 0.38 eur or 0.48 pct to 78.37 eur, while EON was 0.47 eur or 0.39 pct at 120.94 eur.
   
Adidas also outpaced the market, down 0.32 eur or 0.69 pct at 46.15 eur after CEO Herbert Hainer told Die Welt that soccer's European Championship -- to be held in Austria and Switzerland -- and the Olympic Games in Beijing will help make 2008 another "record year."
   
Bucking today's negative trend, Hypo Real Estate rose 1.30 eur or 2.79 pct to 47.95 eur, as one of only two gainers, after the commercial real estate financing specialist surprisingly raised its pretax profit outlook for 2007 due to an "exceptionally high" amount of new business it saw in the second quarter.
   
Bayer gained 0.78 eur or 1.43 pct at 55.35 eur after its shares were reinstated with a 'buy' rating and a price target of 69 eur per share at Merrill Lynch.
   
The brokerage said that a combination of fundamental value, margin out-performance, pipeline catalysts and potential divestments should continue to drive the share price.
   
Over on the MDAX, IKB Deutsche Industriebank fell 0.77 eur or 2.86 pct to 26.19 eur.
   
TexDAX-listed Q-Cells slumped 2.38 eur or 3.44 pct to 66.75 eur at the bottom of the index, while Bechtle was up 1.06 eur or 3.94 pct at 27.96 eur, reversing several days of losses.

ADVFN Poker will match your first deposit up to $500. All you have to do is open an account with us, deposit money and play in our buzzing cash games or exciting tournaments. We will credit your bonus automatically! Play Now

Amsterdam shares close lower, led down by Vedior on profit taking

The AEX closed 1.39 points or 0.25 pct lower at 553.56, after trading in the range 549.34-554.48. Government bonds traded higher while the euro stood at 1.3756 usd versus 1.3718 usd late yesterday.
   
Vedior fell 3.66 pct to 21.84 eur, with one Amsterdam-based analyst saying the shares were down on profit-taking and the market's general bearish sentiment. Fellow staffer Randstad fell 1.21 pct to 61.84 eur, while USG People was 1.55 pct off at 34.99 eur.
   
Unibail-Rodamco was off 1.04 pct at 185.25 eur. The company said today that it now owns 95.74 pct of all Rodamco Europe shares and will soon initiate a squeeze-out procedure for all remaining shares, resulting in a delisting from three Euronext exchanges and Frankfurt Stock Exchange.
   
Among financials, Aegon was off 2.07 pct at 14.16, while Fortis fell 0.74 pct to 30.70 eur. Earlier, the Belgo-Dutch bancassurer said it was planning a 2 bln eur exchangeable notes issue to partially fund its bid, as part of a Royal Bank of Scotland-led consortium, for ABN Amro.
   
ING was off 0.68 pct at 32.21 eur, while ABN Amro rose 0.44 pct to 34.61. Earlier, the Dutch shareholders' association, the VEB, said it is asking Amsterdam's Enterprise Court to appoint independent supervisors to the ABN Amro board on grounds that shareholders have lost faith in management.
   
On the midcap, Fugro fell 0.54 pct to 49.77 eur. The company said earlier it has won a 16.9 mln eur airborne survey project contract in Nigeria, which was welcomed by analysts.
   
Unilever led blue chip gainers, gaining 2.68 pct to 24.12 eur, on ongoing speculation about further consolidation in the food sector, following Danone's 12.3 bln eur takeover offer for Dutch peer Numico.
   
ArcelorMittal added 1.26 pct to 48.32 eur. Several London-based dealers said they were hearing that ArcelorMittal was mulling a 280-eur-per-share bid for Vallourec, the French maker of steel pipes.
   
Corio led midcap gainers, up 0.50 pct at 56.55 eur, following an upgrade to 'buy' from 'hold' at ABN Amro and on the back of yesterday's announcement that it had bought a shopping centre in Turkey for 44 mln eur.

Closing Forex Rates

ADVFN Services