UK/Euro Financial Market Daily Evening Briefing 11-09-2007

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London shares close higher; investors draw comfort from Bernanke speech

UK blue chips closed sharply higher Tuesday as a level of confidence returned to the UK markets following comments from Fed boss Ben Bernanke who left hopes of a rate cut next week intact.
  
By the close, the FTSE 100 index was up 146.6 points at 6,280.7, near the session high of 6,280.7. The FTSE 250 ended up 237.5 points at 11,212.3.
   
Volume was moderate, with 2.46 bln shares having changed hands in 490,124 deals.
   
Across the pond, US markets rallied today even though Bernanke did not offer the suggestion traders had hoped for that the Fed will cut rates at its meeting next week, and avoided the topics of unruly markets and weak credit.
   
By the London close the DJIA was up 98.3 points at 13,227.6, with the Nasdaq up 17.54 at 2576.5 and the S&P 500 10.33 better at 1462.2.
   
As it was, US investors decided that what was not said was more significant than what was actually said and took the optimistic view that the glass was half full, rather than half empty.
   
Instead, Bernanke talked about the need for countries around the globe to co-operate toward economic stability. He said "global imbalances" occur when countries run up trade deficits or produce big trade surpluses.
   
In London, financial and mining stocks dominated the leader board amid some hedge-fund  buying interest as confidence was restored to the UK arena following  recent uncertainty.
   
By the close, Barclays topped the gainers, up 27-1/2 at 607-1/2 benefiting from yesterday's positive trading news with other financial issues finding buying interest from recent weakness due to credit liquidity issues.

Peers Northern Rock added 26 to 672, Schroders added 48 to 1168, inter-dealer broker Icap gained 16-3/4 to 487-1/4 and fund manager Man Group up 16 at 486.

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Elsewhere, Tesco closed up 18-1/4 at 433-1/2 after Lehman Bros upgraded the supermarket operator to 'over-weight' from 'equal-weight' saying it believes the company's international  business will start to thrive.
   
In earnings news, Next took on 79 at 1,940 after reporting a better than expected 10.8 pct increase in first half pretax profit, with improved margins and further cost-cutting offsetting a fall in underlying retail sales, sending its shares over 3 pct higher.
   
The Leicester-based group said it is on track to achieve  internal full-year profit forecasts, despite being cautious on the outlook for the UK consumer, given that the full effect of five interest rate rises in the last 12 months has not yet filtered through to its customers.
   
For the six months to end-July 2007, Next made a pretax profit of 198.2 mln stg. This compares to analyst forecasts of 170-190 mln stg, with a consensus of 183 mln stg, and is up from 178.9 mln stg last time.
   
Also lending support were the miners, against a background of stronger  commodity prices, with Antofagasta up 18-1/2 pence at 694, Rio Tinto up 139 pence at 3,684, BHP Billiton 60 pence firmer at 1,471, Vedanta Resources up 57 pence at 1,867, and Anglo American 108 pence ahead at 2,827.
   
On the downside and among only two fallers today, DSG International dipped 0.3 to 146.9 after Morgan Stanley has cut its rating to 'underweight' from 'equal-weight' citing a need for "radical surgery" in order for it to return to long-term health.
    
Turning to the second line, JJB Sports was a major FTSE 250 casualty, down 28.5 pence or more than 14 pct, at 172.25 in reaction to the company's warning it is likely to miss forecasts by more than 3 mln stg due to tough comparables,  prompting Dresdner Kleinwort to downgrade the stock to 'reduce' from 'hold'.
   
Elsewhere, a broker downgrade took 10.25 from Cobham, finishing at 184.25 while profit taking following in line H1 results from Savills saw its shares close 21 pence lower at 439.

UK Diary of Events

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UK Small Cap Report

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Milan shares close higher, led by Finmeccanica

The Mibtel index was up 1.11 pct to 30,392 points and the S&P/Mib rose 1.16 pct to 38,854. Volume traded was an estimated 5.355 bln eur. Brokers said the US sub-prime credit worries subsided today. One broker said the Jewish religious holiday could depress volumes later this week.
   
Finmeccanica rose 3.78 pct to 21.27 after the Turkish government announced completion of contract talks with Finmeccanica on the helicopter order after the Italian company was selected in March. One broker said Finmeccanica is also benefiting from its defensive characteristics as a stock.
   
STMicro rose 1.85 pct to 12.74. Credit Suisse said it is positive on the stock after Intel upped its third quarter guidance.
   
Utilities continue to be positive on prospects for lower interest rates because of sub-prime problems and forecasts for lower economic growth.
   
Enel gained 0.83 pct to 7.68, also benefiting from an ABN 'buy' recommendation, up from 'hold', with a 9.25 eur target.
   
Snam RG lost 1.29 pct to 4.44 and Terna added 0.53 pct to 2.5775.
   
Eni was up 1.09 pct to 25.14. During the afternoon, the company said conditions are in place to negotiate a settlement of the dispute with the Kazakh government over operating the Kashagan field.
   
One broker said Kazakh officials continue to make reported negative comments on prospects for the talks, adding he sees these comments as part of the negotiating process with Eni.
   
Saipem added 3.20 pct to 27.70. Sector peer Tenaris rose 2.30 pct to 16.30.
   
Banks remain in focus on worries over sub-prime and amid a rash of results from the sector. Intesa Sanpaolo was up 1.08 pct to 5.24 after its results. Brokers said these were in line with expectations.
   
BMPS lost 0.44 pct to 4.4075 after yesterday's results. Credit Suisse cut its price target to 5.10 eur, from 5.35, saying it preferred UBI Banca gained 1.12 pct to 18.35.
   
Banco Popolare lost 0.11 pct to 16.49 after one of its units made a heavy write-down on its Banca Italease stake. Banco Popolare, which holds a larger stake in Italease, is seen making a limited write-down.
   
Italease eased 0.08 pct to 14.52. Mediolanum gained 2.19 pct to 5.19 after first half results.
   
Cements remained volatile. Buzzi Unicem gained 2.48 pct to 19.60. Autogrill rose 1.85 pct to 14.83. One broker said the results were "good" but not enough to warrant earnings upgrades by analysts. Campari fell 3.34 pct to 7.665 after results.

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Paris shares close higher as Wall St climbs sharply ahead of Fed speech

The CAC-40 index closed 92.51 points or 1.72 pct higher at 5,478.94. Two CAC-40 stocks closed lower and 37 were higher, while one was unchanged. The euro was at 1.3840 compared with 1.3786 this morning.
   
"The three leading French actors of the power and civil engineering sector are going to try to create a major player in a sector that will still have a clear outlook on its mid-term development," one Paris-based analyst said.
   
Alstom led gainers on the CAC-40, closing up 8.27 or 6.47 pct at 136.06 after a report in French daily newspaper Les Echos said the government has asked HSBC and McKinsey to examine possible merger opportunities for nuclear engineering firm Areva.
   
The most likely scenario, the paper reported, is a tie-up between Areva, Alstom and Alstom's main shareholder Bouygues. Bouygues ended up 1.88 or 3.41 pct at 57.05.
   
The banking sector saw a cautious rebound, with Societe Generale shares ending the day 1.88 or 1.67 pct higher at 114.76 after an investor day calmed fears of an imminent profit warning. Credit Agricole ended up 0.63 or 2.41 pct at 26.76.

Greece's Emporiki Bank said this morning that its parent group Credit Agricole had raised its stake to over 72 pct. BNP Paribas was also up 1.16 or 1.60 pct at 73.52.
   
Elsewhere on the CAC-40, Renault ended up 3.43 or 3.84 pct at 92.80. The company's chief executive outlined plans for capturing market share in China, India and Brazil at the IAA car show in Frankfurt.    
   
Accor ended the day up 1.54 or 2.57 pct at 61.42. Morgan Stanley reiterated its 'overweight' rating on the hotel group and said its investor day on October 22 should provide a catalyst to boost the stock further.
   
ArcelorMittal closed 1.51 or 3.35 pct higher at 46.64. The company told investors it aims to increase shipments by more than 20 pct between 2006 and 2012 to a total of 131 mln tonnes, largely thanks to organic growth in its low-cost operations in developing markets.
   
Retail group PPR closed up 2.49 or 1.98 pct at 128.28. Its mail order unit Redcats Group agreed to acquire US retailer United Retail Group.

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German shares close higher on Wall St, IAA car show; Merck leads advance

The DAX closed 82.46 points or 1.12 pct higher at 7,457.90, having traded in the 7,409.25-7,481.98 band. The MDAX rose 178.75 points or 1.81 pct to 10,029.30, while the TecDAX added 14.04 points or 1.56 pct to 914.28 points.
   
Merck KGaA led blue-chips higher, adding 5.44 eur or 5.90 pct to 97.70 eur after after its Erbitux cancer drug was shown to prolong the lives of people with a difficult-to-treat form of lung cancer, in a study in the last of three stages needed for regulatory approval.
   
Deutsche Boerse rose 2.91 eur or 3.83 pct to 78.81 eur on speculation the monthly figures for its clearing house unit Clearstream due out today may be quite strong.
   
Continental AG gained 2.10 eur or 2.38 pct to 90.32 eur. The stock benefited from positive news from the IAA car show, where among others peer Bosch said it still sees its full-year sales advancing 5 pct to 46 bln eur.
   
Also, Siemens VDO, an automotive electronics unit Continental recently acquired from Siemens for 11.4 bln eur, earlier today cancelled a planned press conference ahead of a press briefing by Continental scheduled for tomorrow.
   
BMW rose 0.85 eur or 1.99 pct to 43.61 eur as the automaker which benefited most from news coming from the IAA car show.
   
Speaking at the show, BMW chief executive Norbert Reithofer said he was very confident that third quarter business development will be in line with the company's full-year goals and added that he is "very positive" about the company's sales growth this month.
   
MAN advanced 1.30 eur or 1.31 pct to 100.51 eur on news that the heavy truck manufacturer said it is set to transfer its bus operations from Salzgitter to Poland.
       
DaimlerChrysler, also gaining on news coming from the IAA, rose 0.64 eur or 1.00 pct to 64.52 eur after chief executive Dieter Zetsche said the prospects for the automaker increasing dividends in the future are "very good".
   
Shares in Porsche AG, which are not listed on any major indices, rose 2.45 pct to 1,277.01 on the back of strong fiscal year unit sales released today, and after the automaker said that it will consider increasing its 31 pct stake in peer Volkwagen for which it has already secured a large number of options.
   
Back on the DAX index, Volkswagen closed unchanged at 150.00 eur. ThyssenKrupp added 0.35 eur or 0.88 pct to 40.14 eur after the Financial Times Deutschland reported that the steel giant is considering a sale of its steering systems unit Presta, and has started sounding out potential buyers.
   
Bucking today's positive trend, Deutsche Post slipped 0.04 eur or 0.19 pct to 20.88 eur, as the only declining stock on the DAX 30 index.
   
Infineon was off earlier highs, closing unchanged at 12.05 eur. The stock earlier today gained as traders said they were benefiting from higher valuations after US peer Intel Corp, the world's largest semiconductor company, boosted its third-quarter sales forecast on Monday amid stronger-than-expected demand for its microprocessors.
   
Over on the MDAX, Krones jumped 3.13 eur or 5.97 pct to 55.58 eur as the top gainer. Wacker Chemie rose 5.66 eur or 3.77 pct to 155.96 eur after Citigroup initiated coverage with a 'buy' rating and a price target of 190 eur per share, saying it expects the silicon chemistry specialist to show long-term earnings growth that will maintain its strong track record.
   
ProSiebenSat.1 fell 0.29 eur or 1.21 pct to 23.68 eur. TexDAX-listed Solon gained 6.51 eur or 10.87 pct to 66.41 eur as the top gainer among tech stocks. Adva, meanwhile, was the worst performer, down 0.07 eur or 1.12 pct at 6.19 eur.

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Amsterdam shares close higher, tracking Wall Street; TomTom leads

The AEX closed 8.63 points or 1.68 pct higher at 521.53 after opening at 518.07 and trading in a range of 516.68-521.88. Government bonds were lower and the euro stood at 1.3843 usd versus 1.3784 usd late yesterday.
   
TomTom outperformed throughout the day and closed 6.30 pct higher at 53.15 eur, as the market welcomed news that it will supply navigation devices for new Toyota Yaris models, which one analyst said was encouraging given that TomTom is pursuing other, similar deals.
   
Also in demand was KPN, which closed 4.37 pct stronger at 11.93 after trading high throughout the day following an upgrade to 'buy' from neutral at Merrill Lynch and news that it will launch its 6.25 eur per share takeover offer for Getronics tomorrow.
   
Takeover target Getronics also gained, rising 0.65 pct to 6.19 while its midcap peer in the IT sector, Ordina, led midcap gainers at closing, adding 4.73 pct at 14.18. Sector peer LogicaCMG meanwhile closed 2.18 pct higher at 2.34.
   
In recovery from losses yesterday, the staffing sector was on the rise, with dealers pointing to interest rate hopes for the US and short covering. Randstad was 3.22 pct stronger at 37.53, Vedior was up 1.82 pct at 15.68 and midcap staffer USG People was 4.04 pct firmer at 20.87.
   
ABN Amro also outperformed, rising 2.99 pct to 34.08 with traders pointing to renewed hope that a consortium that includes the Royal Bank of Scotland, Santander and Fortis may win the bidding war for the Dutch Bank.
   
Fortis closed 1.49 pct higher at 25.92 while among financial peers, ING was 1.34 pct stronger at 29.35 and Aegon was up 0.77 pct at 13.14.
   
Among other major blue-chip gainers, ArcelorMittal put on 3.35 pct at 46.64 amid news that it aims to increase shipments by 20 pct by 2012 and Philips rose 2.56 pct at 30.00 after several price target upgrades on the back of yesterday's announcement of a new strategic plan that includes a doubling of EBITA per share by 2010, amid talk of M&A interest in Swedish medical company Elekta.
  
Heineken led the pair of AEX decliners, falling 2.01 pct to 45.44 while local brewing peer Grolsch closed 1.30 pct higher at 27.95, off earlier losses due to disappointment with its first-half earnings after Rabo upgraded the share to 'hold' from 'reduce.'
   
DSM, which was also in the news today for announcing a reorganisation in China that will include a factory closure, lost 0.54 pct at 36.50.
   
Among major midcap gainers, Boskalis added 2.68 pct at 31.02 while bakery supply group CSM rose 2.91 pct to 23.00 and industrial supplier Aalberts Industries added 3.14 pct at 16.77.
   
Vopak, in the news today for awarding a contract to Jacobs Engineering Group for services in the relocation of tank terminal facilities in Hamburg, rose 2.62 pct to 41.55.
   
BAM closed 2.00 pct higher at 19.87 after announcing this afternoon that its UK unit has won a 220 mln eur contract in the UK, while construction peer Heijmans added 1.49 pct at 34.00.
   
SNS Reaal, which announced a 0.36 eur interim dividend today, was the only midcap decliner at market close, shedding 0.32 pct at 15.50 while Van der Moolen was flat at 3.25 eur.
   
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