UK/Euro Financial Market Daily Evening Briefing 11-10-2007

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London shares close sharply higher, near year high as miners lead charge

Leading shares closed sharply higher Thursday, climbing back above the 6,700 level for the first time since June this year, aided by a strong performance by UK-listed miners which mirrored gains across the regions.
   
By the close, the FTSE 100 was up 91.5 points at 6,724.5, just shy of its previous seven-year high of 6,732.4 set on June 16. The broader indices all closed higher with the FTSE 250 finishing up 110.8 points at 11,622.9.
   
Volume was solid with 3.8 bln shares trading in 625,005 deals.
   
"There's a lot of positive sentiment back in the market right now and with little economic news of note being seen, this is going to continue providing support, although as always questions have to be asked as to whether this sort of rally can be sustainable," said Jimmy Yates, a trader at CMC Markets.
   
Over on Wall Street, US stocks gained and bond prices fell Thursday after Wal-Mart Stores Inc raised its profit forecast and several other retailers managed to put up better-than-expected sales.
   
While overall monthly sales reports were sluggish, Wall Street appeared relieved that some retailers were able to extract stronger sales even as consumers face uncertainty about the economy, higher fuel prices and, in large portions of the country, unseasonably warm weather.
   
Wall Street views robust consumer spending, which accounts for about two-thirds of economic activity, as crucial for holding up the economy. A short while ago, the DJIA was up 85.5 points at 14,165.2, with the Nasdaq up 20.22 at 2,831.83 and the S&P 500 9.82 stronger at 1,572.3.
   
In London today, markets took their cue from indices in Sydney, Seoul and Shanghai which all extended their record run, while the Hang Seng closed at a new record.
   
Stronger metal prices underpinned by buoyant sentiment over long-term supply and demand fundamentals lifted mining stocks, with Vedanta closing up 127 at 2,317, BHP Billiton ending 79 pence better at 1,880, while Antofagasta gained 35 pence at 871-1/2, Xstrata firmed 137 pence at 3,592 and Rio Tinto took on 155 pence to 4,563.
   
Oil stocks were also firmer after the US government reported an unexpected decline in crude oil inventories, with Tullow Oil 28 higher at 626-1/2, BG Group up 40 at 883 and Royal Dutch Shell closing up 49 at 2,025.
   
BP gained 13-1/2 to 593-1/2 as investors welcomed the unveiling of plans for a significant restructuring that will see the number of its key businesses reduced from three to two.

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The shake-up comes as BP attempts to recover from a string of operational mishaps and problems that many industry experts have blamed on the group's excessively complex organizational structure.
   
Elsewhere, Vodafone finished 8.5 firmer at 179.5 amid chatter CEO Arun Sarin was stepping down although the company refused to comment.
   
And Schroders finished among the leading pack, up 57 at 1,351 after the FT reported it is mulling whether to sell its investment management arm to focus on private banking.
   
Among other financials, insurer Resolution added 12 pence at 692 after the firm revealed after the market close last night that it has rejected a 660 pence per share cash proposal from Pearl Assurance.
   
Resolution said Pearl's proposal significantly under-values the group and its prospects as part of a planned merger with Friends Provident -- shares in which firmed 0.5 pence lower to 178.3.
   
Bucking today's positive trend, Sage finished down 8-1/2 pence at 243 after a trading statement revealed disappointing organic growth at its US business which prompted the departure of two members of its US management team.
   
Northern Rock slid 15.5 to 258 amid a bout of profit taking following recent strength which saw the shares rally nearly 40 pct in the past two days.
   
Deutsche Bank added to the reversal in sentiment by cutting its target to 225 pence from 370 while maintaining its 'sell' rating.
   
And housebuilders were weak, reflecting the news from the RICS survey today and recent sector downgrades by UBS. This morning in its monthly survey of the housing market, the Royal Institution of Chartered Surveyors said 14.6 pct more of its members reported a fall than a rise in house prices, well above after August's -3.3 pct reading.
   
Barratt Developments lost 26-1/2 pence at 722, with Persimmon down 42 pence at 1,003, and Taylor Wimpey off 13 pence to 291 -- the latter two both cut to 'neutral' from 'buy' by UBS on Tuesday.
   
Midcap peer Redrow, which was cut to 'sell' from 'neutral' by UBS this week, shed 18 pence at 388, with Bovis Homes off 18 pence at 684, and Bellway down 32 pence at 1,076.
   
Elsewhere, RBS shares shed 6 pence to 553 on profit taking following gains earlier this week after the success of its consortium bid for Dutch bank ABN Amro and as Deutsche Bank resumed coverage on the stock with a downgrade to 'hold' from 'buy' with a cut in target to 570 pence from 750 pence

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And shares in Barclays, which lost out in the bid battle for ABN Amro, also fell back down 4-1/2 pence at 651 as ABN Amro, the broker, resumed coverage on the stock with a downgrade to 'hold' from 'buy' with a cut in target to 660 pence from 850 pence.
   
Turning to the second line, oil services group Hunting topped the mid-cap risers, up 73 at 783 amid rumours of mega-mergers fuelled gains across the sector.
   
Evolution Securities said rumours of a Halliburton Co bid for Baker Hughes Inc have driven the US oil service index to an all-time high, highlighting that M&A activity in the oil service sector is still very active.
   
Hays took on 2.75 pence to 145.5 after a positive trading update which revealed a 24 pct increase in first-quarter net fees.
   
The UK's largest recruiter posted the rise amid continued strong demand across its markets and said it will continue with strong international expansion.
   
Cobham added 5-3/4 pence at 204 on news its US unit, Sargent Fletcher Inc, has won a contract from Boeing to provide composite body fuel tank system for the US firm's KC-767 advanced tanker.
   
And Cookson added 18 pence to 840 as the group confirmed an 497 mln stg agreed takeover offer for Foseco - up 3 pence to 287.
   
Cookson said the deal would deliver significant annual cost synergies of around 18 mln stg in the second year, through the elimination of overhead duplications and increased purchasing efficiencies.
   
Finally, WH Smith dipped 27 to 393 as profit takers emerged after the company released its full-year results and said it would only decide on a possible share buy-back after Christmas.

Diary of Events

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UK Small Cap Report

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Paris shares close up on positive local news, Wall St gains
 
The CAC-40 index finished up 24.34 points, or 0.42 pct, at 5,862.83. Among CAC-40 stocks, 23 closed higher and 17 closed lower. On the Matif, October CAC-40 futures were trading at 5,864.
   
On the broader indices, the SBF-80 index closed up 20.15, or 0.29 pct, at 7,064.25 and the SBF-120 ended up 16.97, or 0.40 pct, at 4,277.99.
   
The euro was quoted at 1.4220 usd compared to 1.4154 usd late yesterday.

Milan

Milan shares close higher, Telecom Italia outperforms on buoyant sector

Share prices closed higher in good volumes supported by a positive start on Wall Street, with Telecom Italia posting solid gains on the back of a buoyant European telecoms sector.
   
The Mibtel index was up 0.39 pct at 31,966 and the S&P/Mib rose 0.27 pct to 41,024. Volume traded was an estimated 6.854 bln eur.
   
Telecom Italia rose 2.66 pct to 2.12 eur on positive sentiment following Telefonica's investor day. Telefonica chairman Cesar Alierta said he expects the sale of the 18 pct stake in Telecom Italia held by Pirelli & C and Benetton to the Telco consortium to be completed on schedule.

He said approval from Brazil's regulator Anatel is expected before the end of the month and then Telco, in which Telefonica has a key stake, will be able to complete the deal.
   
Pirelli rose 1.65 pct to 0.85 eur.

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German shares close higher tracking Wall Street, subprime fears ease

The DAX closed 47.12 points, or 0.59 pct, higher at 8,033.69, having traded between a low of 7,981.53 and a high of 8,063.83 in today's session.
   
The MDAX advanced 100.00 points, or 0.94 pct, to 10,756.50, while the TecDAX was up 7.45 points, or 0.74 pct, at 1,013.90. DAX futures were up 61.00 points, or 0.76 pct, at 8,103.50, while bund futures lost 0.43, or 0.38 pct, to 112.03.
  
Heino Ruland, trader at FrankfurtFinanz, said easing worries over the long-term fallout from the subprime crisis in the US along with a higher close on the Nikkei index this morning boosted German market.
   
"The stock market is once again pushing upwards," said Stefan Soellner, a market expert at Deutsche Postbank. He attributed the strength to indications the US Fed would likely lower rates at its next meeting along with relatively good news surrounding some key German companies.
   
Leading blue chips higher, Volkswagen jumped 8.33 eur, or 4.75 pct, at 183.57, boosted by speculation that Porsche AG might increase its stake in Germany's largest automaker, perhaps in an effort to take full control of the Wolfsburg-based company.
   
ThyssenKrupp followed, rising 1.12 eur or 2.54 pct to 45.24, after it announced it won a 150 mln usd deal to install and maintain the elevators in New York City's Freedom Tower.
   
Lufthansa added 0.50 eur or 2.36 pct at 21.72, continuing positive momentum from yesterday's strong September passenger data. The airline reported that September showed a 1 pct gain in passenger load factor to 80.1 pct on high demand for air travel in Europe.
   
Henkel gained 0.80 eur or 2.26 pct to 36.14, while Bayer added 1.25 eur or 2.25 pct to 56.72.
   
Deutsche Bank was the only banking stock to decline, dropping 0.62 eur or 0.66 pct to 93.38, while peer Hypo Real Estate rose 0.91 eur or 2.07 pct to 44.80 and Commerzbank gained 0.38 eur or 1.26 pct to 30.59.
   
At the bottom of the index, SAP dropped 0.79 eur or 1.99 pct to 38.94, while Deutsche Boerse fell 1.17 eur or 1.10 pct to 105.57.
   
Fresenius Medical Care dipped 0.33 eur or 0.90 pct at 36.14 and Adidas lost 0.31 eur or 0.70 pct at 44.21.
   
On the MDAX, Suedzucker signalled a good start to the third-quarter reporting season in Germany after Europe's largest sugar supplier and processor announced strong results for the second quarter of its 2007-08 fiscal year. At the other end of the MDAX, Celesio dropped 1.04 eur, or 2.49 pct, at 40.71, making it the worst performer.
   
TecDAX-listed Versatel gained 1.50 eur, or 14.44 pct, at 11.89 as the top performer on the index. On the other end, Freenet lost 0.70 eur, or 3.52 pct at 19.17 on a media report that a planned takeover of the internet service provider by Drillisch and United Internet has been abandoned because of financing problems.

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Amsterdam shares close higher, tracking Wall St; AND surges

The AEX closed 3.44 points, or 0.62 pct, higher at 558.01, after trading in a range of 555.04-559.43. Government bonds traded lower while the euro stood at 1.4224 usd versus 1.4154 usd late yesterday.
   
AND International was the biggest gainer of the day, adding 18.61 pct to 16 eur on the small cap market, amid a second day of speculation that the maker of digital navigation maps may be scooped up by a maker of navigation devices.
   
Hagemeyer led gainers among blue chips, adding 3.85 pct to 4.85 eur amid news that takeover bidder Sonepar has increased its stake in the company to 10.24 pct. Analysts continue to speculate that Sonepar will have to increase its bid to succeed and dealers in France suggested that a rival approach from Rexel looks less likely.
   
KPN put on 3.50 pct to 12.73 eur after a positive read-through from Telefonica's earnings and revenue outlook for 2006-2010.
   
Arcelor Mittal rose 1.80 pct to 56.50 eur amid news that the steel company will replace ABN Amro on the Dow Jones Stoxx 50 Index. Boskalis rose 4.73 pct to 37.83 eur as it will replace ABN Amro on the Dow Jones Euro Stoxx 50 index.
   
Unilever rose 1.31 pct to 22.37 eur as investors shrugged off news of a strike at the group's Dutch factories.
   
Fortis rose 1.25 pct to 23.55 eur after it said it had an almost 98 pct acceptance level for its 2-for-3 rights issue.
   
Ahold rose 0.37 pct to 10.89 eur after it said it has sold its US Tops supermarkets to Morgan Stanley Private Equity for 310 mln usd.
   
Among decliners, Philips shed 0.34 pct to 31.92 eur after it announced the acquisition of a lighting company in the US. ASML shed 0.54 pct to 22.07 eur amid reports that TSMC and UMC may cut its spending. Wolters Kluwer shed 1.18 pct to 21.83 eur and TNT dropped 1.61 pct to 30 eur.
   
Among midcap shares, Oce rose 1.98 pct to 15.98 eur, Heijmans added 1.39 pct to 35.70 and Fugro rose 1.21 pct to 57.03 eur. Binckbank dropped 1.75 pc to 13.49 eur after it confirmed it is in talks to buy online bank Alex from Rabobank. Tele Atlas shed 2.85 pct to 22.83 eur.

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