UK/Euro Financial Market Daily Evening Briefing 12-07-2007

Leading blue-chips closed sharply higher in a chopppy session after Wall Street surged on reassuring retail sales data, with trading in London dominated by news of further consolidation within the mining sector.

By the close, the FTSE 100 finished up 82.6 at 6,697.7, significantly up from the session low of 6,594.7, while the FTSE 250 finished up 142.2 at 11,809.00.

Volume picked up during the afternoon with 2.9 bln shares changing hands in 605,142 deals.

Over on Wall Street, US stocks surged, carrying the Dow Jones industrials into record territory as investors gleaned positive consumer spending trends from retailers' June sales reports.

By the London close, the Dow was up 141.3 points at 13,718.1, with the S&P 500 up 12.19 at 1,530.59.

In London today, M&A fever gripped the mining sector after Rio Tinto announced a 38.1 bln usd bid for Canadian aluminium producer Alcan which trumped a 28.8 bln usd hostile offer from US peer Alcoa Inc.

As it was, all miners rose apart from Rio, which finished 183 pence lower at 3,810 after investors factored in reduced expectations for a large special dividend, diminishing chances of a share buyback program and a virtual end to expectations for a potential takeover offer of Rio itself.

This deal will make Rio the worlds largest mining company, with a market capitalisation approaching 70 bln usd.

The rest of the miners found support and were among the best performers amid rising copper prices.

Copper rose towards a recent two month high, well-supported by continued strikes across the world and as signs of tight global inventory emerged.

Vedanta was the top FTSE riser, up 109 pence at 1,800, with Antofagasta taking on 43 pence to 715-1/2, Kazakhmys gaining 53 pence to 1,423, Lonmin 150 better at 4,350 and Xstrata 153 ahead at 3,427.

Meanwhile, crude oil rose above 77 usd per barrel, a fresh 11-month high, propelled by speculative buying as the market focused on supply fears amid rising tension in the Middle East and lower production from the North Sea.

This helped oil stocks rise with BP up 6 at 611, RD Shell up 32 at 2,139, despite being cut to to 'neutral' from 'buy' at UBS, and BG Group rising 16 to 858.

Elsewhere, among the large caps, Kingfisher shares took on 5-1/4 pence to 224-3/4 after being upgraded to 'equal-weight' from 'underweight' by Morgan Stanley on valuation grounds, albeit while having its earnings estimates reduced.

Morgan Stanley said the implicit value of B&Q (excluding property) within Kingfisher's share price is now below 0.2 times enterprise value divided by sales and the broker sees little further downside to this, even if news flow deteriorates.

The broker cut its earnings estimates but said the new lower earnings were already reflected in Kingfisher's share price.

And shares in drugs firm Shire added 34 pence to 1,231 after Morgan Stanley resumed coverage of the company with an 'overweight' recommendation and a 1,400 pence price target.

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Turning to the fallers and Rio aside, leisure group Whitbread succumbed to some profit taking after the shares rose nearly 7 pct yesterday after press reports linked Starwood Capital with a possible 2,400 pence a share bid.

However, a lack of any statements from either company and a certain degree of skepticism from brokers saw the shares pull back 48 pence to 1,898.

And Experian slipped 4-1/2 pence at 616 after its latest trading update failed to impress.

The credit checking group reported first-quarter organic sales growth increase of 7 pct and said it expects an acceleration in sales in the second half.

ITV shares were also underperforming, off 0.7 at 111.3 after Bear Stearns downgraded its rating for the free view broadcaster to 'underperform' from 'peer perform' with the broker saying much of the company's recovery is already priced into the share price.

On the second line, CSR was a strong FTSE 250 riser, adding 47-1/2 pence to 853 after Morgan Stanley upgraded its rating to 'equal weight' from 'underweight' with a raised target of 720 pence.

The broker said it does not expect the WiFi and bluetooth solutions provider to lose market share in 2007.

And in earnings news, Aveva Group was up 34 at 978-1/2 after an upbeat AGM, which reported solid progress and high levels of demand in all its end markets as well as good sales in all major regions.

Panmure Gordon considered that the software company could be a potential acquisition target given that the entire engineering IT segment is consolidating.

A broker upgrade also drove National Express shares higher, taking on 43 pence to 1,123 after Citigroup upped its stance to 'buy' from 'hold' with a price target of 1,207 pence.

And a broker upgrade also helped shares in Xchanging gain 8-1/4 to 273 with Bridgewell Securities initiating coverage on the group with an 'overweight' stance with a fair value of 300 pence, citing the group's above-average market growth.

But on the downside, Spectris shed 32 pence to 912 on profit taking after its trading update only received muted acknowledgement.

Bridgewell however, said the Spectris story is an exciting one with EBITA margins on an upward trend and the group's niche automation markets enjoying structural growth.

The broker did see this as largely reflected in the share price, and broadly in line with global automation peers.

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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 summmary of today's trading on the FTSE 250 and the AIM, click here

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Shares close higher, rebounding from week's losses; Iberia soars

Share prices closed higher and at session highs, rebounding from three days of losses and boosted by strong gains on Wall street, with Iberia soaring higher, while leading constructors Ferrovial and FCC were lower.

The IBEX-35 index ended up 175.60 points at 14,941.80, after trading in a range of 14,672-14,941.

Equities opened higher after a positive finish on Wall Street, but dipped lower in early deals on renewed interest rate jitters after hawkish comments by the ECB before pushing higher again by midday amid some bargains-hunting.

Dollar-sensitive blue chips continued to see pressure as the euro reached another all time high amid ongoing concern about the US sub-prime mortgage market.

The IBEX-35 remained in the black through the afternoon and saw an extra boost from a solid start on Wall Street and as the Dow Jones reached intra-day records amid better than expected retail data.

Iberia led gainers, soaring 0.14 eur or 3.94 pct to 3.69, after the flag carrier's board said it will not give a consortium led by TPG and BA full access to its books before it had received a firm bid.

Dollar-sensitive Cintra dropped 0.24 or 2.01 pct to 11.73, while constructors were also under pressure with FCC falling 0.50 to 68.40 and Ferrovial dropping 1.10 to 68.80.

Blue chips moved higher, with Santander up 0.21 at 14.02, Telefonica adding 0.33 to 16.96, BBVA rising 0.07 to 18.00 and Repsol YPF gaining 0.06 to 29.68.

Outperforming the broad market, Antena 3 climbed 0.52 or 3.53 pct to 15.26 amid renewed speculation that News Corp is eyeing Planeta's stake in the broadcaster and after Bear Sterns upgraded the stock to 'outperform' from 'peer perform' with a 17.2 eur per share price target.

Peer Telecinco added 0.05 to 20.70, underperforming as Bear Sterns' downgrade to 'underperform' from 'peer perform' offset positive advertising revenue forecasts.

Among smaller caps, La Seda surged 0.26 or 10.44 pct to 2.75 after the EU approved 99 mln eur of aid for a PTA plant project in Portugal.

Amper advanced 0.38 or 3.25 pct to 12.09, extending yesterday's gains on takeover hopes.

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Share prices ended sharply higher as a surge on Wall Street, which helped the Dow Jones Industrials to an intraday record, added to already-strong gains in Paris that were driven by impressive sales figures -- led by Alstom -- and further takeover talk.

The CAC-40 index finished up 101.96 points or 1.70 pct at 6,103.05.

Among CAC-40 stocks, 36 closed higher and 4 closed lower.

On the Matif, July CAC-40 futures were trading at 6,098 points.

On the broader indices, the SBF-80 index closed up 70.91 or 0.98 pct at 7,306.59 and the SBF-120 ended 70.04 or 1.60 pct higher at 4,448.74.

The euro was at 1.3749 usd, strengthening further from 1.3741 usd late yesterday.

Alstom led the charge on the CAC-40, soaring 10.57 eur or 8.45 pct to 135.60 after thrashing analyst forecasts with its first quarter results.

The industrial group this morning reported first quarter sales of 4.0 bln eur, up 27 pct from a year earlier, and orders of 7.6 bln eur, up 62 pct year-on-year.

The group also confirmed its guidance for an operating margin above 7 pct in March 2008 and above 8 pct in March 2010, and double-digit sales growth in 2007.

Alstom's quarterly sales helped lift Areva -- up 20.04 or 2.56 pct at 802.82 -- and Bouygues -- 2.27 or 3.72 pct higher at 63.24.

Bouygues owns 25 pct of Alstom, while Areva is an important partner for Alstom in nuclear power. The three companies have been the object of regular rumours about a tie-up should the French government decide to privatise Areva.

Lens maker Essilor International also rose sharply on the back of second quarter sales figures, adding 3.69 or 4.19 pct to 91.80.

The company said first-half sales were 1.476 bln eur, up 8.3 pct from a year earlier, as like-for-like sales growth accelerated to 8.7 pct in the second quarter from 8.1 pct in the first quarter.

Exane BNP Paribas said like-for-like sales came in 2.4 pct above its own estimates, while the broker was further positively surprised by the regional performances in Europe and South America.

Index heavyweight Total climbed 1.83 or 3.02 pct to 62.38 as it benefited both from escalating oil prices and the news that Russia's Gazprom has chosen the French oil-company to help develop its giant Shtokman gas field.

Under the deal, Total will receive 25 pct of a company developing the project's first phase, while other foreign partners may also be brought in to share up to 24 percent.

Capgemini, meanwhile, surged in the afternoon on rumours of a 70 eur-per-share takeover bid by Indian IT services group Infosys Technologies.

The French company ended up 2.51 or 4.67 pct at 56.21.

Infosys CEO Kris Gopalakrishnan yesterday did not rule out an acquisition in Europe. But said any target would have to meet Infosys' criteria and should want to be acquired, whereas Capgemini has repeatedly said it does not want to be bought.

Vinci extended yesterday's gains as speculation went on as to the intentions of businessman Romain Zaleski, who has raised his stake in the French construction group to over 2 pct compared to 1 pct in May.

Vinci shares ended up 2.22 or 4.00 pct at 57.70.

Schneider Electric added another 2.61 or 2.59 pct to 103.21 as investors continued to welcome yesterday's news that the European Commission is to pay the group compensation for its blocked merger with Legrand.

Outside the CAC-40, Groupe Eurotunnel SA soared 0.19 or 39.58 pct to 0.67, reversing recent losses, as SG Securities said the Channel Tunnel operator's first half sales figures herald a "solid" full year EBITDA for the restructured group.

Fimalac, the owner of credit ratings agency Fitch, jumped 2.40 or 3.52 pct to 70.50 after it won the backing of Les Echos journalists for its 245 mln eur offer to buy the newspaper.

Fimalac said earlier today that it submitted the offer to the newspaper's current owner, Pearson, in response to a request from the senior editorial team.

But Pearson reiterated that it is in exclusive negotiations with luxury goods group LVMH, whose takeover approach is being opposed by the journalists.

LVMH shares were up 0.75 or 0.90 pct at 84.00.

Among the rare fallers, Accor shed 1.08 or 1.48 pct to 71.88 as speculation subsided over a potential takeover bid.
The share had added 5.27 pct yesterday on talk that private equity firm KKR could be preparing an 80 eur a share bid.

Vallourec, meanwhile, managed to hold on to its speculative gains from yesterday, coming off an early drop to close up 1.00 or 0.43 pct at 233.00.

The stock, which surged 5.22 pct yesterday on renewed speculation that ArcelorMittal is considering a takeover, was lifted today by Rio Tinto's announcement of a 38.1 bln usd bid for Canadian aluminium group Alcan Inc is fuelling expectations of a consolidation in the sector.

ArcelorMittal rose 0.84 or 1.74 pct to 49.15.

Elsewhere, TF1 gained 0.55 or 2.19 pct to 25.70 as the broadcaster was lifted by an upgrade to 'outperform' from 'peer perform' from Bear Stearns.

Industry association SNPTV, meanwhile, reported that television audiences and gross spending on advertising in France hit record highs in the first half of 2007.

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Shares close higher, tracking Wall Street; Hagemeyer higher

Shares closed higher in Amsterdam, buoyed by early gains on Wall Street, while shares like blue-chip industrial supplier Hagemeyer outperformed on takeover speculation, according to trading sources.

The AEX closed at a high of 560.14, up 6.58 points or 1.19 pct, after opening at 554.55 and reaching a low of 551.34.

Government bonds traded lower and the euro stood at 1.3769 usd versus 1.3756 usd late yesterday.

Hagemeyer closed 7.73 pct higher at 4.18 eur after leading gainers throughout the afternoon. The share jumped suddenly at midday on reports that Swiss-Swedish ABB is looking to make a major acquisition, with companies similar to Hagemeyer being mentioned as potential targets.

Philips followed, closing 3.32 pct higher at 32.99.

With oil prices on the rise, oil services group SBM Offshore was 2.45 pct stronger at 30.11, while midcap peer Fugro firmed 1.27 pct at 50.40 and Anglo-Dutch oil giant Royal Dutch Shell rose 1.21 pct to 30.89, recovering losses sustained earlier on a downgrade to 'neutral' from 'buy' at UBS.

ABN Amro climbed 2.08 pct at 35.33, while the market awaits a Supreme Court ruling tomorrow morning on the future of the Dutch bank's plan to sell its US LaSalle unit to Bank of America. A lower court blocked the sale on grounds that shareholders should have been consulted, but tomorrow's ruling could reverse that decision, which is likely to have an effect on an ongoing bidding war for ABN Amro.

Among other financials, Fortis, a member of a consortium that has bid for ABN Amro, gained 1.14 pct at 31.05. Fortis made news earlier by saying it cut its rights issue to finance the takeover to 13 bln eur, from 15 bln.

ING meanwhile added 1.37 pct at 32.65 while Aegon added 0.21 pct to 14.19.

TomTom added 2.08 pct at 41.72 while Arcelor Mittal advanced 1.72 pct at 49.15 and Heineken rose 1.71 pct to 42.25 eur, while local peer Grolsch slid 0.62 pct to 32.00 after the brewer was downgraded to 'sell' from 'hold' at Theodoor Gilissen on worries that stagnation in the European bear market would offset growth in the US.

The publishing sector was also in demand, with Reed Elsevier closing 1.36 pct higher at 14.19 and Wolters Kluwer climbing 1.12 pct to 22.65.

Unilever led blue-chip decliners, slipping 0.91 pct to 23.90 and surrendering gains earned yesterday when Danone-driven M&A speculation drove the stock forwards.

Midcap food share Wessanen likewise declined, falling 1.34 pct to 12.50 while bakery supplier CSM gave up 0.56 pct at 26.63.

Takeover target Numico was off by 0.13 pct at 53.77, TNT dipped 0.47 pct at 33.72 and Vedior gave up 0.32 pct at 21.77 after trading higher early in the day on its announcement that it will propose Tex Gunning as its next CEO.

BAM led midcap gainers, rising 3.84 pct to 22.15 before close. With little news to stir the market, analysts in Amsterdam said a strong construction sector had solidified the share.

Aalberts Industries added 2.45 pct at 21.73 and USG People gained 1.94 pct at 35.67 while LogicaCMG closed 2.25 pct stronger at 2.27 eur, with dealers crediting its rise to M&A speculation in the IT sector.

IT peer Getronics, on the other hand, was flat at 6.60 eur while Wereldhave declined 0.55 pct at 102.33, Boskalis dug 0.34 pct deeper to 29.48 and Crucell closed 0.55 pct lower at 17.21 while market maker Van der Moolen flattened out at 4.09 eur.

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