UK/Euro Financial Market Daily Evening Briefing 12-09-2007

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London shares close higher; oils gain on record crude price; NY rises

UK blue chips recovered from morning losses to close higher, with oil heavyweights gaining on record crude prices, and Wall Street edging higher, still seeking direction ahead of the Federal Reserve's meeting on Tuesday.
   
At the close, the FTSE 100 index was up 25.5 points at 6,306.2, compared with a low for the session of 6,232.0. The FTSE 250 closed 7.4 higher at 11,219.7. Volume was solid, with 2.7 bln shares having changed hands in 504,728 deals.
   
As London was closing, the Dow Jones Industrial Average was up about 30 points at 13,338.4, despite some concern after Texas Instruments cut the upper end of its revenue forecast range.
   
Defence group BAE Systems was the biggest FTSE 100 riser, closing up 14-3/4 pence at 478-1/4 pence, after it said it is in exclusive talks about a potential 3.4 bln usd order to build 10,000 lorries for the US army. The company's US land and armaments unit, formerly known as Armor Holdings Inc, is in "sole source negotiations" to build a range of cargo and troop transport trucks under the US army's Family of Medium Tactical Vehicles programme, a BAE spokesman confirmed.

The proposed deal involves options for a further 10,000 vehicles in the longer term.
   
Record oil prices boosted the oil heavyweights in the FTSE 100. BP closed 4 pence higher at 567-1/2 pence. Royal Dutch Shell was 21 firmer at 2,104 pence.
   
Oil contracts in New York hit an all-time high above 79 usd per barrel after US crude inventories fell by far more than expected in the Energy Information Administration's weekly snapshot of American fuel stockpiles. At 4.02 pm, London's benchmark Brent crude contracts for October delivery were up 58 cents at 76.96 usd per barrel.
  
Elsewhere, Vodafone rose 3.1 pence to close at 166.1 pence after JP Morgan said it was one of its top picks in a telecoms sector that is holding up well in the current market turmoil due a resilient outlook on earnings.
   
And in another positive note on telecoms, Merrill Lynch said the sector offered investors a "safe haven" in difficult markets because of its attractive valuation and relatively low exposure to the current credit crunch.
   
Retailer Next found support again, adding 42 pence to close at 1,982, following yesterday's well-received first-half numbers from the clothing retailer.
   
Societe Generale said the company's efforts to re-establish the Next brand in a competitive market could support second-half trading, although the broker said like-for-like sales recovery appears to be postponed until 2008. The broker upgraded its recommendation on the retailer to 'hold' from 'sell'.
   
Home Retail Group was 10 pence higher at 410-3/4, after the company said sales at its Argos high street catalogue business were 1.835 bln stg in the 26 weeks to Sept 1, and margin was up 125 basis points. Sales at its Homebase DIY chain were 854 mln stg, with margin up 300 basis points. Evolution upped its rating to 'reduce' from 'sell'.

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Away from the high street, British Energy added 9-1/2 pence to close at 495, after Morgan Stanley upped its stance to 'equal-weight' from 'underweight' and raised its target to 460 pence from 360, on the back of a higher long-term power price assumption and delayed impact from rising uranium prices.
   
Among the FTSE 100 fallers, ITV fell 1.7 pence to 111, after it reported a smaller-than-expected increase in its programming budget in a long-awaited strategy review.
   
Unveiling his first review, executive chairman Michael Grade said he wants to double the amount ITV earns from its in-house production arm to 1.2 bln stg by 2012, taking its proportion of total programming spending up to 75 pct over time, compared to 54 pct currently. In reaction, UBS said it believes a turnaround for ITV is already priced in, and the broker repeated its 'sell' rating and 100 pence price target on ITV.
   
Elsewhere, many shares that were falling were simply giving back strong gains from the previous session. Insurer Legal & General, which ended the day down 3.1 at 133.4, was a case in point, and was the biggest FTSE 100 faller. Rival Standard Life fell 3-1/2 at 288-3/4, after Citigroup cut its target to 320 pence from 340. 

However, Standard Life also went ex-div, as did several others including Rentokil Initial, BHP Billiton, Capita and Diageo. Rentokil fell 2.2 pence to 168.7 despite Credit Suisse upgrading to 'neutral' from 'underperform'.
   
As well as going ex-div, Scottish & Newcastle, suffered from Blue Oar Securities initiating coverage on the stock with a 'sell' rating. It closed 7 pence lower at 614-1/2.
       
Also on the back foot was WPP Group shedding 8 pence to 679-1/2 after being downgraded to 'hold' from 'buy' by Citigroup in a review of the European sector, with the broker saying a fresh look at advertising agency groups leads to more caution.
    
In the FTSE 250, strong first-half numbers provided the spur for Charter, up 40 pence to 1,180.
   
Charter reported that interim pretax profits rose to 92.1 mln stg from 69.6 mln last year, with adjusted EPS up 26.1 pct to 41.6 pence. In reaction, Landsbanki said it envisages consensus earnings forecasts rising by perhaps 10 pct, to give 2008 EPS of about 95 pence. The broker repeated its 'buy' rating and said it continues to see Charter as a key pick in the sector.
   
Carphone Warehouse shares closed 11-1/2 pence firmer at 352, boosted by Collins Stewart reiterating its 'buy' rating and 420 pence price target. The broker thinks Virgin Media's move to charge customers premium rates on its helplines could result in Carphone gaining market share in UK broadband at Virgin Media's expense.
   
Carphone will be promoted to the FTSE 100 in the quarterly reshuffle, the FTSE committee confirmed after the market closed today.
   
Taylor Wimpey, which will also be promoted, closed up 9-1/4 pence at 342-1/2.

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Tullow Oil rose 4-1/2 pence to close at 560. Apart from promotion to the blue chips, it was also benefitting from high oil prices.
   
Cairn Energy rose 39 pence to 1,887, despite being downgraded to 'neutral' by Credit Suisse.
   
Shares in the three companies dropping out of the FTSE 100 - Drax, Kelda and Segro, - were all little changed today.
   
Meanwhile, Ashmore Group fell 9 pence to 247 as news of a secondary placing offset better-than-expected full year results from the asset management company.
   
Ashmore revealed a placing of 26.575 mln shares in the firm held by its directors and employees, representing 3.7 pct of the group's market cap. The placing will reduce the holding of Ashmore's directors, employees and their related interests, currently totaling 72.5 pct to 68.8 pct.
   
Meanwhile, Ashmore posted a full-year pretax profit of 131.4 mln stg, up from 103.9 mln a year ago. Assets under management stood at 31.6 bln usd at the end of June, up from 11.5 bln a year ago, whilst net management fees were up 61 pct to 126.4 mln stg. In reaction, UBS said Ashmore's results were better than it expected, and repeated its 'buy' rating and 280 pence price target on the firm.
   
Restaurant Group closed 14 pence lower at 306, despite reporting that  first half adjusted pretax profit increased 30 pct to 17.6 mln stg, that the second half has started well, and that the group is looking forward to another year of good progress.
   
The operator of the Frankie & Benny's, Chiquito, Garfunkel's and Blubeckers  chains said like-for-like sales for the 36 weeks to September 9 increased 7 pct, accelerating from 6.5 pct growth for the six months.
  
Finally in economics news today, UK unemployment continued to fall in August, with the claimant count dropping for the eleventh month in a row, while earnings growth picked up marginally but remained benign, official figures showed.
   
The Office for National Statistics said the number of Britons claiming the jobseeker's allowance, the claimant count, fell in August, by 4,200, but came below forecasts for a bigger drop of 8,000.

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Paris shares close higher as on M&A talk, positive newsflow

The CAC-40 index finished up 29.07 points or 0.53 pct at 5,508.01. Among CAC-40 stocks, 25 closed higher and 15 closed lower.  On the Matif, September CAC-40 futures were trading at 5,505.00. On the broader indices, the SBF-80 index closed down 2.39 or 0.04 pct at 6,589.16 while the SBF-120 ended down 18.08 or 0.45 pct at 4,014.58.
   
In the absence of any major catalyst to dispel uncertainties over the credit crisis, investors were back in cautious mood today after yesterday's rebound, causing the CAC-40 to fluctuate slightly between losses and gains.
   
Nonetheless, strong performances from a number of individual stocks finally helped to lift the index, with Bouygues leading the CAC-40 gains on ongoing talk of a tie-up with Areva and Alstom.
   
At close, Bouygues was up 2.40 eur or 4.21 pct at 59.45. Shares in the construction group found additional support today from press speculation over a possible privatisation of Areva, as well as comments from Egyptian-based Orascom indicating its interest in Bouygues Telecom.
   
In contrast, Areva finished up 0.09 or 0.01 pct at 702.01 and engineering group Alstom closed down 0.66 or 0.49 pct at 135.40 as investors raked in some of yesterday's strong gains.
   
Alstom shares in particular had sharply outperformed Bouygues and Areva when the speculation began yesterday, surging over 6 pct over the day.
   
Heavyweight Total provided a sharp boost to the CAC-40 index, rising 0.42 or 0.76 pct to 55.80. Oil contracts in New York hit an all-time high above 79 usd per barrel after US crude inventories fell by far more than expected in the Energy Information Administration's weekly snapshot of American fuel stockpiles.
   
Outside the CAC-40, Clarins surged 4.58 or 8.26 pct to close at 60.00 on market rumours of an impending buyout by cosmetics giant L'Oreal.
   
Although the rumours are not new, one trader pointed out, Clarins is due to publish its first-half results tomorrow after the markets close, and the possibility of comments from executives is increasing speculative appeal.
   
L'Oreal was also lifted by the M&A talk, rising 1.98 or 2.33 pct to end the day at 86.92.
   
JCDecaux added 1.05 or 4.71 pct to 23.32 after beating analyst estimates this morning with first half net profit of 114.1 mln eur, up 7.3 pct, and confirming its full-year organic sales growth forecast of between 7 and 8 pct.
   
Car parts-maker Valeo finished up 1.47 or 4.28 pct at 35.84 after chairman Thierry Morin said in a presentation at the IAA car show in Frankfurt that the company is well positioned to benefit from tighter regulation on reduction of carbon dioxide emissions.
   
Meanwhile, in the media sector, Havas gained 0.11 or 2.78 pct, ending at 4.06 after being upgraded to 'buy' at Citigroup in a report on the advertising industry.
      
Bank stocks continued to make a cautious recovery, as recent disclosures on exposure to sub-prime risks have restored a degree of confidence. Societe Generale finished up 0.55 or 0.48 pct at 115.31, BNP Paribas rose 0.66 or 0.90 pct to 74.81 and Credit Agricole edged up 0.17 or 0.64 pct to 26.93.
   
However, the big banks are still down significantly over the past five days, as investors struggle to assess the extent of the impact of the credit crisis.
   
Among the heaviest fallers, Air France-KLM finished down 0.93 or 3.35 pct at 26.80 after being cut to 'equal-weight' from 'overweight' by Morgan Stanley. The broker reiterated its cautious stance on the sector saying it sees further headwinds ahead for European network airlines, and said it prefers low cost carriers such as easyJet.

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German shares close higher on pharma stock gains, Wall Street advance

The DAX was 15.09 points or 0.20 pct higher at 7,472.99, having traded in the 7,420.66-7,477.99 band. The MDAX rose 44.32 points or 0.44 pct to 10,073.62 points, while the TecDAX retreated 0.77 points or 0.08 pct to 913.51. DAX futures were down 4.50 points or 0.06 pct at 7,482.00, while bund futures added 0.17 or 0.15 pct to 114.39.
   
Leading blue-chip stocks higher, Fresenius Medical Care (FMC) gained 1.16 eur or 3.20 pct to 37.36 eur after the US Food and Drug Administration said current guidelines on erythropoetin (EPO) usage were appropriate making it further unlikely use of the drug will be limited beyond current restrictions in the US. The decision is important for FMC as about 25 pct of its dialysis revenues are dependant on administering drugs, which help boost EPO levels, one trader said.
   
Merck KGaA closed 2.12 eur or 2.17 pct higher at 99.82 eur after Credit Suisse raised its target on the chemicals and pharma company to 121 eur per share from 116 while maintaining its 'outperform' rating.
   
TUI added 0.30 eur or 1.64 pct to 18.59 eur on news Cyprus-based Geveran Trading Co, one of shipping billionaire John Fredriksen's investment vehicles, raised its stake in the tourism and shipping giant to 5.12 pct from 3.07 pct.
   
MAN was 1.69 eur or 1.68 pct higher at 102.20 eur after Citibank raised its stance on the shares to 'buy' from 'hold' and lifted its target to 118.00 eur per share form 110.00. The brokerage said while the merger plans with Swedish peer Scania AB seem to be on the back-burner at the moment, the shares are attractive on stand-alone value.
   
Continental AG rose 1.34 eur or 1.48 pct to 91.66 eur as dealers said the stock was in demand due to vague rumours peer Michelin might raise its full-year forecasts and due to comments made today about the company's VDO unit.
   
Bucking the trend, Lufthansa dropped 0.71 eur or 3.45 pct to 19.86 eur after Morgan Stanley downgraded the stock to 'underweight' from 'overweight', saying it sees further revenue headwinds ahead for European network airlines, and that it prefers low-cost carriers such as easyJet.
   
Shares in Infineon lost 0.22 eur or 1.83 pct to 11.83 eur after investors used plans announced by the chipmaker to cut its stake in its US DRAM unit, Qimonda AG, as a reason to consolidate their gains.
   
BMW fell 0.62 eur or 1.42 pct to 42.99 eur, with traders pointing to its high exposure to the dollar and comments made yesterday at the IAA car show that indicate the group is unlikely to present a strategic review any time soon.
   
Deutsche Post eased 0.12 eur or 0.57 pct to 20.76 eur after the European Commission said it has opened a formal investigation against Germany over compensation paid to the postal carrier.
     
Over on the MDAX, ProSiebenSat.1 added 0.77 eur or 3.25 pct to 24.45 eur to lead the index higher.
   
Beiersdorf was up 1.44 eur or 3.00 pct to 49.51 eur after Morgan Stanley raised its stance on the cosmetics specialist's stock to 'equal-weight' from 'underweight', while pegging its price target at 53 eur per share.
   
TecDAX-listed Aixtron rose 0.21 eur or 3.60 pct to 6.04 eur, while Nordex fell 0.88 eur or 2.65 pct to 32.32 eur.

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Amsterdam shares close higher, Randstad leads gainers

The AEX closed 1.85 points or 0.35 pct higher at 523.38 after trading in the range 518.59-524.18. Government bonds traded broadly lower and the euro stood at 1.3881 usd versus 1.3843 usd late yesterday.
   
Staffing stock Randstad led gainers, adding 3.41 pct to 38.81 eur on a technical rebound, following weeks of pressure following its third-quarter outlook warning. Peer Vedior added 1.85 pct to 15.85 eur, while USG People added 2.16 pct to 21.32 eur after saying its Dutch division Start People has penned two long-term contracts with the Dutch government worth several mlns of euros annually.
   
Hagemeyer gained 1.33 pct to 3.04 eur as Petercam upped its price target to 3.42 eur on a positive response to the company's investor day, while maintaining its 'hold' recommendation.
   
Shell put on 0.79 pct to 29.10 eur, boosted by a surge in the price of crude. Meanwhile, Brazilian mining group Compagnie Vale do Rio Doce (CVRD) said it has signed an agreement with Shell's Brazilian unit under which the groups will jointly study exploiting natural gas blocks operated by Shell Brazil in the federal state of Espirito Santo in the southeast.
   
ABN Amro gained 0.50 pct to 34.25 eur, while ING gained 0.41 pct to 29.63 eur and Fortis fell 0.85 pct to 25.70 eur. The Belgo-Dutch bancassurer is prudently delaying the 13 bln eur capital increase planned as part of its funding for the consortium bid for ABN Amro until next week in the hope that market conditions will improve, analysts said.
   
ASML gained 0.40 pct to 22.34 eur following an upgrade to 'outperform' at Credit Suisse, while TNT put on 0.43 pct to 30.53 eur after saying it will launch two new time-guaranteed services to expand its morning delivery services portfolio.
   
ArcelorMittal led blue-chip fallers, off 1.16 pct at 46.10 eur, in-line with other steel producers as US-based Nucor Corp warned third-quarter earnings will likely miss Wall Street estimates. Arcelor also said today said it has acquired all outstanding shares in Arcelor Brasil and now owns 100 pct of the unit.
   
Corporate Express fell 1.10 pct to 8.06 eur, while TomTom dropped 0.92 pct to 52.66 eur. DSM was 0.44 pct lower at 36.34 eur as it said it has completed the 750 mln eur share buyback scheme announced in April.
   
Midcapper Wereldhave fell 1.10 pct to 83.04 eur, while Heijmans was down 1.0 pct at 33.66 eur and LogicaCMG lost 0.85 pct to 2.32 eur.

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