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

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London shares close higher, as central banks move to ease credit crisis

At the close, the FTSE 100 index was up 22.9 points at 6,559.8, off a low this morning of 6,429.5. The FTSE 250 index lost 4.9 points at 10,643.0. News broke this afternoon that the Federal Reserve will hold the four term auctions in cooperation with the Bank of Canada, the Bank of England, the European Central bank and the Swiss National Bank.

The Fed has also established swap agreements with the European Central Bank for 20 bln usd and with the Swiss National Bank for 4 bln usd, which could help them intervene in European dollar markets.

US stocks jumped on the news, and by the London close the Dow Industrial Average was up 151.5 points at 13,584.3 and the Nasdaq climbed 44.02 points to 2,696.37.98 and the S&P 500 index added 21.05 to 1,498.7.

Back in London, housebuilders turned around this morning's losses, encouraged by the welcome liquidity aid. The top Footsie riser was Barratt Developments, up 23 at 508-1/2, boosted by bid talk in circulation yesterday, with French companies Lafarge or Bouyges rumoured as potential predators.

However, the company has lost its place in the FTSE 100 reshuffle. Sector peer Taylor Wimpey was 6 higher at 229. Some financial stocks reversed slumps on the news from the Fed, with Alliance & Leicester up 28 at 728, HBOS 16-1/2 higher at 833.

However Northern Rock was off 5.2 at 99.2, after the Times reported that Cerberus has dropped out of the running to buy the group.

Meanwhile, with oil prices back above 90 usd a barrel, there were some obvious beneficiaries. BG Group was up 4 at 1,083, though it was also helped by rumours of a "big find" and index heavyweight BP was up 6-1/2 pence at 623.

On the downside, DSG International, owner of PC World and Currys, was a major faller, down 3.2 pence at 110.6. The FTSE Committee is expected to conform after the market closes today that DSG will drop out of the FTSE 100 this month, following the quarterly reshuffle which is based on market capitalisations at yesterday's close.

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This had been flagged up before today, but two other factors hit DSG shares today. Firstly, it went ex-dividend. Secondly, Goldman Sachs reiterated its

'sell' rating on Argos owner Home Retail Group and cut the target to 283 pence, from 327. Home Retail fell 5 pence to 358-1/2. Miners were also out of favour, as copper prices extended recent falls. Antofagasta was down 10 pence at 785, while Vedanta Resources was off 36 at 2,254.

Rio Tinto was 23 lower at 5,657, and BHP Billiton was down 2 at 1,670, after it said it continues to seek talks with Rio Tinto about the merger proposal. Xstrata, meanwhile, was 34 weaker at 3,704, off earlier lows, after the Anglo-Swiss miner confirmed it is in talks with a number of parties regarding issues of mutual interest such as industry consolidation.

Looking at midcaps, Rank Group fell 6 to 101-1/2 after a trading statement. The group has scrapped its final dividend, saying that the effects of the smoking ban, recent "restrictive" changes to gaming regulations, and a weakening in consumer confidence have resulted in an uncertain outlook for 2008.

Game Group, which closed at a 12-month high on Friday, fell for a second day, down 14 at 220, following yesterday's trading statement. In broker-generated news, Michael Page was down 10 at 291-3/4, as Credit Suisse cut the group to 'underperform' from 'outperform'.

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Meanwhile, Sports Direct fell back 5 to 96-3/4, as Merrill Lynch downgraded the group to 'sell' from 'neutral'.

On the upside, International Personal Finance ended the day up 7-3/4 at 211-3/4 after the company said it expects full-year pretax profit a little ahead of the market consensus of 46 mln stg, on good progress made in the second half of the year

While Marshalls took on 11-3/4 to 273-1/2, after UBS upgraded the stock to 'neutral' from 'sell'. Finally, G4S was up 5-1/4 at 224-1/4. The security services company will be promoted to the FTSE 100 this month.

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UK Small Cap Report:

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Milan shares close flat, off lows as central banks announce joint move

The Mibtel index rose 0.03 pct to 30,138 points and the S&P/Mib blue chip index gained 0.10 pct to 39,464, while volumes rose to 5.73 bln eur from 4.64 bln yesterday. Gainers outnumbered decliners 173 to 168, and 16 shares ended flat.

Alitalia rose 2.74 pct to 0.884 eur, ahead of a tomorrow's board meeting which is expected to choose the potential investor to acquire control of the government owned airline. Enel fell 0.58 pct to 8.29 after the company announced details on the expected synergies stemming from the tie-up with Endesa.

Elsewhere among utilities, AEM rose 2.03 pct to 2.98. Banco Popolare rose 1.26 pct to 15.44, helped by reports that UBS has raised its rating on the stock to 'buy' from 'neutral', keeping its 18.4 eur target unchanged.

There continued to be selling pressure on Fiat, which fell 1.23 pct to 18.11. Sources close to company said Fiat is losing production of cars at the rate of 5,000 units per day because factories are halted by a truckers strike.

Eni was up 0.57 pct at 24.89, pending a settlement to the dispute with the Kazakh government over cost over-runs and delays at the huge Kashagan oil filed in the Caspian Sea, of which Eni is the operator. A dealer said he expects an agreement to be reached by the Dec 20 deadline.

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German shares close higher on news of US Fed/ECB short-term auctions

The DAX closed 66.70 points or 0.83 pct higher at 8,076.12 points, having traded between 7,928.12 and 8,117.79 today. The MDAX gained 8.74 points or 0.09 pct to 10,047.28 points, while the TecDAX was 2.34 points or 0.23 pct lower at 993.52 points.

DAX futures added 192.00 or 2.43 pct to 8,097.00, while bund futures were down 1.09 or 0.95 pct at 113.07. The euro was trading at 1.4683 usd, against 1.4684 usd in London morning trade.

Leading blue chips higher, Deutsche Boerse added 3.55 eur or 2.82 pct to 129.28 eur. Bayer added 1.59 eur or 2.70 pct to 60.44 eur after JP Morgan raised its target price on the pharma giant to 75 eur from 74 while maintaining its 'overweight' rating. 

Hypo Real Estate -- up 1.00 eur or 2.63 pct at 39.00 eur -- was on the vanguard of a group of banking stocks that erased earlier losses and pushed into positive territory on the joint ECB/US FED announcement on US dollar liquidity-providing operations.

Peer Deutsche Postbank added 0.80 eur or 1.36 pct to 59.74 eur, Deutsche Bank was 0.49 eur or 0.54 pct higher at 91.16 eur, while Commerzbank slipped 0.02 eur or 0.07 pct to 27.65 eur. Utilities were in demand as RWE added 1.25 eur or 1.32 pct to 95.77 eur and EON gained 2.40 eur or 1.69 pct to 144.53 eur.

Bucking the positive trend, Fresenius Medical Care dropped 1.29 eur or 3.41 pct to 36.52 eur. BMW was down 0.34 eur or 0.81 pct at 41.70 eur as traders said the recent weakness in the US dollar could signal a weak 2008 outlook for the automaker.

Infineon dipped 0.02 eur or 0.23 pct to 8.85 eur, with traders pointing to investors shifting their portfolios and the stock's general sensitivity to market weaknesses, rather than sales numbers released by the chipmaker.

SAP eased 0.13 eur or 0.36 pct to 36.33 eur after Credit Suisse cut its rating to 'underperform' from 'outperform' and took the German business software maker off its Focus List, predicting margin pressure and a low likelihood of consensus-beating future earnings.

Shares in Daimler were 0.29 eur or 0.41 pct lower at 69.59 eur as traders pointed to technical trading weaknesses after the stock was unable to push past the 70 eur mark recently.

Over on the MDAX, Norddeutsche Affinerie added 4.18 eur or 16.08 pct to 30.18 eur after a media report said A-Tec Industries chief executive Officer Mirko Kovats is seeking to increase his company's stake in the German copper specialist to about 20 pct from 14 pct.

Premiere gained 0.44 eur or 3.53 pct to 12.90 eur on speculation that Vivendi has mandated investment bank Lazard to look over a possible bid which it might make for the German pay-TV broadcaster.

Praktiker lost 0.63 eur or 2.98 pct to 20.53 eur as the worst performer on the MDAX. TecDAX-listed Versatel added 11.35 eur or 6.24 pct to 23.00 as the top performer on the index.

Conergy, meanwhile, dropped 3.06 eur or 11.79 pct to 22.89 eur after the alternative power specialist said it expects to make a full-year EBIT loss of 150-200 mln eur, compared with a previous forecast of a 40 mln eur profit, and that it does not expect to achieve its 1 bln eur sales target.

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Amsterdam shares close higher, boosted by Wall Street; Hagemeyer slumps 

The AEX closed up 0.71 points, or 0.14 pct, at 516.20, after opening at 510.04 and trading in the range 509.32-521.49. Government bonds traded mainly lower, while the euro stood at 1.4678 usd, against 1.4703 usd late yesterday.

Wolters Kluwer led AEX gainers, adding 2.87 pct at 23.25, while DSM gained 1.73 pct at 35.17 and ArcelorMittal gained 1.61 pct at 51.71 after it said it will buy back 44 mln shares over the next two years.
Royal Dutch Shell, which was downgraded to 'equal-weight' from 'overweight' in a Lehman Brothers oil sector note, put on 1.47 pct at 28.17.

SBM Offshore was not so resilient, falling 0.17 pct to 22.44, but off sharper intra-day losses after it was cut to 'underweight' from 'equal-weight' in the same Lehman note. Staying with the AEX decliners, TomTom led stocks down, falling 9.79 pct at 54.26 eur.

Randstad shed 1.88 pct to 28.14 after expanding its stake in takeover target Vedior to 15.03 pct. Vedior lost 2.60 pct at 17.21 also amid news shareholders association VEB is threatening to file a lawsuit against the company seeking compensation for financial damages to investors due to alleged insider knowledge and trading.

Akzo Nobel lost 1.05 pct at 53.53 as the EU's second-highest court upheld a 20.99 mln eur fine imposed by the European Commission for participation in a choline chloride cartel. Choline chloride is also known as vitamin B4 and is used in animal feed.

Financials also made an afternoon recovery, but still closed lower, as ING shed 0.72 pct to 27.2, while Aegon fell 0.64 pct to 12.30, and Fortis fell 0.52 pct to 18.92.

Midcap gainers were shown the way higher by Boskalis Westminster, which closed 4.29 pct higher at 40.76 pct, after earlier spiking more than 18 pct. Traders said there was no clear reason why the share price jumped so much.

SNS Reaal rose 1.36 pct at 15.63 and Vopak added 0.67 pct at 38.70. Among midcap decliners, ASMI fell 3.96 pct at 15.97, while Corio lost 3.61 pct at 58.74, and Aalberts lost 3.28 pct at 14.12. Local issue Ten Cate fell 2.59 pct to 21.02 as it said after market close that it has signed a letter of intent to buy Edel Grass together with Oranjewoud.

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