UK/Euro Financial Market Daily Evening Briefing 13-08-2007

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London shares close up, as Miners rally, NY higher as banks add liquidity

Leading shares were sharply up by the close, just off session highs, with the miners fuelling the blue-chip rises, while Wall Street gained after the Federal Reserve eased some of investors' credit concerns.
   
At the close, the FTSE 100 index was up 180.7 points at 6,219.0, with the FTSE 250 index 295.3 points higher at 11,184. Volume was fair, with 3.205 bln shares changing hands in 799,009 deals.
   
"It has been a steady day of gains for the London index, as traders look to rebuild off last week's lows, whilst support was also seen on the back of lacklustre UK PPI data which may help the BoE defer any rate hike. However, an overall air of caution undoubtedly remains in the market," said a trader at CMC markets.
   
In the US, meanwhile, Wall Street rebounded after the Federal Reserve and other central banks added more cash to their banking systems, helping investors set aside some concerns about credit tightness.

By the London close, the Dow Jones Industrial Average was up 86.50 points at 13,326.0, while the Nasdaq Composite rose 17.43 at 2,562.32 and the S&P 500 index added 11.90 at 1,465.55.
   
Mining stocks dominated the blue-chip leaderboard today, helped by rising copper prices. Antofagasta soared almost 11 pct or 65 pence to 685. Kazakhmys also made substantial gains, up 113 pence at 1,195, aided further by a broker upgrade, as UBS upgraded the Miner to 'buy' from 'neutral' with a target of 1,450 pence.

UBS said the Kazakhmys share price has declined by 27 pct since the mid-July market correction and is now overdone.
   
Copper prices climbed today, as short-term credit risk concerns appear to have eased following cash injections from the central banks.
       
Sector peers also made firm gains: Rio Tinto added 212 to 3,220, BHP Billiton took on 87 to 1,348, Xstrata advanced 156 to 2,794, Anglo American pushed up 216 to 2,816, and Vedanta Resources moved 98 pence higher to 1,667.
   
M&A news pushed Resolution higher, up 18-1/2 to 644-1/2 amid weekend press reports that UK insurance giant Prudential will resume talks with its peer on the sale of its UK operations once the life insurer completes its proposed merger with Friends Provident, according to the Mail on Sunday.
   
A broker upgrade saw 3i Group move 57 higher at 1,067, with UBS raising its recommendation to 'neutral' from 'sell' following the significant fall in the share price over the past couple of months, partly on concerns about the impact of the debt market turmoil on future realisations.

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Elsewhere, ICI gained 17-1/2 pence to 642 after its board said that they had reached agreement on the terms of a recommended 670 pence per share cash offer by Akzo Nobel.
   
The deal was further sweetened by a 5 pence per share pro rata dividend from July 1 to completion, and ICI shareholders will also receive the 4.95 pence dividend announced Aug 2. The offer values ICI at around 8 bln stg, and comes hours before the UK Takeover Panel's 'put-up-or-shut-up' deadline this morning.
   
Support services group Wolseley climbed 49 pence to 1,046 after Credit Suisse assumed coverage in the plumbers merchant with a 'buy' rating and 1,150 target.
   
Credit Suisse said while it does not doubt that what it perceives as Wolseley's superior business model could at some stage justify a premium to the peer group, it thinks it is too early to expect a re-rating of the stock.
   
The broker pointed out that near-term share-price sentiment is likely to remain dominated by the continuing downturn in the US housing market and rising interest-rate environment in Europe.
   
Also benefiting from positive broker comment was Man Group, up 33 at 512 after Dresdner Kleinwort raised its price target to 680p from 650 and retained its 'buy' stance.
   
Only a handful of stocks traded negatively today, with J Sainsbury sliding 2 pence to 547 amid growing pressure on Delta Two, the Qatari investment fund, to raise the equity element of its proposed 10.6 bln stg takeover offer due to turmoil in global credit markets, according to a report in the Financial Times.
   
The credit crunch has raised concerns that Delta Two will struggle to raise funds for its planned Sainsbury deal.
   
Moving onto the second line, Michael Page added 45 pence at 523-1/2 after Altium Securities upgraded its view to 'buy' from 'add' this morning, with a price target of 600 pence as it feels the recent share price weakness now provides an opportunity.
       
VT Group moved 16 ahead at 565-1/2 as Evolution Securities maintained its 'buy' rating on the defence a civil contractor, citing the certainty of value for the firm's shipbuilding operations after its venture with BAE Systems.
   
In a note published earlier today, Evolution Securities said it feels the 13 pct fall in VT's share price from a high of 628 pence provides a real opportunity to buy into a stock which has considerable visibility through the current 3.7 bln stg order book.

It said the stock also has very real momentum across all of its business areas, a factor most clearly seen in the order book being set to double by the end of the current calendar year.
   
Meanwhile, FKI advanced 9-3/4 to 98-3/4 after Merrill Lynch raised its rating to 'neutral' from 'sell' citing recent underperformance.       

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There was activity in the bus sector after a Collins Stewart review, with National Express Group edging up 88 at 1,147 with Collins Stewart putting the group as a trading 'buy' as part of its review today.
   
In a note this morning, Collins Stewart said that although it had been cautious on National Express, with a 'hold' rating and 1,110p price target, it now feels the downside risk has been mitigated and there is a chance of upside if it is successful in winning a bid for East Coast Mainline (ECML).

Sector peer Stagecoach was also 13 firmer at 206-1/2.
   
Elsewhere, Millennium & Copthorne took on 37 pence to 504 after Citigroup moved its rating to 'buy' from 'hold' as part of a hotel review. Citigroup said that European hotel stocks have fared particularly badly in the recent sell-off, as credit concerns sparked fears of higher property yields and removed, at least for now, support from any plausible M&A speculation.
   
Game Group recovered 11-1/4 pence to 182-1/4 following last week's heavy falls precipitated by the OFT's decision to refer its Gamestation acquisition to the Competition Commission.
       
Moving to the 250 fallers, F&C Asset Management was 5-1/4 lower at 194-3/4 after ABN Amro downgraded its stance to 'reduce' from 'hold' and cut its target to 158 pence from 181 pence.

Finally, Avis Europe fell back 6 at 45 after Goldman Sachs cut its target on the group to 46 pence from 66.3 pence.

UK Small Cap Report

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UK Diary of Events

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Paris shares close higher; Wall Street gains reinforce technical rebound

The CAC-40 index closed up 120.65 points or 2.21 pct at 5,569.28. Of stocks in the index, 36 rose and four declined. On the Matif, August CAC-40 futures were trading at 5,560.0.
   
Transport-related shares were the big gainers, amid recent improvements in automobile sales and continued M&A talk in the airline sector.
   
Tyre-maker Michelin posted the biggest rise among blue chips, closing up 4.51 eur or 5.35 pct at 88.81.
   
Air France-KLM finished up 1.44 eur or 5.04 pct at 30.00, recovering from its 11 pct drop over the previous two sessions.
   
Automakers were also strong, with Renault closing up 3.61 eur or 3.79 pct at 98.74 and Peugeot ending 1.87 eur or 3.24 pct higher at 59.57.
   
Banks and insurers outperformed after bearing the brunt of the selling last week as the US subprime lending crisis spurred concerns about potential exposure among foreign financial companies.
   
Dexia closed up 0.83 eur or 4.33 pct at 19.98, Axa finished up 1.18 eur or 4.21 pct at 29.20 and Credit Agricole gained 0.83 eur or 3.08 pct to 27.80.
   
BNP Paribas closed up 2.03 eur or 2.57 pct at 81.00. It told Agence France-Presse it hopes to unfreeze by the end of August three investment funds that were hit by US liquidity problems tied to the subprime crisis. The bank has been blocking investor activity in the funds since last week.
   
BNP Paribas also sought to reassure investors about its exposure to US-based mortgage lender Homebanc, which filed for Chapter 11 liquidity protection on Thursday. A spokeswoman told Agence France-Presse its exposure to the lender is "quite low", amounting to 30 mln eur in credits that "are guaranteed by securities".
   
Among other gainers, Vivendi closed 0.97 eur or 3.37 pct higher at 29.72 after its Universal Music Group unit said on Friday it tentativly agreed to buy V2 Music Group Ltd from Richard Branson's Virgin Group.
   
Property shares were among the few decliners, mainly on profit-taking after moving upward in a declining market on Friday. Klepierre finished down 3.90 eur or 3.39 pct at 111.03 and Unibail-Rodamco closed down 3.42 eur or 1.96 pct at 170.77.

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German shares close higher on Wall Street rebound

At the close, the DAX was up 131.07 points or 1.78 pct at 7,474.33, having traded between 7,380.18 and 7,476.70. The MDAX added 253.53 points, or 2.55 pct, to 10,185.47, while the TecDAX gained 6.48, or 0.71 pct, to 888.51. DAX futures were up 46.00 points or 0.62 pct at 7,503.00, while bund futures gained 0.03 or 0.03 pct to 112.54 points.
   
Traders said that today's slightly higher closing to Nikkei index as well as better-than-expected US retail sales data also helped underpin gains.
   
MAN added 4.38 or 4.63 pct at 98.91 to lead the blue chips higher as the stock rebounded from several days of declines. Lufthansa and DaimlerChrysler both also gained rebounding from recent strong declines; the former added 0.81 eur or 4.23 pct at 19.95, and the latter was 2.37 eur or 3.94 pct higher at 62.45. 
   
Thyssenkrupp was up 1.46 eur or 3.82 pct at 39.66, to lead blue chips higher, after its shares were upgraded to 'add' from 'hold' at WestLB.
   
Munich Re was up 3.35 eur or 2.66 pct higher at 128.30, as traders said the shares continued to benefit from Credit Suisse having raised its stance on the reinsurer's stock on Friday.
   
Hypo Real Estate added 1.26 eur or 3.21 pct at 40.50, as one of the main stocks to benefit from an overall friendly market after its shares had been under considerable pressure last week.
   
Bucking today's positive trend, Siemens dropped 1.01 eur or 1.10 pct at 91.13, after two separate media reports gave indications that the bribery scandal at the electronic giants might be larger than assumed. A report in the Sueddeutsche Zeitung said that Siemens might have made over 1 bln eur in dubious payments. The report did not cite sources.
       
Deutsche Postbank was up 10.48 eur or 0.89 pct at 54.23, but underperforming the DAX average, as its shares were under pressure after the group said over the weekend that its investments of 600 mln eur in IKB's Rhineland Funding subsidiaries will now be incorporated in its financial accounts.  It also reiterated that its subprime exposure amounts to 800 mln eur.
   
Over on the MDAX, Krones added 14.90 or 9.78 pct at 167.19 to lead the index higher.
   
Norddeutsche Affinerie added 2.57 eur or 9.17 pct at 30.59 as the index's top performer which traders largely attributed to a technical correction after recent losses. Aareal Bank, gained 2.83 eur or 9.53 pct at 32.53, also had a technical trading correction.
    
On the other end, Fraport dropped 3.78 eur or 6.87 pct at 51.27 as the airport operator's stock became the victim of profit taking. This came after several days of advances ahead of its releasing traffic figures today, which were inline with investors' expectations.
   
Premiere declined 0.57 eur or 3.06 pct at 18.03, after the pay-TV company announced today that its chief executive Georg Kofler will be stepping down from his post.
   
TecDAX-listed QSC was 0.25 eur or 5.54 pct lower at 4.26, while Bechtle gained 2.14 eur or 8.84 pct at 26.34 as the top gainer on the index.

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Amsterdam shares close higher, boosted by ECB, Wall St; TomTom leads

The AEX closed 11.21 points or 2.23 pct higher at 513.25 after opening at 508.21 and trading in a range 506.54-513.92. Government bonds traded lower and the euro stood at 1.3631 usd versus 1.3685 usd late last week.
   
TomTom was the top gainer on the AEX, rising 5.89 pct at 45.45 eur, while digital map supplier and takeover target Tele Atlas put on 0.24 pct at 20.50.
   
TNT rose 3.22 pct at 30.48, KPN closed 3.15 pct higher at 10.82, DSM increased 2.96 pct at 36.91 and Arcelor Mittal climbed 2.60 pct at 43.06. Heavyweight Shell rose 2.55 pct at 27.38.
   
ABN Amro put on 1.86 pct at 34.48 amid news that the Finance Ministry is ready to make a statement on its proposed merger with Barclays.
   
Other financials also rebounded, with Aegon putting on 3.74 pct at 13.28 and Fortis gaining 2.09 pct at 27.51, following last week's losses amid the credit crunch worries and after Morgan Stanley moved the financial sector to 'overweight' from 'underweight' as part of European Strategy review.
   
ING gained 2.01 pct at 30.50 amid news its real estate investment fund sold in a joint venture 50 pct of the Torres do Colombo office blocks project in Lisbon for a combined 12 mln eur.
   
Akzo Nobel rose 2.42 pct at 58.05 after the company said ICI is now backing its 670 pence per share takeover proposal. Investors were said to appreciate Akzo Nobel's promise of a 3 bln eur capital return, but Rabo Securities was less than enthusiastic, calling the takeover deal "expensive and risky".
   
There were few decliners, with Corporate Express taking the lowest rung, down 5.06 pct at 9.57, while Unibail-Rodamco was off 1.96 pct at 170.77.
   
Randstad fell 1.09 pct at 46.09, but peer blue chip staffing stock Vedior gained 2.10 pct at 18.01, while midcapper USG People rose 2.99 pct at 25.47 after UBS maintained the stock at 'buy' but cut the target to 37 eur.
   
Hagemeyer fell 0.82 pct at 3.65 after a downgrade to 'reduce' at Rabo Securities with a lowered price target of 3.5 eur versus 4 ahead of its first-half earnings on Friday.
   
On the midcap, Boskalis Westminster closed strongly higher, up 8.72 pct at 27.67, having moved sharply higher from 2 pm. Traders pointed to a possible technical recovery following strong losses on Thursday and Friday last week.
   
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