UK/Euro Financial Market Daily Evening Briefing 13-09-2007

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London shares close higher, near session peak; rallying with NY on data

UK blue chips closed higher today, just off the late afternoon peak after rallying from earlier falls in tandem with an jump on Wall Street as the latest weekly US jobless claims numbers eased worries over the health of the world's largest economy.
   
At the close, the FTSE 100 index was 57.7 points firmer at 6,363.9, below the session high of 6,374.5, having recovered from an opening low of 6,280.2.
   
All the broader FTSE indices were higher aside from the FTSE 250 index, down 47.3 points at 11,172.0. Volume was moderate, with 2.582 bln shares changing hands in 543,256 deals.
   
On Wall Street by London's close, the DJIA was 134.80 points stronger at 13,426.405, with the broader S&P 500 index up 13.20 points at 1,484.75, and the tech-laden Nasdaq composite index ahead 10.99 points at 2,603.06.
   
US stocks jumped higher after the weekly jobless claims came in better than economists expected.
   
The Labor Department reported claims for unemployment benefits rose by 4,000 last week to 319,000 -- the sixth increase in seven weeks -- but the number was less than the 325,000 claims analysts expected.
   
The rise in jobless claims countered last week's worse-than-forecast reading on August payrolls, which declined for the first time in four years and sent stocks plummeting amid worries that credit tightness and market turmoil had hit the labour market.
   
In London, Cable & Wireless was the top FTSE 100 riser today, up over 4.5 pct in value with a 7.5 pence rise to 174.3 after Cazenove upgraded its stance to 'outperform' from 'in-line' and increased its fair value estimate to 220 pence from 192 following recent share price weakness.
   
The broker also pointed out that new contract wins suggest the company's UK recovery is more than on track.
   
Brokers also highlighted a read-across from Q2 results yesterday for US managed network communications services provider Global Crossing's UK subsidiary, GCUK.
   
Reiterating its 'outperform' rating on the UK firm, Bear Stearns said it sees C&W UK's servicing arm aspiring to Global Crossing UK's margins and modestly outperforming its reported revenue performance.
   

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Fellow telecom blue chip BT Group also saw good support, up 8-1/4 pence at 318-1/4 aided by news of an upgrade in rating to 'buy' from 'outperform' by Collins Stewart with a target of 350 pence.
   
The broker cited valuation grounds and expectations for better visibility for margins at its Global Services business with first half results due early November.
   
Elsewhere among the gainers, commodity issues benefited from the better news for the US economy which helped lift heavyweight miners -- Lonmin gained 95 pence to 3,400, Anglo American added 92 pence to 2,908, BHP Billiton took on 38 pence to 1,494, and Vedanta Resources firmed 45 pence to 1,894.
   
Oil majors also added their strength to the blue chips as crude prices consolidated around the record highs hit yesterday after a massive drop in US crude stockpiles heightened supply fears, and amid fears that production could be threatened by hurricane Humberto.
   
Royal Dutch Shell shares gained 30 pence to 2,044, while BP added 4-1/2 pence to 572.
   
Away from resource issues, Unilever was also a good riser, up 22 pence at 1,611 after Lehman Brothers upped its rating on its Dutch sister company to 'equal weight' from 'underweight' citing underpinned margin progression.
   
On the downside with blue chips, financial issues were a drag on sentiment as concerns over arrears among UK borrowers hit mortgage banks.
   
Northern Rock was the top blue chip faller, 33 pence lower at 639 as fresh rumours circulated of a possible further profit warning from the group, while peer Alliance & Leicester shed 26 pence to 937-1/2, and HBOS dropped 6 pence to 892.
   
Sentiment was further hit after an RICS report showed UK house prices fell during August for the first time in nearly two years, while new buyer enquiries dropped at their fastest rate for three years.
   
Elsewhere among the fallers, ITV shares lost 4.6 pence to 106.4 after Goldman Sachs removed the commercial broadcaster from its Conviction Buy List and cut its target to 125 pence from 140, although it opted to maintain its 'buy' rating, following ITV's strategy presentation yesterday.

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Meanwhile, news of a cut in target and estimates contributed to losses in Kingfisher, down 1.5 at 196 with Evolution Securities reducing its target for the retailer to 225 pence from 250 and lowering its earnings estimates ahead of Kingfisher's interim results on Sept 20.
   
And Scottish & Newcastle also suffered from negative broker comment, losing 3-1/2 pence at 611 after a downgrade to 'neutral' from 'buy' by Merrill Lynch, with the broker citing the growing unlikelihood of a near-term bid from Danish peer Carlsberg.
   
On the second line, Charter was a notable casualty, down 49 pence at 1,136 after UBS cut its stance on the industrial machinery group to 'neutral' from 'buy' following yesterday's results.
   
Meanwhile in-line results today from industrial supply group SIG failed to stimulate any buying interest, with the shares shedding 49 pence to 1,227.
   
Among the mid cap risers, emerging markets fund manger Ashmore was the top riser, up 16 pence at 263, a near 6.5 pct advance, extending yesterday strong post-results advance helped by the rally in equity markets.
   
Other mid cap fund managers also saw support, with Bluebay Asset Management up 11 pence at 380, and F&C Asset Management ahead 4-1/2 pence at 202.
   
And Kier Group was also a good gainer, up 25 pence at 1,945 after the firm reported that construction and support services orders were at record levels as it announced a 30.5 pct rise in full-year pretax profits before amortisation
   
In reaction, Altium Securities reiterated its 'add' stance, and said it is likely to upgrade its forecasts on Kier by around 10 pct.

    
UK Diary of Events

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Paris shares close up, spurred by M&A talk, gains for defensive stocks

The CAC-40 index finished up 57.96 points or 1.05 pct at 5,565.97. Among CAC-40 stocks, 35 closed higher and 5 closed lower. On the Matif, XX CAC-40 futures were trading at 5,578.00. On the broader indices, the SBF-80 index closed up 11.14 or 0.17 pct at 6,600.30, while the SBF-120 ended up 37.38 or 0.93 pct at 4,051.96.
   
Vallourec led gainers on the CAC-40, ending the day up 8.80 eur or 4.82 pct at 191.26 on the back of market rumours that it is the target of takeover interest from Russia.
   
"Vallourec is a natural target - the main shareholder Bollore doesn't hold even 4 pct so the shareholding is not locked up - there is plenty of availability," said one dealer. Reports in the UK press that the French company is close to a deal with Gazprom, and that Lukoil is on the lookout for European acquisition targets, boosted its stock, the trader said.   
   
Alstom and Bouygues were also in focus amid continuing talk of a tie-up with Areva and rumours that Bouygues might sell its Bouygues Telecom unit to fund a stake in the merged business.
   
Bouygues finished up 0.70 or 1.18 pct at 60.15, while Alstom rose 4.60 or 3.40 pct to 140.00.
   
In contrast, Areva slipped back 3.01 or 0.43 pct to 699.00, hit by speculation that the state-owned nuclear group might be the main loser in the merger deal. According to a Paris-based dealer, "people see a slight downward risk to the price as it might be lowered to help Bouygues take a stake in the capital."
       
Carrefour finished up 0.58 or 1.20 pct at 49.10, while Danone added 0.85 or 1.54 pct to end at 56.22 and Veolia Environnement climbed 1.50 or 2.66 pct to 57.95.
   
Veolia was penalised at the start of the month, following the annoucenment of the Suez-GDF deal, amid concerns that Suez Environnement would be spun off fairly rapidly.
   
However, as one Paris dealer noted, "it's now becoming clear that the merger is going to take a long time, and in the meantime, with Veolia, you've got a great defensive stock, and a world leader that has underperformed the market."
   
Among other strong performers, ArcelorMittal surged 2.09 or 4.53 pct to 48.19. A local trader said the group is seen as a safe investment thanks to "extremely optimistic speeches recently on activity levels in the steel sector."
   
At the start of the week, he noted, Russian peer OAO Severstal reported first half net profit of 999 mln usd, up 134 pct year-on-year thanks to strong steel prices and increased production.
   
French media and defence conglomerate Lagardere SCA also rose sharply over the day, closing up 2.68 or 4.65 pct at 60.31.
   
Investors welcomed the group's first half earnings, published last night, which showed a better-than-expected performance in the press and radio division.
   
On the downside, Alcatel-Lucent weighed on the CAC-40 index, plunging 0.63 or 8.69 pct to 6.62 after issuing a profit-warning this morning.
  
Vincent Rech, a telecommunications analyst at French bank Societe Generale said "the real problem with this profit warning is where its coming from - it's coming from the US, we believe specifically the CDMA market, which has historically been a major source of profit for Lucent."
      
Fellow technology stock STMicroelectronics was down 0.37 or 2.98 pct at 12.06 after Lehman Brothers cut its rating to 'underweight' from 'overweight', and as the Alcatel-Lucent profit-warning, described as a "catastrophe" by one Paris-based dealer, weighed on the sector.

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German shares close higher as Wall Street gains, US data fans rate hopes

The DAX was 62.98 points or 0.84 pct higher at 7,535.97, having traded in the 7,430.64-7,545.23 band. The MDAX fell 7.51 points or 0.07 pct to 10,066.11, while the TecDAX retreated 5.44 points or 0.60 pct to 908.07. DAX futures advanced 64.50 or 0.86 pct to 7,536.50, while bund futures lost 039 or 0.34 pct to 114.06.
   
Deutsche Boerse rose 2.61 eur or 3.33 pct to 80.93 eur, leading rising blue-chip stocks higher, after the German Stock Exchange operator confirmed it is not interested in acquiring a stake in London-based rival London Stock Exchange Group PLC -- part of a 31 pct stake which Nasdaq Stock Market Inc plans to sell.
   
Retailing giant Metro gained 1.52 eur or 2.47 pct to 63.06 eur on further speculation that a break up of the group may be one of the prospects after Haniel increased its stake in the retailer to 34.24 pct at the end of August.
   
Utilities also fared well as investors turned to traditionally defensive stocks like utilities. RWE added 1.11 eur or 1.37 pct to 81.86 eur and EON gained 1.37 eur or 1.11 pct to 124.87 eur.
   
Further helping RWE shares were media reports that said the utility company's chief executive Harry Roels will step down earlier than planned and the EU commission has abandoned its plans to force a break-up of European utilities.
   
At the other end of the index, Munich Re slumped 1.05 eur or 0.82 pct to 126.75 eur.
   
Fresenius Medical Care slipped 0.24 eur or 0.64 pct to 37.12 eur after posting gains yesterday on news that the US Food and Drug Administration said that current guidelines on erythropoetin (EPO) usage were appropriate making it further unlikely that use of the drug will be limited beyond current restrictions in the US.
   
Infineon was 0.05 eur or 0.42 pct lower at 11.78 eur as dealers said negative data from US and German semiconductor sectors offset the potential positive effect from an upgrade from Lehman Brothers that the German chipmaker received this morning.
   
The PHLX Semiconductor Sector -- which is a price-weighted index composed of 19 companies primarily involved in the design, distribution, manufacture, and sale of semiconductors -- fell 1.94 pct to 490.21 yesterday evening.
   
Deutsche Postbank fell 0.24 eur or 0.47 pct to 50.58 eur as dealers pointed to speculation that Germany's largest retail bank might be hard hit by continued problems associated with the US subprime crisis, which might prompt it to issue a profit warning.
   
BMW was under pressure, closing 0.06 eur or 0.14 pct lower at 42.93 eur on concern over the weak US dollar as well as comments on made earlier this week at the IAA car show which indicate that the group is unlikely to present a strategic review any time soon.
   
Over on the MDAX, Fresenius gained 1.75 eur or 3.21 pct to 56.25 eur, while Kuka fell 0.84 eur or 2.80 pct to 29.15 eur. TecDAX-listed FJH gained 0.06 eur or 2.25 pct to 2.25 eur as the strongest performer on the index, while QSC was 0.11 eur or 2.93 pct lower at 3.65 eur.

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Amsterdam shares close higher, boosted by Wall St; Arcelor Mittal leads

The AEX closed 7.58 points or 1.45 pct higher at 530.96, after trading in a range of 521.65-531.72. Government bonds traded lower while the euro stood at 1.3876 usd versus 1.3881 usd late yesterday.
   
Arcelor Mittal added 4.53 pct to 48.19 eur after it said that its earlier announced share buyback programme started today.
   
Financials gained. ABN Amro added 2.74 pct to 35.02 eur, while ING added 1.82 pct to 30.17 eur, Aegon put on 0.53 pct to 13.23 eur and Fortis put on 0.39 pct to 25.80 eur.
   
Unilever rose 1.69 pct to 22.76 eur amid reports that it is considering selling its Maille and Alsa units. Royal Dutch Shell added 1.57 pct to 29.69 eur and SBM Offshore put on 1.24 pct to 27 eur amid record oil futures, traders said. Philips added 0.76 pct to 30.50 eur after it said it sold its 2.5 pct stake in US outfit Nuance for 60 mln eur.
   
Akzo Nobel added 0.61 pct to 56.10 eur amid news that several Imperial Chemical Industries (ICI) shareholders have sold shares. Akzo Nobel has put out a takeover bid ICI.
   
TNT added 0.49 pct to 30.68 eur after it said it has completed its 400 mln eur share buyback.
   
TomTom shed 0.78 pct to 52.25 eur amid profit-taking after several days of strong gains, traders said, while ASML led decliners, dropping 2.33 pct to 21.82 eur after sector peer STMicroelectronics was cut to 'underweight' in a sector review.
   
Among midcap shares, Corio rose 3.05 pct to 54.68 eur after an upgrade to 'buy' at UBS. CSM added 1.45 pct to 23.73 eur after the company announced a 100 mln eur share buyback.
  
Fugro added 1.75 pct to 52.80 eur, Wereldhave put on 1.26 pct to 84.09 and SNS Reaal rose 1.04 pct to 15.59 eur. ASMI dropped 1.17 pct to 19.50 eur, Wessanen shed 1.27 pct to 10.89 and Ordina dropped 3.12 pct to 13.66 eur.
   
Among small cap shares, Ten Cate dropped 9.06 pct to 28.29 eur amid news that its CEO is being investigated for tax fraud in the 1990s, when he was not CEO of the company.

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