UK/Euro Financial Market Daily Evening Briefing 14-02-2008

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London shares close flat, dragged back as NY falls on sombre Fed comments

The FTSE 100 index closed down 0.8 points at 5,879.3, having spent much of Thursday's session in the positive, while the FTSE 250 index held on to gains to close up 93.1 points at 10,089.

Volume was heavy, with 2.36 bln shares changing hands in 730,809 deals.

Across the pond, Wall Street was firmly in the red at the UK close as comments filtered out from Federal Reserve Chairman Ben Bernanke's congressional testimony.

The Dow Jones Industrial Average was 104.00 points lower at 12,448.20 at the UK close, while the Nasdaq Composite lost 22.56 to 2,351.37 and the S&P 500 slipped 9.95 lower to 1,357.25.

Testifying before the Senate Banking Committee, Bernanke predicted the economy will grow at a "sluggish" pace before recovering later in the year and that banks' mortgage investments could lose more value. Though the chairman's comments suggested the Fed is still open to further interest rate reductions, the tone was, as expected, sombre.

In London, Diageo was the top Footsie riser, 47 pence higher at 1,081, after the drinks producer reported first-half organic operating profit of 1.414 bln stg, up 9 pct on the previous year, and reiterated its target of 9 pct full-year organic operating profit growth.

Merrill Lynch described the results as solid and reiterated its 'buy' rating along with a 1,100 pence price target.

Elsewhere, UK miners rallied on the back of fresh metal price increases amid South Africa's power crisis, and ongoing hopes of sector consolidation.

Anglo American added 69 to 3,094, Lonmin was up 79 at 3,359, Vedanta Resources took on 50 to 2,004, and Xstrata gained 72 at 3,852. The latter was also in play on reports Glencore, the Swiss commodities trader that owns 35 pct of the Anglo-Swiss mining group, has been offered 48 stg for its stake. A spokeswoman for Xstrata declined to comment.

Sticking with M&A news, J Sainsbury took on 9-3/4 at 380, buoyed by rumours suggesting the Qatar Investment Authority may have lifted its stake in the supermarket chain by buying shares from property tycoon Robert Tchenguiz.

Meanwhile, British Energy was also in demand, 9 ahead at 542, on speculation since denied by the company that it is considering a 5.5 bln stg break-up plan. The plan would reportedly create a new company focused on building the next generation of nuclear power plants, but British Energy told Thomson Financial News it has no plans for a split.

And the announcement that Pearson is selling its data management business for 225 mln usd (115 mln stg) in cash sent shares in the publisher 11 higher to 674.

M&A apart, Standard Life made headway, 3.7 higher at 210.7 after the UK insurer said it is set for a 100 mln stg profits boost this year from an agreement to transfer 6.7 bln stg of annuities to Canada Life.

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Turning to broker changes, bullish comment helped fuel shares in Reckitt Benckiser, up 78 at 2,801, with SG Securities upgrading the group to 'buy' from

'hold' and increasing its price target to 3,400 pence from 2,900 following yesterday's encouraging full-year results.

But bearish comments from brokers also weighed on a number of blue-chips, with Hammerson down 33 at 1,052, Land Securities off 44 at 1,553 and British Land 39 weaker at 969 after Goldman Sachs downgraded the first two to 'sell' from 'neutral' and the latter to 'neutral' from 'buy' as part of a real estate investment trusts (REIT) note.

The main faller, however, was HBOS, which led the banking sector lower as full-year numbers from Swiss peer UBS stoked investors' nerves regarding subprime positions.

HBOS shed 34 at 631, Royal Bank of Scotland fell back 8-1/4 at 361 and Barclays slipped 10-1/2 to 443.

In the pharmaceuticals sector, AstraZeneca was 51 lower at 1,945 as the market digested news it has spun-off part of its gastrointestinal unit in Sweden to a consortium of venture capitalists.

There were suggestions from analysts that investors may have expected the Anglo-Swedish drugmaker to get more money for the sale, which raised 27 mln usd in its first closing.

Peer Shire lost 21-1/2 at 903 and GlaxoSmithKline dipped 3 lower at 1,101.

Elsewhere, shares in WPP lost 11-1/2 to 604 after the group said it has acquired a 75 pct stake in website design and development agency, HeathWallace, in line with its strategy to develop networks in fast growing sectors and markets.

On the second tier, Aquarius Platinum surged over 12 pct higher, up 84-1/2 at 786-1/2 after platinum prices breached the 2,000 usd an ounce level this morning amid fears the electricity shortages which have hit South African mine production could be set to worsen.

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Elsewhere, Southern Cross Healthcare also attracted buyers, 38-3/4 ahead at 407 after the care home provider reported an in-line trading statement that was welcomed as "reassuring" by analysts.

Investec Securities said in a note to clients that all operational metrics were as expected, and the trading update was reassuring, retaining his 'buy' recommendation.

A broker upgrade helped send Interserve shares 14 higher to 445 with UBS upgrading its stance on the group to 'buy' from 'neutral' on valuation grounds ahead of the company's full-year numbers next month.

Among mid-cap fallers, Electrocomponents dropped 5.7 pct, down 11 at 182-1/2 after its trading statement showed a slowdown in growth, prompting Investec to repeat its 'sell' recommendation and 168 pence price target on the stock.

Kesa Electricals was 9-1/2 weaker at 214-1/2 in sympathy.

Also suffering in the wake of a trading statement were shares in Paypoint, down 5-1/2 at 613-1/2, after the company reported full-year earnings in line with market expectations, but which Citigroup labelled "unexciting".

Sentiment was also dented by news non-executive chairman David Baxter Newlands, chief executive Dominic Taylor and Tissington Ltd -- a trust of which Taylor is the sole beneficiary -- recently sold shares in the company.

And finally, Barratt Developments took a hit today as traders speculated the housebuilder was thinking about a rights issue to refinance its debt, although the company denied such talk.

Barratt shares lost 15 at 383.

UK Diary of Event:
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 UK Small Cap Report:
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Paris shares close flat as Bernanke comments spark late slide

The CAC-40 index finished up 0.07 pct, or 3.25 points, at 4,858.65. Among CAC-40 stocks, 20 closed higher and 20 closed lower.

On the broader indices, the SBF-80 index closed up 27.24 points or 0.49 pct at 5,577.08 and the SBF-120 was 4.31 points or 0.12 pct higher at 3,520.70.

The euro was quoted at 1.4622 usd, compared to 1.4625 at middday.

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German shares close lower after downbeat Fed comments on US economy

The DAX closed 11.39 points or 0.16 pct lower at 6,962.28, having traded between 6,935.31 points and 7,062.08 points today. The MDAX added 30.66 points or 0.34 pct to 9,082.16 points, while the TecDAX rose 1.14 points or 0.14 pct to 821.41 points.

DAX futures retracted 56.00 points or 0.80 pct to 6,988.00 points, while bund futures eased 0.22 points or 0.19 pct to 115.99 points. On the DAX index, Deutsche Boerse led blue-chips lower, closing 1.41 eur or 1.20 pct lower at 116.07 eur.

Commerzbank slid 1.39 eur or 6.55 pct to 19.84 eur after the bank released fourth-quarter figures that mostly met expectations. Traders the results offered no surprises and the share price was correcting from firm buying in recent days.

Deutsche Postbank was 0.99 eur or 1.66 pct lower at 58.77 eur as rumours of an impending takeover of Germany's largest retail bank continued to cool.

Commerzbank CEO Klaus-Peter Mueller signalled interest in the retail bank this morning, but did not announce a bid as some had speculated.

Fresenius Medical Care lost 0.98 eur or 2.81 pct to 33.85 eur after traders said Unicredit lowered its target to 62 eur per share from 64.

Continental was 0.91 eur or 1.33 pct lower at 67.51 eur as traders spoke of vague rumours of a possible profit warning by the tyre and auto parts specialist, which releases its full-year results next Wednesday.

At the other end of the DAX, Deutsche Post added 0.60 eur or 2.77 pct to 22.25 eur after police raided chief executive Klaus Zumwinkel's office, which investors feared could spur an upper-level management change at the mail carrier and accelerate the sale of its Deutsche Postbank AG unit.

Daimler gained 0.19 eur or 0.35 pct to 53.95 eur after the company issued a bullish outlook for 2008 and an announcement it will restart its stock buyback programme.

Siemens rose 0.77 eur or 0.87 pct to 89.73 eur and ThyssenKrupp rose 0.75 eur or 2.22 pct to 34.54 eur. On the MDAX, IKB Deutsche Industriebank added 0.75 eur or 12.80 pct to 6.61 eur as the top gainer.

Traders credited news late yesterday the bank will receive 1.5 bln eur additional capital, which will include 1 bln eur from the German government.

Wacker Chemie added 1.41 eur or 0.96 pct to 148.21 eur after the silicon wafer specialist said full-year EBITDA rose to 1 bln eur from 786 mln eur last year.

At the other end of the mid-cap index, Hugo Boss lost 3.65 eur or 9.21 pct to 36.00 eur after the fashion specialist said chief executive Bruno Saelzer will quit at the end of February because of disagreements over the German fashion company's strategy.

Hochtief eased 2.01 eur or 2.61 pct to 74.99 eur after the construction giant's Australian unit, Leighton Holdings, released first-half figures that fell short of market expectations.

TecDAX-listed Conergy was the strongest gainer on its index, up 0.84 eur or 6.14 pct at 14.51 eur. Solarworld was up 1.01 eur or 3.14 pct at 33.18 eur after investors cheered its full-year results.

QSC lost 0.24 eur or 10.17 pct to 2.12 eur

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Amsterdam shares close lower after Bernanke speech; Randstad shines

The AEX closed down 1.65 points or 0.37 pct at 442.53, after opening at 449.55 and trading in the range 441.63-450.49.

Government bonds traded lower, while the euro stood at 1.4629 usd compared with 1.4569 usd late yesterday.

Earlier, the Amsterdam market had been supported by news that Dutch GDP grew 4.4 pct in the fourth quarter from a year earlier, the fastest pace in seven years, the Central Bureau of Statistics said.

Blue chip shares were led down by TomTom which fell 2.48 pct at 38.08 eur, while takeover target Tele Atlas led midcap decliners, falling 1.51 pct at 26.67.

Wolters Kluwer lost 2.21 pct at 19.00 eur as Goldman Sachs downgraded the publisher to 'sell' and Reed Elsevier eased 1.09 pct at 11.82 eur as the US broker reduced its opinion to 'neutral'.

Aegon led financials down, losing 2.08 pct at 9.43 eur.

Heavyweight oil and energy group Shell fell 0.12 pct at 24.22 eur amid news that it still sees coal a key energy source over coming decades.

Corporate Express fell 1.81 pct at 5.43 eur amid profit taking after yesterday's takeover-fuelled gains. On the midcap, BinckBank shed 1.11 pct at 8.01 eur.

But Randstad was the day's stand-out stock, rising 5.11 pct at 26.34 eur after it returned better-than-expected fourth quarter results and said the new year has started well.

Takeover target Vedior climbed 3.11 pct at 16.89 as Randstad said the takeover preparations are on track. Midcap peer USG People also traded higher, gaining 3.97 pct at 14.39 eur.

Heineken added 0.66 pct at 37.88 eur as the European Commission said its inquiry deadline for the Dutch brewer's proposed acquisition of Scottish & Newcastle assets is set for March 18.

TNT rose 0.29 pct at 27.75 eur as analysts expect the postal group to report strong fourth-quarter results on Monday amid concerns over 2008.

Among other notable gainers, midcapper Nutreco lifted 2.38 pct at 45.60 as the animal and fish feed maker announced higher than expected full year profit.

Ballast Nedam rose 3.19 pct at 25.85 eur as investors welcomed news the company has been awarded a 170 mln eur contract to carry out work on a power plant in the Netherlands.

Local issue Grontmij gained 4.98 pct as minority shareholder Midlin called on the company to pay a super dividend or launch a share buyback.

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