UK/Euro Financial Market Daily Evening Briefing 15-10-2007

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London shares close lower; jitters over US earnings knock confidence
 
Shares closed sharply lower as jitters surrounding US corporate earnings hit sentiment, with weakness among UK financials offsetting bid talk at Johnson Matthey.
   
The FTSE 100 closed 86.2 lower at 6,644.5 having slipped back from a morning high of 6,751.7. The broader indices were also lower with the FTSE 250 off 136.4 at 11,439.9.
   
Over on Wall street, US shares fell as investors backed away from the market amid a slump in Q3 earnings from Citigroup and a surge in oil prices.
   
Finanicial stocks bore the brunt of selling after Citigroup announced it was suspending its share buyback programme amid a slump in Q3 earnings.   
   
At midday in New York, the DJIA was off 124.5 points at 13,969.2, with Nasdaq off 21.26 at 2,783.4 and the S&P 500 down 9.7 at 1,552.2.
   
Northern Rock slumped 57 pence to 216.25 pence amid concern any takeover of the group would leave shareholders with worthless share certificates.
   
The bank confirmed it is in talks with potential buyers, but said the discussions were at an uncertain preliminary stage.
   
Credit Suisse added to today's negative sentiment after lowering its target to 180 pence from 390 and reiterating its 'underperform' stance, saying it was very difficult to value the shares at present.
   
Financial peers came in for some selling pressure, with Barclays off 21 at 626-1/2, HBOS down 27 at 878 and midcap group Bradford & Bingley off 11 at 265.
   
Merrill Lynch's resumption of coverage in Royal Bank of Scotland with a 'neutral' recommendation hit the shares 19 to 527.

Insurers also felt the crunch. Legal & General fell 6.3 to 135.5 with JP Morgan reiterating its 'underweight' stance, with rumours circulating among traders that it may 'talk down' forecasts.
   
The takeover saga surrounding Resolution remained fluid after Zurich-based reinsurer Swiss Re said it was in talks with Standard Life over buying parts of Resolution should it make a successful bid for the company.

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Resolution dipped 3-1/2 to 705, Standard Life was 9.25 lower at 280, Friends Provident eased 5.9 to 175.1 and Aviva fell 36 to 747.
   
Meanwhile, SABMiller fell 70 pence to 1,413 after it said lager volumes grew 11 pct on an organic basis in the six months to end-September as Miller Brewing continued to show a turnaround in fortunes.
   
Merrill Lynch reiterated its 'neutral' stance and Collins Stewart maintained its 'hold' recommendation with a price target of 1,600 in reaction.
   
Whitbread eased 49 to 1,725 while DSG Internation slid 9.2 to 135.3, both ahead of trading updates later this week.
   
On the upside, Johnson Matthey jumped nearly 10 pct, or 166 pence to 1,746 and topped the FTSE 100 gainers board amid rumours US industrial gas provider Praxair Inc is looking at a possible 2,000 pence per share bid for the company.
   
Oil shares made up the remainder of gainers today, buoyed by crude prices hitting all-time peaks in London and New York.
   
BP gained 3-1/2 pence to 622-1/2, shrugging off HSBC's slicing of its price target to 675 pence from 680, and lowering earnings forecasts. Royal Dutch Shell gained 14 to 2,055
   
Midcap Rank Group continued its decline after a profit warning, partly caused by the effects the smoking ban has had on its bingo activities. Rank closed 15-1/4 pence lower at 109-3/4.

Investec Securities cut its rating to 'sell' from 'buy' with a 95 pence target, highlighting the smoking ban.
   
CSR fell 20-1/2 to 620 following Citigroup cutting its dollar price target to 20.4 usd from 23.0 usd to reflect the near-term caution following the announcement of a new CEO.
   
Elsewhere, Travis Perkins was 30 pence weaker at 1,512 after the builders' merchant and home improvement retailer's nine month turnover failed to attract buyers despite revealing a rise of 11.3 pct compared to the equivalent period last year.

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Diary of Events

For a diary of key financial and corporate events in the UK this week, click here

UK Small Cap Report

For a summary today's trading on the FTSE 250 and the AIM, click here

Paris

Paris shares close lower, CAC falls 0.62 pct to 5,807.44

The CAC-40 index finished down 36.51 points, or 0.62 pct, at 5,807.44. Among CAC-40 stocks, 30 closed lower and 10 closed higher.
   
Rising oil prices lifted the shares of French oil major Total, which closed up 0.84 eur or 1.51 pct at 56.43.
   
Carmaker PSA Peugeot Citroen's shares were the biggest losers on the day among blue-chip stocks. Peugeot shares closed down 2.22 eur or 3.7 pct at 57.85 after brokerage UBS cut its recommendation on the stock to sell from neutral.
   
The company is one of the European carmakers most at risk of not meeting its 2008 targets, the banks' analysts said in a research note.
   
Paris' blue-chip banking stocks all closed lower after US peer Citigroup reported a 57-pct-drop in quarterly profit.
   
Societe Generale closed down 2.79 eur or 2.27 pct at 120 eur, BNP Paribas closed down 1.42 eur or 1.78 pct at 78.48, and Credit Agricole closed down 0.44 pct or 1.59 pct at 27.22.
   
Investors snapped up LVMH shares after the luxury goods group reported above-forecast organic sales growth for the third quarter and first nine-months of the year. The stock led Paris' blue-chip gainers, closing up 2.18 eur or 2.55 pct at 87.68.
   
Merrill Lynch analysts reiterated their 'buy' stance and price target of 95 eur, saying all divisions at the luxury goods group had surpassed their expectations, adding weight to their scenario of 11.8 pct EBIT growth for the full year.
   
Utilities Suez and Gaz de France both got a lift from their announcement of financial targets for their merger, now expected to be completed early in 2008. Suez closed up 0.38 eur or 0.89 pct at 42.93 eur and GDF closed up 0.31 eur or 0.82 pct at 38.15 eur.
   
The merged GDF-Suez group's EBITDA is seen rising 10 pct in 2008, and will reach 17 bln eur by 2010. GDF Suez has targeted an average annual dividend rise of 10-15 pct through 2010, based on GDF's 2007 dividend payout.
   
The company will strengthen its activities with average capital spending of 10 bln eur per year in 2008-2010, with priority given to Europe.

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German shares close lower as investors are cautious ahead of earnings

The DAX closed down 71.79 points, or 0.89 pct, at 7,969.47, after having traded between a low of 7,951.26 and a high of 8,039.80 in today's session. The MDAX declined 56.69 points, or 0.53 pct, to 10,698.40, while the TecDAX slipped 0.70 points, or 0.07 pct, to 1,013.97.
   
DAX futures were down 56.00 points, or 0.69 pct, at 8,034.50, while bund futures gained 0.14, or 0.13 pct, to 111.78. The euro was trading at 1.4213 usd, versus 1.4209 usd in afternoon London trade.
  
Siemens led large caps lower, dropping 2.67 eur or 2.72 pct to 95.32 after competitor Philips reported quarterly results which did not meet market expectations in terms of net profit, traders said.
   
Deutsche Boerse plunged 2.46 eur or 2.31 pct to 103.85, after earlier reaching an intraday high of 107.96 as the company said today it bought back 224,000 of its own shares in the period Oct 8-12 for a total of 23.7 mln eur.
   
Lufthansa fell 0.37 eur or 1.74 pct to 20.88, while Deutsche Post declined 0.38 eur or 1.72 pct to 21.68.
   
Volkswagen retreated 3.14 eur or 1.72 pct to 179.29.
   
On the upside of the DAX, EON was the strongest gainer, rising 0.98 eur or 0.77 pct to 128.88 following a target increase at Deutsche Bank to 145 eur from 118 eur and as Morgan Stanley resumed coverage of the stock.
   
Deutsche Bank analyst Lars Slomka is expecting the company to achieve an 11 pct compound annual growth rate until 2010, with "optimised financing structures due to a 7 bln eur share buyback", he wrote in a note to clients.
   
RWE jumped 0.33 eur or 0.37 pct to 89.77 after the company said it, together with Libyan partner National Oil Company (NOC), had discovered a new oil well in the Sirte basin, some 700 km to the east of Tripoli in Libya.
   
Bayer was the third and last gainer on the DAX, adding 0.15 eur or 0.26 pct to 57.81 after the company said its experimental multiple sclerosis (MS) drug Alemtuzumab led to fewer relapses and was better at slowing the progress of disabilities than Merck KGaA's Rebif in a three-year phase II study.
   
Over on the MDAX, Pfleiderer closed as the top gainer, having added 0.46 eur or 2.61 pct to 18.08 after Exane BNP Paribas started coverage of the stock with an 'outperform' rating and a price target of 23.70 eur.
   
At the lower end, MLP fell 0.57 eur or 5.19 pct to 10.42.
   
TecDAX-listed Ersol Solar climbed 4.50 eur or 6.20 pct to 77.08, while Conergy lost 5.41 eur or 9.42 pct to 52.00 after a report in weekly Euro am Sonntag said the solar energy company's business performance is worse than expected.

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Amsterdam shares close lower, tracking Wall Street; Philips falls

The AEX closed 6.07 points or 1.09 pct lower at 553.07, after opening at 558.01 and trading in a range of 555.48-558.83. Government bonds were broadly lower and the euro stood at 1.4204 usd versus 1.4161 usd late on Friday.
   
Philips closed 5.66 pct lower at 30.33 eur after leading decliners throughout the day following third-quarter results that were marked by disappointment in the company's medical systems business. Petercam also downgraded Philips to 'hold' from 'add' while the company's US unit MedQuist, in which it holds 70 pct, made news announcing it's intent to request a NASDAQ listing.
   
Hagemeyer closed 2.17 weaker at 4.96, after also declining throughout the day. The takeover target was downgraded by both UBS and Fortis today, and while SNS Securities noted a positive read-through from performance by Hagemeyer peers in the UK and US markets, the brokerage said in a note that when it comes to share price impact and importance, market developments will "take a backseat" to M&A developments.
   
Reed Elsevier was down 1.79 pct at 13.16 while publishing peer Wolters Kluwer found itself among the handful of AEX gainers, rising 0.41 pct to 21.96.
   
Unilever closed 1.66 pct lower at 21.97 amid news that unions plan to continue strikes against the company.
  
Fortis fell 1.62 pct to 23.10 after it was reinitiated at 'buy' at KBC following its recent rights issue, and financial peer ING shed 1.29 pct at 32.03 amid news it will buyback roughly 105 mln eur in preference shares from ABN Amro and has raised its stake in French business software group Business Objectives to over 5 pct.
   
Among other major decliners, Corporate Express lost 1.60 pct to 8.00 and KPN, which was in the news as it announced it was making its offer for IT group Getronics unconditional, lost 1.48 pct to 12.67 while the takeover target rose 0.80 pct to 6.27 eur, closing 2 cents over KPN's offer price.
   
Ahold, which received a price target upgrade at ING this morning on an expected recovery for its US Stop & Shop chain, closed 0.46 pct lower at 10.90 while Numico was nearly flat, adding 0.02 pct to 54.61.
   
TomTom led blue-chip gainers, closing 2.28 pct higher at 54.27 eur after outperforming throughout the day. Earlier, the personal navigation device maker was mentioned by Citigroup as a preferred stock in the electronic technology sector. TomTom takeover target Tele Atlas also outperformed, rising 3.60 pct to 23.31 eur, still trading well above the 21.25 eur per share takeover offer put out by TomTom.
   
Semiconductor share ASML, which was also mentioned by Citigroup, closed 0.82 pct higher at 22.15, while Royal Dutch Shell added 0.61 pct to 29.53.
   
Among major midcap decliners, LogicaCMG slipped 2.95 pct to 2.30 and Van der Moolen was down 2.22 pct at 3.52 while Vopak was 2.45 pct weaker at 39.01 and real estate share Wereldhave lost 2.47 pct to 83.74 while peer Corio, which made news announcing a Turkish acquisition this morning, shed 1.35 pct to 59.98.
    
Binckbank led midcap gainers, rising 3.74 pct to 13.60 while Heijmans put on 1.73 pct to 29.40, recovering ground lost following Friday's profit warning while Petercam put the share on 'hold' after reviewing its 'add' rating over the weekend.

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