UK/Euro Financial Market Daily Evening Briefing 16-10-2007

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London shares close lower, miners weigh; NY down on Bernanke speech

Leading shares closed down, with mining stocks helping to drag blue-chips lower, while US stocks were in negative territory after last night's speech from Fed chairman Ben Bernanke added to economic concerns.
   
At the close, the FTSE 100 index was down 30.2 points at 6,614.3, while the FTSE 250 index was down 73.7 points at 11,366.2. Volume was moderate, with 2.737 bln shares having changed hands in 615,310 deals.
   
On Wall Street, US stocks were down after Federal Reserve Chairman Ben Bernanke said last night that the slumping housing market remains a "significant drag" on the economy.
   
By the London close, the Dow Jones industrial average was down 38.00 at 13,946.80. The Standard & Poor's 500 index slipped 3.85 to 1,544,85, while the Nasdaq composite index dipped 0.02 to 2,780.03.
   
Back in London, miners, which have played a major part in driving the FTSE 100 to near seven-year highs in recent days, have been a negative factor today.
   
Morgan Stanley, in a sector review cut Anglo American, down 86 pence at 3,320, to 'equal-weight' from 'overweight', and Antofagasta, which was 24 pence weaker at 829, was cut to 'underweight' from 'equal-weight'.
   
BHP Billiton was off 6 pence at 1,823, Vedanta Resources dropped 42 pence to 2,165, and Lonmin was down 47 pence at 3,578.
   
Investors were also anxious ahead of the third-quarter operations review tomorrow from Rio Tinto, with its shares down 54 pence at 4,419.
   
However, Johnson Matthey ended the day as the top faller, down 87 pence at 1,753, following yesterday's 10 pct surge precipitated by talk of a 2,000 pence offer from Fortune 300 company Praxair, which prompted Evolution to trim its rating to 'add' from 'buy'.
   
In a comment this morning, Evolution said Johnson Matthey's positioning as a global market leader in the environmental space means that the company is always a bid candidate for a larger group having completed a strategic review of future direction.

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Credit checking company Experian slipped 12-1/2 pence to 476-1/2 after Morgan Stanley downgraded its view to 'equal-weight' from 'overweight', while cutting its target by 24 pct to 560 pence, citing a lack of short-term catalysts.
   
Elsewhere, Vodafone fell back 2.7 to 173.6 after European peer Ericsson said third-quarter results have come in lower than expected due to a shortfall in revenues from mobile network upgrades and expansions, which also impacted margins.
   
Currys and PC World owner DSG International was 3.0 pence lower at 132.3, near a 12-month low, ahead of a trading update on Thursday.
   
Turning to the gainers, oil stocks were in favour yet again, as oil prices traded at record highs. Brent for November delivery, which expires today, was trading at more than 84 usd a barrel.
   
The oil sector continued its bullish run, with Royal Dutch Shell taking on 20 pence to 2,075, while BP climbed 4-1/2 pence to 627, yet another high. The strong showing since chief executive Tony Hayward's restructuring statement last week has helped it to regain top spot as the UK's biggest company, by market capitalisation.
   
BG Group also extended recent gains, rising 19 pence to 914, amid renewed speculation that the oil & natural gas exploration & production company is a takeover target..
   
Banking stocks were mostly lower, with Lloyds TSB dropping 11 pence to 536-1/2, after the Financial Times reported that the group was charged yesterday by US prosecutors of knowingly helping an international fugitive launder hundreds of mlns of dollars in illicit gains before and after he was indicted in 2002 by a federal grand jury.
   
Barclays was down 11-1/2 pence to 615, Royal Bank of Scotland fell 12 to 514-1/2 and HBOS lost 12 to 866.

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However, Northern Rock, continuing its turbulent run reversed this mornings losses to close as the top riser, up 7.5 at 223.5, as ongoing bid speculation encouraged investors.
   
Among the midcaps, news support services group Alfred McAlpine added 6 pence to 538 after it confirmed it has received a takeover approach from Carillion at 570 pence per share, but said it rejected the offer as it believed it materially under-valued the company.
   
Carillion was the top 250 faller by the close, down 25-1/4 at 389.
   
Elsewhere, SSL International took on 19 pence to 518, with its positive trading update helping to elevate the company to the top of the mid-cap leaderboard.
   
Earlier, the group said it expects sales to exceed 260 mln stg in the first half, driven by growth in Asia and Eastern Europe.
   
Like-for-like sales are expected to grow by 9 pct, with the Durex and Scholl brands contributing the greatest proportion of sales, the company said.
   
Finally, Bellway closed up 18 at 1,047 after it posted in-line results and with Shore Capital upgraded its stance to 'hold' from 'sell' in reaction.

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 of today's trading on the FTSE 250 and the AIM, click here

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Paris shares close lower on rising oil prices, US housing outlook

The CAC-40 index finished down 33.08 points or 0.57 pct at 5,774.36. Among CAC-40 stocks, 28 closed lower and 11 closed higher.
  
Shares in Alcatel-Lucent were dealt another heavy blow, as a profit-warning from Sweden's Ericsson prompted by declining revenues in the networks business raised fresh concerns over the French group's outlook.
   
Alcatel-Lucent shares closed down 0.31 eur, or 4.48 pct, at 6.59 eur. According to Nomura, the news from the Swedish group is negative for peers across the sector, namely Alcatel-Lucent, Nokia Siemens Networks and Nortel, "as this is clearly a market phenomenon and not limited to Ericsson."
   
Moreover, as a local dealer put it, a bad performance from Ericsson hardly inspires confidence in Alcatel given its poor track record for profit-warnings. "We're constantly being disappointed by Alcatel, so when Ericsson disappoints, people automatically think they need be wary of the French group," he commented.
   
Shares in Pernod Ricard bucked the overall market trend, rising 2.08 eur or 1.38 pct to 152.92, helped by the confirmation of a forthcoming two-for-one share split, and a positive assessment from CM-CIC Securities on the group's ability to finance an acquisition of Absolut vodka and the benefits of the deal.
   
According to a trader, the news was lifting the shares today, with investors anticipating improved liquidity that will help drive trade.

However, for CM-CIC, the most important items in the resolutions were the proposals for authorisation to issue equity or debt, which will give the group "broad financial flexibility to go ahead with major acquisitions."
   
Shares in Total were also up strongly, gaining 0.77 eur or 1.36 pct to 57.20. Oil was up, having earlier hit a new record high, as fund buying continued, supported by geopolitical tensions, a weak dollar, and fears US heating oil supplies may not keep up with demand during the winter months.
   
While an ongoing diplomatic spat between Turkey and Iraq is adding some immediate risk premium to prices, a host of other factors, including the weak dollar and fears over the tightness of US stockpiles, are underpinning today's gain, analysts said.
   
The rising oil price weighed heavily on shares in Europe's airlines, such as Air France-KLM. The company's shares fell 0.64 eur or 2.35 pct to 26.56 as further escalation in the price of oil triggered negative sentiment on the airline industry, dealers said.
       
Moreover, Air France-KLM's investor meeting yesterday offered no positive catalyst to counter the oil effect, prompting investors to sell off shares.
   
Accor fell 0.18 eur or 0.27 pct to 67.32, and Carrefour rose 0.25 eur or 0.53 pct to 47.71. The French hotels group and retailer were scheduled to report third quarter sales after the market close.

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German shares close lower led by VW, ThyssenKrupp, Siemens

The DAX was down 6.83 points or 0.09 pct at 7,962.64 after trading between 7,927.78 and 7,964.60 in today's trade. The MDAX was down 163.42 points or 1.53 pct at 10,534.98 while the TecDAX lost 10.96 points or 1.08 pct to 1,003.01. DAX futures were down 4.50 points or 0.06 pct at 8,033.00 while bund futures were down 0.16 or 0.14 pct at 111.65.
  
Volkswagen, down 5.62 eur or 3.13 pct at 173.67, was the biggest loser after the VW's Group European Sept new car registrations fell steeper than the overall market although it remained still a market leader despite the 6.8 pct year-on-year decline, analysts said.
   
Siemens lost 2.40 or 2.52 pct at 92.92 after peer Ericsson issued a profit warning.
   
ThyssenKrupp declined 1.29 or 2.89 pct at 43.35 after its share price breached key support levels.
   
On the upside, utilities led, with RWE up 2.23 eur or 2.48 pct at 92.00 and EON adding 3.08 or 2.39 pct at 131.96.  Citigroup raised it targets for shares in RWE and EON while maintaining its 'buy' ratings.
   
In a note to clients, Citigroup said it had raised its target on RWE to 111 eur from 110 to reflect its new German long-term power price assumption, which is increased to 60 eur/MWh from 55 eur. Citigroup raised its target for EON shares to 147 eur from 140.
   
Vossloh led the MDAX index, adding 1.92 or 2.45 pct at 80.39.
   
MTU Aero Engines, the biggest loser on the MDAX, eased 1.94 or 4.37 pct at 42.50. Financial Times Deutschland said a member of the jet engine specialist's management board, Bernd Kessler, is to leave the company to become the new chief executive of Swiss rival SR Technics perhaps leading to a management vacuum.
   
IKB fell 0.18 or 1.34 pct at 13.26. IKB CEO Guenther Braeunin said today he would not rule out a capital increase in the future and said the move would depend on who the bank's partner would be.
   
On the TecDAX, Q-Cells lost 3.76 or 4.47 pct at 80.42 while United Internet rose 0.58 or 3.93 pct at 15.34.

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Amsterdam shares close lower as Wall Street dips

The AEX closed 2.77 points or 0.50 pct lower at 550.30, after opening at 551.56 and trading in the range 547.68-552.24. Government bonds traded mixed while the euro stood at 1.4157 usd versus 1.4204 usd late yesterday.
   
Corporate Express led blue-chip decliners, off 2.75 pct to 7.78 eur, while  Philips fell 2.31 pct to 29.63 eur. Rabo Securities today cut its target for the electronics giant to 40 eur from 41, while reiterating its 'buy' rating following yesterday's third-quarter results.
   
ArcelorMittal was 2.19 pct off at 53.96 eur on news it sealed a deal to buy an additional 25 pct in its four Polish steel mills from the Polish treasury ministry, valuing the stake at 436.4 mln zlotys.
   
TomTom slipped 2.08 pct to 53.14 eur. Earlier the company said it is preparing to file for regulatory permission with the European Union for its takeover of Tele Atlas, with the filing taking place in the "near future". The company also announced it was launching a new product -- the TomTom ONE XLS -- which will be rolled out across the US and Canada from the end of October for around 400 usd.
   
Staffing stock Vedior lost 1.86 pct to 16.35 eur, recovering slightly from earlier lows, as Petercam has upgraded the issue to 'hold' from 'reduce' and held its target at 18.03 eur ahead of the company's third-quarter figures, due Oct 25. Peer Randstad dropped 1.77 pct to 39.98 eur.
   
Hagemeyer dropped 1.21 pct to 4.90 eur as the company said it met with representatives of Sonepar -- which has made an indicative offer of 4.25 eur-per-share for Hagemeyer -- and reiterated that the offer "significantly  under-values the company" and that no follow-up meeting has been scheduled.
   
On the midcap, bakery supplier CSM fell 5.52 pct to 23.60 eur after saying it expects to incur an extra 190 mln eur in material costs at its Bakery Supplies division over the full year when compared to 2006 and that it expects its full-year results to be impacted by around 8 mln eur as a result.
   
Heijmans lost 0.85 pct to 29.15 eur as Rabo Securities cut its price target on the stock to 31 eur from 38, while reiterating its 'hold' recommendation following the Dutch builder's recent profit warning.
   
ASML added 1.58 pct to 22.42 eur ahead of its third-quarter numbers, due tomorrow, while Shell gained 1.25 pct to 29.89 eur as oil prices surged.

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