UK/Euro Financial Market Daily Evening Briefing 18-02-2008

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London shares close higher, banks lead the rally; US closed for holiday

At the close, the FTSE 100 index was up 159.0 points at 5,946.6, just off a session high of 5,951.9. The FTSE 250 index was up 186.1 at 10,084.0.

Volume was weak, with just 1.687 bln shares changing hands in 484,650 deals. Banks led the rally in a day when all but three blue chips were in positive territory.

The sector was given hope by reports in the Sunday Times that two of Britain's biggest banks, Barclays and Lloyds TSB, will this week attempt to lift the climate of fear surrounding the country's financial institutions by declaring an unexpected increase in dividend payments.

Barclays, due to report tomorrow, was the top FTSE riser, up 32-1/2 pence at 460, with HBOS 30-1/2 higher at 639 and Lloyds TSB, due to report final results Friday, up 28-3/4 at 424-1/2.

The insurers joined the rally, with Friends Provident up 4.3 pence at 135.8, after the Saturday Financial Times reported that JC Flowers, the US private equity group stalking Friends, has been sounding out shareholders in the embattled life assurer.

Sector peers were also higher. Prudential was up 29 at 622 and Aviva was 25 firmer at 578.

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Meanwhile, oil and mining stocks helped to underpin gains, aided by firmer commodity prices. Crude prices were strong as worries that Venezuelan supply could be affected by the ongoing ExxonMobil legal spat counterweighed the murky outlook for the US economy.

Oil sector heavyweight BP was 15 higher at 568-1/2 and BG Group was up 37 at 1,159.

Miners were also higher. Platinum prices broke through 2,100 usd an ounce to touch another fresh record high this morning amid ongoing worries over a widening market deficit this year as power outages in South Africa continue to crimp output. Copper and gold prices were also up.

BHP Billiton added 67 at 1,618, Antofagasta rose 27 at 785 and Vedanta Resources was up 108 at 2,180.

There were only three stocks on the downside at the close, with BT Group 0-1/2 lower at 234-1/4, as ING cut its target to 325 pence from 335, citing a delay in capex savings coming through.

On the second line, Moneysupermarket.com leapt 14-1/4, or 12.75 pct, at 126 after UBS upgraded its rating on the company to 'buy' from 'neutral' with the broker commenting that the upcoming results will be better than the market expects.

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Elsewhere, Go-Ahead was up 77 at 1,917, rallying after dropping on Friday following weak results, Dresdner Kleinwort gave the travel group a boost this morning by raising its recommendation to 'buy' from 'hold'.

Balfour Beatty was up 11 at 453, after announcing a 74 mln stg contract from Network Rail to restore and paint the Forth Bridge.

Finally, equipment and tool hire company Speedy Hire was up 29-1/2 at 811, after the group posted a 43 pct rise in third-quarter revenue and said it expects its full-year results to be in line with forecasts, prompting WH Ireland to reiterate its 'outperform' stance.

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Paris shares close higher led by Michelin, Schneider 

The CAC-40 index finished up 1.89 pct or 90.01 points at 4,861.80. Among CAC-40 stocks, 37 closed higher and 3 closed lower.

On the broader indices, the SBF-80 index closed up 1.37 pct or 75.53 points at 5,582.49, while the SBF-120 ended up 1.82 pct or 62.92 points at 3,523.13.

The euro was quoted at 1.4652 usd, compared to 1.4622 usd at midday.

Michelin gained 4.44 pct or 2.64 eur to 62.10. The tyre maker rebounded after investors overcame initial uncertainties on Friday over the group's outlook and results.

Oddo Securities raised its stance on the tyre-maker to 'add' from 'reduce', commenting that visibility may be weak for 2008, but that the group will increasingly feel the benefits of its Horizon 2010 cost-saving plan.

In a separate note, Lehman Brothers strongly reiterated its 'overweight' stance on Michelin advising clients to use post-results weakness in the share as a buying opportunity.

Electric plug and switch maker Schneider Electric rose 4.65 pct or 3.41 eur to 76.80 amid talk of a possible acquisition by Swiss-Swedish engineering firm ABB.

French broker Societe Generale said the Swiss-Swedish group is poised to make a major acquisition this year following the departure of CEO Fred Kindle, and singled out Schneider as the "ideal" strategic target.

Local dealers also said Schneider shares are in focus ahead of the group's full-year results publication due on Wednesday morning.

Steel tube maker Vallourec was another of the day's big movers, closing up 2.86 pct or 3.80 eur at 136.80 after a report Friday that Groupe Bollore is rebuilding its stake.

The report cited CEO Vincent Bollore as saying the group is buying shares in Vallourec, after making a substantial profit from the sale of its previously held stake.

According to a local dealer, the news is reassuring investors over Vallourec's outlook, given that Bollore has in-depth and longstanding knowledge of the company.

Among the day's fallers, Danone closed down 0.23 pct or 0.12 eur at 52.57. The dairy and bottled water company's CEO Franck Riboud said in an interview with La Tribune he hopes to find a solution to the French group's ongoing dispute with Chinese partner Wahaha "during 2008".

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German shares close higher led by Daimler

The DAX closed 135.12 points or 1.98 pct higher at 6,967.55, having traded in the 6,865.57-6997.77 range.

The MDAX rose 150.947 points or 1.68 pct to 9,095.83, while the TecDAX gained 19.09 points or 2.38 pct to 820.32.

DAX futures were up 76.00 points or 1.10 pct at 6,992.00, while bund futures declined 0.42 points or 0.36 pct to 115.91.

The euro was trading at 1.4659 usd, compared with 1.4650 usd in London afternoon trade.

Daimler led blue chips higher, gaining 2.21 eur or 4.09 pct to 56.22 after Goldman Sachs reiterated its 'buy' stance on the automaker and raised its target to 65 eur from 62.

Hypo Real Estate rose 0.71 or 4.07 pct to 18.15 as investors positioned themselves ahead of key news in the US this week on bond insurers and their credit ratings.

MAN was up 3.24 eur or 3.81 pct at 88.23 as traders spoke of rumblings of a possible tie-up between heavy truck manufacturer rival Scania and Volkswagen's truck operations.

In addition, MAN benefited from an upgrade at HSBC on Friday. the brokerage upped its stance to 'overweight' from 'neutral' in a machinery sector review and raised its target 100 eur from 93.

ThyssenKrupp gained 1.25 eur or 3.74 pct to 34.66.

Deutsche Boerse added 4.13 eur or 3.61 pct to 118.50 as it is expected to post strong fourth-quarter results tomorrow evening.

Bucking the trend, Bayer lost 1.26 eur or 2.26 pct to 54.40 as one of only two decliners. Bayer and Onyx Pharmaceuticals said they have halted a phase III trial in which the two companies were testing their Nexavar kidney cancer drug on patients suffering from non-small cell lung cancer (NSCLC).

A panel of independent experts monitoring the safety of the tests concluded that the study was unlikely to meet its primary goal of showing the Nexavar pill improves overall survival, the companies said in a joint statement.

Merck lost 1.08 eur or 1.28 pct to 83.46 after releasing weaker than expected fourth-quarter operating profit due to integration costs associated with the company's Merck Serono unit.

On the MDAX, Aareal Bank led advancers after it released slightly better-than-expected full-year figures. Its shares rose 1.66 eur or 7.43 pct to 24.01.

IKB, meanwhile, fell 1.63 eur or 24.15 pct to 5.12, as the index's worst performer after it announced plans to implement a 1.48 bln eur capital increase.

TecDAX-listed Solarworld rose 1.73 eur or 5.37 pct to 33.93, while Morphosys dropped 0.40 eur or 0.90 pct to 44.00.

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Amsterdam shares close at highs in thin trade led by financials

The AEX closed at its highest level of the day, up 9.81 points or 2.26 pct at 444.62 points, after opening at 438.12.

Government bonds traded higher, while the euro stood at 1.4650 usd compared with 1.4682 usd late Friday.

ING led gainers and recorded the highest volume, putting on 5.45 pct to 21.47 eur as the European financials sector posted M&A-fuelled gains. Peer Fortis added 4.25 pct to 14.22 and Aegon firmed 3.79 pct to 9.58 eur.

Heineken rose 3.16 pct to 38.79 ahead of second-half results on Wednesday with analysts expecting a slowdown in net profit growth but looking forward to announcements regarding the brewer's 2008 forecasts.

Amid tech related issues, ASML added 2.98 pct to 17.30 and Philips put on 2.49 pct to 26.37 after the company said it is on track to meet its target of green products making up 30 pct of total sales by 2012. Philips shares were also rebounding from Friday's losses, trading sources said. Midcapper ASMI was one of the few decliners of the day, shedding 1.70 pct to 13.27 eur.

Oils also boosted the AEX, with SBM Offshore up 2.48 pct at 21.89 and Royal Dutch Shell lifting 2.08 pct to 24.10 amid hints OPEC may cut production if global supplies continue to rise.

TNT turned higher in afternoon trade after trading lower, as the company's fourth-quarter results failed to meet analysts expectations and overshadowed what some analysts said was a strong outlook. The issue closed 0.88 pct higher at 27.48.

Reed Elsevier rose 0.52 pct to 11.80 amid reports the company may cut another 1,000 jobs as part of its cost cutting efforts. Fellow publisher Wolters Kluwer edged 0.26 pct higher to 19.06 eur as Rabo Securities cut its price target to 24 eur from 26, but kept its rating at 'buy' as it sees Wolters Kluwer holds the key to possible sector consolidation.

On the midcap, BAM led gainers, adding 4.33 pct to 13.25 eur, while Nutreco rose 2.66 pct to 46.25 eur as ING raised its price target to 47.70 eur from 44.50, but kept its rating at 'hold'.

There were no AEX decliners at the close.

On the midcap, Corio slowed 0.24 pct to 58.11.

Local issue Sligro closed down 0.27 pct at 26.18 after CFO Huub van Rozendaal said the company wants to sell real estate worth a book value of 15 mln eur, as part of reorganisation in its supermarket operations, Dutch online journal FEM reported.

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