UK/Euro Financial Market Daily Evening Briefing 20-12-2007

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London shares close higher; Johnson Matthey top blue-chip riser

By the close, the FTSE 100 index was 61.1 points ahead at 6,345.6, down from a high of 6,367.7, and up from a low of 6,284.5, with the FTSE 250 index up 165.3 points at 10,397.2. Volume was low, with 1.91 bln shares changing hands in 566,140 deals.

On Wall Street, by London's close, the DJIA was down 25.4 at 13,181.8, after the latest GDP report fuelled inflation concerns, offsetting the impact of strong results from Oracle Corp. Broader stock indices were mixed, with the Nasdaq Composite index up 11.65 points at 2,612.66, and the S&P 500 index off 0.25 point at 1,452.75.

Back in London, Johnson Matthey headed the blue-chip leaderboard at the end of the session, 93 pence ahead at 1,836, extending yesterday's gains after a report in the FT this morning said the speciality chemicals company could be a bid target for Dow Chemicals.

Johnson shares ended 93 pence firmer at 1,836. M&A speculation also helped boost ITV, which closed up 1.4 pence at 84.45, after the UK Competition Commission recommended that BskyB should sell down its 17.9 pct stake in the broadcaster to below 7.5 pct, sparking new hopes of a bid for the UK TV group.

Elsewhere, bullish broker comment helped advertising and marketing company WPP Group end 19 pence ahead at 630-1/2, with Deutsche Bank highlighting that WPP has won more net new business in the fourth quarter than in the whole of the rest of the year so far.

The broker said that in its opinion, recent comments from management on early indications for 2008 budgets are "encouraging" and repeated its 'buy' stance. Meanwhile, Carphone Warehouse closed up 6-1/2 pence at 337, with sales expected to rise ahead in the holiday season.

"Carphone Warehouse is a stock we like coming up to Christmas," said Henk Potts of Barclays Capital. And Vodafone also rose as investors cheered news that SFR has confirmed reports it plans to buy the stakes it doesn't own in fixed-line telecoms group Neuf Cegetel.

Shares in Vodafone -- which owns a 44 pct stake in SFR -- ended the day up 3.2 pence at 184.95, after SFR said it would pay much less than expected for Louis Dreyfus' 29.5 pct stake in Neuf Cegetel. Confirmation of a pension-scheme agreement encouraged investors in Rolls-Royce, with the shares closing up 6-1/2 pence at 509-3/4.

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The group announced this morning that it proposed to make a lump sum contribution of 500 mln stg across its three main UK defined benefit pension schemes as part of a strategy to reduce the overall deficits.

And a rise in crude prices aided blue-chip oil stocks, with Royal Dutch Shell finishing up 41 pence at 2,072, and BP ending 7-1/2 pence ahead at 611-1/4. However, sector peer Tullow Oil closed as the biggest faller, down 20 pence at 630, after news from its Mputa-4 well failed to impress.

Tullow reported this morning that the Mputa-4 well in Uganda flowed between 950 barrels and 1,100 barrels of oil per day following testing operations. In reaction, Merrill Lynch described the outcome as 'disappointing'. Merrill previously had a Net Asset Value (NAV) of 623 pence for Tullow, but said this might have to be adjusted down by 9 pence per share.

On the second line, Arriva closed up 26 pence at 794-3/4, as the UK'S OFT has cleared the company's win of Cross Country Rail franchise. In other news surrounding Arriva, the company said it is to offer 45 pence a share for Tellings Golden Miller, valuing it at 10.3 mln stg.

National Express Group also finished firmer, up 76 at 1,228-1/2, as the UK's Office of Fair Trading said it has cleared the company's win of the inter city East Coast Rail franchise. And Keller Group finished up 20-1/2 pence to 660-1/2, after the company said it has continued to trade strongly in the second half and accordingly it expects results for the year to end-December to be slightly ahead of market expectations.

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In reaction, Altium Securities described the update as strong and retained its 'buy' recommendation and 1,175 pence price target.

Elsewhere, JKX Oil & Gas closed up 9 pence at 375-1/2, aided by a rise in prices and on positive news it has farmed into two exploration licenses, Hernad I and Hernad II, covering a total of 5,420 sq km in the north Hungarian Pannonian Basin.

Among the midcap casualties, Marstons was the biggest faller, down 8-3/4 at 311, following JP Morgan's move to downgrade the beer producer to 'underweight' from 'neutral' and reduce its price target to 320 pence from 450. And finally, sector peer Greene King shed 10 to 803, while JP Morgan cut its target to 920 pence from 1,200.

UK Diary of Event:
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, here
   

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Paris shares close up but off highs as Wall St, housing stocks weigh

The CAC-40 index finished up 14.03 points or 0.26 pct at 5,511.45. Among CAC-40 stocks, 24 closed higher, one closed unchanged and 15 closed lower. On the Matif, December CAC-40 futures were trading at 5,522.

On the broader indices, the SBF-80 index closed up 3.33 or 0.05 pct at 6,209.04 and the SBF-120 ended 9.07 or 0.23 pct higher at 3,984.30. The euro was quoted at 1.4339 usd compared to 1.4343 usd late yesterday.

Kaufman & Broad plunged 4.09 eur or 13.71 pct to 25.75 as brokers said the company's disappointing full-year results yesterday pointed to a tough 2008. Landsbanki Kepler downgraded Kaufman to 'Hold' from 'Buy' and slashed its price target to 32.5 eur from 48 to match reductions in its estimates for the coming year.

The order cancellation rate will rise to around 25 pct in 2008 from 22 pct in 2007 and gross margins could be hit by low-profit social housing programmes, Landsbanki Kepler analysts said in a note to clients.

In the CAC-40, disappointment with Kaufman added to pressure on construction stocks, with Bouygues, down 2.30 or 3.95 pct at 55.95, and Vinci, off 1.49 or 2.92 pct at 49.56, leading blue chip fallers. The negative mood also affected Saint-Gobain, down 1.06 or 1.65 pct at 63.10, and Schneider Electric, 1.42 or 1.57 pct lower at 88.84.

The CAC-40, hotel group Accor gave up earlier gains following news of a major sale and leaseback deal to end down 0.23 or 0.44 pct at 52.60. Vivendi SA rose 0.18 or 0.58 pct to 31.28 after announcing this morning that mobile phone unit SFR has agreed to buy Louis Dreyfus' 29.5 pct stake in alternative telecoms operator Neuf Cegetel for 34.5 eur per share, and will offer 36.5 eur per share for the remaining minorities.

But shares in Neuf fell back 1.74 or 4.74 pct to 35.00 as on disappointment over the bid price offered by Vivendi's SFR. "The bid price of 36.5 eur is much lower than the 40 eur rumoured in the press and hovers around current trading levels," Rog Goyens of Dexia said in a note to clients.

Elsewhere, EADS gained 0.38 or 1.72 pct to 22.52 following its announcement yesterday that it has chosen preferred bidders for the sale of six manufacturing plants in Europe as part of its Power8 restructuring plan.

Utilities Gaz de France, up 0.25 or 0.65 pct at 38.89, and Suez, up 0.26 or 0.57 pct at 46.16, also ended in positive territory. The companies' aim to close their merger by the end of the first half of 2008 was boosted by the French government's publication of a decree authorising the privatisation of GDF.

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German shares close higher after calm trading day, led up by Continental 

The DAX closed 31.87 points or 0.41 pct higher at 7,869.19, after trading between 7,919.05 and 7,842.17. The MDAX won 54.32 points or 0.57 pct to 9,623.26, while the TecDAX was 6.94 points or 0.73 pct higher at 954.63.

DAX futures advanced 34.50 or 0.44 pct to 7,877.50, while bund futures won 0.16 or 0.14 pct to 113.15. The euro was trading at 1.4338 usd, unchanged from afternoon trade. Leading blue chips higher, Continental added 2.74 eur or 3.25 pct to 86.93.

Industry sources told Thomson Financial news it sold its electric motor drives division, which was part of former Siemens AG's VDO unit as well as its cooling fan operations to Brose for some 250 mln eur, largely in line with market expectations.

Traders said the stock might also be profiting from new re-weighting to go into effect on Dec 27, which will give Continental more weight on the DAX. Henkel added 0.96 eur or 2.54 pct to 38.76. Autostocks were in demand as MAN led gainers in the sector, up 1.68 eur or 1.55 pct at 110.23, as the heavy truck maker benefited from a 16 pct increase in European truck sales.

Deutsche Boerse advanced 2.04 eur or 1.61 pct at 128.92. At the other end of the DAX, Infineon lost 0.10 eur or 1.23 pct to 8.05, while Hypo Real Estate dropped 0.24 eur or 0.65 pct at 36.45. Over on the MDAX, Praktiker won 0.76 eur or 3.77 pct to 18.46 after Cheuvreux upgraded its stance to 'outperform' from 'underperform' while lowering it target to 22.80 eur per share from 29.50.

At the other end of the mid-cap index, Deutz fell 0.48 eur or 6.55 pct at 6.85 after UBS downgraded its stance to 'sell' from 'neutral', setting a reduced price target of 6.50 eur from 9.60 eur. TecDAX-listed Conergy was the strongest performer on the index, shooting up 1.87 eur or 9.09 pct at 22.44.

At the other end, Freenet lost 0.69 eur or 4.03 pct to 15.96 after it announced that exclusive takeover talks with Drillisch AG that the latter might buy its mobile service provider were ended, quashing hopes for a quick sale of its DSL unit.

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Amsterdam shares close higher tracking Wall Street

The AEX closed 4.16 points or 0.83 pct higher at 506.79, after trading in a range of 503.93-508.30. Government bonds traded higher while the euro stood at 1.4328 usd versus 1.4390 usd.

TomTom rose 2.19 pct to 52.68 eur, SBM Offshore added 2.05 pct to 20.87, Unibail-Rodamco lost 1.39 pct to 144.39 and ArcelorMittal dropped 1.43 pct to 49.50 eur after its CEO said he does not expect the steel sector to be affected by the US sub-prime mortgage crisis.

Royal Dutch Shell rose 1.34 pct to 28.67 eur amid news that it will expand its cooperation with Chinese peer CNPC. KPN added 0.74 pct to 12.32 eur after it said it will next year sell some of its real estate, as it had announced earlier. Philips added 1.02 pct to 30.71 eur, Unilever put on 1 pct to 24.17 and Ahold gained 0.96 pct to 9.50 eur.

Wolters Kluwer rose 0.31 pct to 22.37 eur after it said it completed its share buyback programme. On the other end of the spectrum, Heineken dropped 0.23 pct to 44.21 eur, Corporate Express lost 0.82 pct to 4.86, DSM shed 1.01 pct to 32.41 eur and ASML lost 1.11 pct to 22.25 eur.

Among midcap shares, real estate and property companies gained. Wereldhave added 3.47 pct to 74.29 eur while Corio rose 0.85 pct to 54.56. Vopak added 0.37 pct to 37.87 eur amid reports that the company is in talks to form a joint venture with Russia's Severstaltrans.

Heijmans dropped 0.75 pct to 24.98 eur with investors unimpressed by news that it won a new contract valued at 138 mln eur. Later in the day, Heijmans said it had sold an office building it owned for 50 pct together with Hurks. The building was valued at 66 mln eur.

USG People shed 1.58 pct to 18.10 eur after a price target downgrade at Theodoor Gilissen. Aalberts led decliners, losing 2.28 pct to 12.44 eur.

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