UK/Euro Financial Market Daily Evening Briefing 21-02-2008

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London shares close firmer, off highs; NY lower; Reed Elsevier strong

At the close, the FTSE 100 index was 38.6 points firmer at 5,932.2, well below an early afternoon peak of 6,000.4, but having stayed in the black all day.

James Hughes, market analys at CMC Markets said "there seems to be a genuine reluctance for the FTSE (100 index) to push above the 6,000 level, with this point acting as a signal to book profits for many".

All the broader FTSE indices also ended firmer, but off highs, with the FTSE 250 index up 57.3 points at 10,181.2. Volume was moderate, with 2.938 mln shares changing hands in 652,732 deals.

On Wall Street by London's close, the DJIA was 17.60 points lower at 12,409.70, with the S&P 500 index down 2.45 points at 1,357.60, both having reversed opening gains, although the Nasdaq composite index was 0.89 points higher at 2,327.99.

US blue chips ran back after the release of some disappointing economic data on Philadelphia-area manufacturing activity and leading indicators, which offset yesterday's enthusiasm on further rate-cut hopes, which followed the publication of minutes from last month's FOMC meeting.

The Philly Fed's manufacturing index fell to a negative 24.0 in January, below the median estimate for a negative 12.0 reading. Separately, the US Conference Board's index of leading economic indicators reading for January was minus 0.1 pct, the fourth-straight monthly decline, albeit matching economist expectations.

In London, Reed Elsevier was the biggest FTSE 100 riser today, adding 43-1/2 pence to 627-1/2 after the Anglo-Dutch publisher accompanied its full-year results with plans to divest its trade magazine subsidiary, and announced a 4.1 bln usd acquisition of insurance data specialist Choicepoint.

Reed Elsevier reported strong 2007 results, with pretax profit of 998 mln stg, well ahead of the average analysts' forecast of 954 mln stg, as revenue from continuing operations rose 2 pct to 4.58 bln stg.

Also on the up after blue chip results today, shares in Shire added 23 pence at 974 after the drugs group reported a stronger than forecast rise in full-year sales to 2.4 bln usd, against 1.79 bln last time out. Shire said sales of its recently acquired ADHD drug Vyvanse had risen to 76 mln usd in the full year, much higher than the consensus forecast for sales of 49 mln usd.

Deutsche Bank analysts described Shire's numbers as "excellent", saying total revenues were "very strong" and product sales were even more impressive.

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Elsewhere Kingfisher took on 3.5 pence at 135.5 after a Q4 trading update from the DIY retailer which showed a slowdown in underlying sales but also saw the group forecasting full-year underlying pretax profit in line with the current consensus of analyst expectations.

Heavyweight mining issues were in favour again today amid fresh sector consolidation hopes, and with gold and copper prices also stronger today. Xstrata stood out, 113 pence higher at 4,060 after a Brazilian newspaper revived talk that Vale has presented an increased takeover offer to the group pitched at 4,700 pence per share.

Talks are said to be still in their informal stage, although an announcement could come this week, the newspaper said. And M&A interest was revived in Sainsbury, up 7-3/4 pence at 373 after news the Sainsbury family trust has sold a chunk of its shareholding.

According to a filing to the stock exchange today, the holding of Judith Portrait -- the City lawyer who controls the Sainsbury family trust -- has been cut to 71.3 mln shares, or a 4.09 pct stake, down from 90.7 mln shares previously. On Jan 31 Portrait disposed of 40 mln shares, triggering fresh rumours of a private equity takeover bid for the food retailer.

On the downside, Centrica was the biggest blue chip casualty, losing 12-3/4 pence at 314 following the release of uninspiring in-line full-year results. Deutsche Bank said the results lacked a significant catalyst, but noted that it still sees value in the shares.

Other utilities also suffered, with Scottish & Southern Energy losing 31 pence at 1,504, while International Power shed 10 pence at 408-1/4, and British Energy dropped 14 pence at 531 as the sector's defensive benefits were shunned.

Elsewhere, British Airways shares shed 10 pence at 272 knocked by worries over high fuel prices and news that its pilots have voted to strike because of allegations that the firm plans to outsource flying duties to less qualified pilots on lower pay at its new OpenSkies subsidiary.

Meanwhile Alliance & Leicester lost another 12-1/2 pence at 479-/12 after falling to a record low yesterday after it warned of tougher times in 2008 and said its profit was hurt by massive writedowns. Morgan Stanley downgraded its stance on A&L to 'underweight' from 'equal-weight' and cut its price target to 370 from 730, while HSBC cut its rating to 'underweight' from 'neutral'.

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And Scottish & Newcastle reversed yesterday's speculative jump, losing 20-1/2 pence at 787 following news late on Wednesday that SABMiller will not launch a rumoured counterbid for the brewer.

On the second line, Aricom was the top FTSE 250 riser, up 7-1/2 pence at 79-1/2 after the Anglo-Russian miner reported a maiden profit in 2007 and said it is on course to start production at the Kuranakh mine in the first half.

Aricom's net profit reached 0.1 mln usd in 2007, turning around from a loss of 2.6 mln usd previously, after booking revenues of 4.9 mln usd. Peer Aquarius Platinum was also a good mid cap riser, adding 38 pence at 876 reflecting the firmer sector trend.

Elsewhere, BlueBay Asset Management continued its rally, adding 27-1/2 pence at 298-1/4 after reporting a solid set of first-half figures yesterday and giving a bullish outlook statement.

On the downside with mid caps, Galliford Try was the worst performer, losing 6 pence at 74 after the firm accompanied solid full-year results with a cautious outlook statement.

Galliford said the UK housebuilding market remains challenging and it views the economic outlook with some caution as it reported a 63 pct increase in first-half pretax profit before exceptionals, boosted by growth in its building and infrastructure divisions.

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Paris shares close higher on European insurers' rally; Wall St falls

The CAC-40 index finished 46.04 points or 0.96 pct higher at 4,858.85. Among CAC-40 stocks, 31 closed higher and 9 closed lower. On the Matif, March CAC-40 futures were trading at 4,869.00. On the broader indices, the SBF-80 index closed 36.33 points or 0.65 pct higher at 5,614.21, and the SBF-120 ended 31.99 or 0.92 pct higher at 3,523.90. The euro was quoted at 1.4789 usd, compared with 1.4661 usd late yesterday.

Germany's Allianz published a 13.5 pct rise in net profit this morning, and announced a substantial dividend increase, but the real boost to sentiment came from the CEO's encouraging comments on the group's mid-term targets and sub-prime exposure.

In France, Axa ended the session 0.61 or 2.78 pct higher at 22.57 while some other financial stocks also fared well. BNP Paribas rose 2.00 or 3.35 pct to close at 61.69, Credit Agricole was 0.18 or 1.02 pct higher at the close at 17.75. However Dexia edged down 0.02 or 0.12 pct to 16.14 and Societe Generale, which published definitive full-year earnings this morning, moved back into the red after some gains earlier in the session, closing 1.52 or 2.28 pct lower at 65.08, the CAC-40's biggest faller.

Other strong performers included ArcelorMittal, which gained 2.17 or 4.40 pct to close at 51.50 after announcing this morning it has raised base prices for flat carbon steel products in Europe by another 40 eur per ton, and Saint Gobain, which ended 2.06 or 3.97 pct higher at 53.99, helped by an upgrade to 'overweight' from 'neutral' at JPMorgan.

Meanwhile utility stocks suffered: EDF lost 0.76 or 1.13 pct to close at 66.29, extending yesterday's heavy losses sparked by the group's modest outlook for 2008. JPMorgan cut the stock to to 'underweight' from 'neutral' and lowered its target to 69 eur from 83, to reflect the disappointing guidance, saying the group's profitability "is not as resilient as its asset mix might imply."

Suez was down 0.39 or 0.93 at 41.52, Gaz de France was 0.22 or 0.58 pct lower at 37.52.

Elsewhere,  oil-related stocks fared better after crude prices hit a fresh record of 101 usd a barrel in overnight trade. Seamless tube manufacturer Vallourec was up 3.59 or 2.69 pct at 136.99, provider of geophysical services and equipment CGG Veritas rose 5.96 or 3.60 pct to 171.50 and oil services group Technip gained 2.03 or 3.95 pct to close at 53.40 after announcing a smaller than expected fourth-quarter net loss and issuing a bullish outlook.

French broker Cheuvreux also upgraded the stock to 'outperform' from 'underperform' in the wake of the earnings, to reflect the group's operating margin target of more than 7.3 pct for 2008 and the 14 pct rise in the group's dividend to 1.20 eur.

Total, however, lost 0.13 or 0.26 pct to end at 49.75.

In other sectors, TF1 finished the session 0.87 or 4.92 pct lower at 16.80. The company recovered slightly from earlier lows following the release last night of below-consensus full-year earnings. The group said this afternoon it is targeting a 2.4 pct jump in full-year sales to 2.830 bln eur for 2008, from 2.763 bln in 2007, but declined to give ad sales guidance.  

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German shares close flat, Thyssenkrupp and Continental AG mildly firmer

The DAX was up 5.17 points or 0.07 pct at 6,904.85, after having traded between a low of 6,881.29 and a high of 7,017.86. The MDAX was down 117.29 points or 1.29 pct to 9,221.10, while the TecDAX rose 4.01 points or 0.50 pct to 810.24.

DAX futures were down 57.00 points or 0.81 pct to 6,942.00, while bund futures were up 0.09 or 0.08 pct to 115.83. The euro was trading at 1.4794 usd compared with 1.4733 usd in afternoon trade in London.

Leading blue chips higher, ThyssenKrupp gained 1.53 eur or 4.44 pct to 36.01, on news that peer ArcelorMittal said it has raised base prices for flat carbon steel products in Europe by another 40 eur per ton, taking the minimum base prices to 600 eur per ton for hot-rolled coil and 680 eur per ton for cold-rolled/coated products.

Continental was 2.42 eur or 3.64 pct higher at 68.91 after the group raised its synergy targets with respect to the VDO unit it acquired from Siemens in December, as it presented its fourth-quarter and full-year earnings report this morning.

Munich Re added 2.30 eur or 2.02 pct to 116.23, investors positioning themselves ahead of the world's second-largest reinsurer issuing on Monday full-year results that are expected to be strong.

Hypo Real Estate increased 0.24 eur or 1.32 pct to 18.40 as traders looked to proposals by US regulators and some bond insurers to split up their businesses to perhaps guarantee 'AAA' ratings and insure the German bank's continued access to lost-cost bonds.

Bayer increased 0.56 eur or 1.05 pct to 53.93.

Bucking the trend, Deutsche Boerse led large-caps lower, losing 2.36 eur or 2.05 pct to 112.79, still suffering from investors' disappointment with the group's proposed dividend despite consensus-beating full-year earnings results published Tuesday night.

BASF dropped 1.54 eur or 1.77 pct to 85.33, as investors concentrated on a weaker-than-expected full-year EBIT, which the chemical's giant posted this morning.

EON decreased 1.82 eur or 1.38 pct to 129.91.

Fresenius Medical Care retreated 0.41 eur or 1.15 pct to 35.29, reversing yesterday's strong gains on the back of a 30 pct jump in its fourth-quarter net profit, beating market consensus. Over on the MDAX, Premiere soared 0.63 eur or 4.35 pct, after News Corp said it hiked its stake in the German pay-TV operator to 19.9 pct, up from 14.58 pct.

Traders earlier today pointed to speculation that News Corp had bought the stake from Morgan Stanley, which, according to Premiere, cut its stake in the pay-TV operator to 0.26 pct from more than 5 pct last week.

At the other end, MLP AG fell 0.48 eur or 4.77 pct to 9.58.

TecDAX-listed Conergy increased 2.39 eur or 16.97 pct to 16.47 following media reports that investors Andreas and Thomas Struengmann plan to acquire a stake in the company by buying up 25 pct of shares issued in a 250 mln eur capital increase.

BB Biotech declined 1.81 eur or 3.63 pct to 48.01.

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Amsterdam shares close off highs, Wall Street slips; Reed Elsevier surges

The AEX closed up 6.45 points or 1.44 pct at 453.14, after opening at 451.15 and trading in the range 449.51-457.55. Government bonds traded lower, while the euro stood at 1.4789 usd, compared with 1.4652 usd late yesterday.

Reed Elsevier surged 6.64 pct to 11.70 eur as the Anglo-Dutch publisher announced plans to sell its trade magazine business and said it will buy Choicepoint for 2.1 bln stg as it also announced strong 2007 results. Steel giant ArcelorMittal rose 4.40 pct at 51.51 after it said it has raised base prices for flat carbon steel products in Europe by another 40 eur per ton.

Dutch financials also performed well after Germany's Allianz posted record full-year results, with insurer Aegon adding 4.38 pct at 10.02 eur. Aegon also said it will buy Hungary's UNIQA Asset Management company and Heller-Saldo 2000 Pension Fund Management Company from UNIQA Insurance Company.

Peer ING rose 4.10 pct at 22.86 eur and Fortis edged 0.69 pct higher at 14.63 eur amid news it has successfully placed 750 mln usd in securities to institutional intermediaries in Asia and Europe. Midcap financial SNS Reaal rose 0.66 pct at 13.79 after the company reported solid full-year results that met or exceeded analysts' expectations.

Hagemeyer, which is being taken over by French peer Rexel, gained 0.21 pct at 4.79 eur as brokerage ING said it reported a "solid" set of fourth-quarter numbers after market close yesterday. On the midcap, BinckBank rose 3.70 pct at 8.40 eur to lead gainers.

BAM added 2.99 pct to 14.46 eur, after saying it won a 50 mln eur contract to develop a dry dock at the Rosyth naval base near Dunfermline, Scotland. Staffing group USG People added 1.22 pct at 14.98 eur as it reached conditional agreement on acquiring Germany's Allgeier DL for 175 mln eur in cash.

Small cap stock Imtech rose 1.68 pct at 14.50 with analysts expecting it to report higher full-year results next week, boosted by solid sales growth and improved margins. Among decliners, TomTom led AEX stocks down as it slumped 9.29 pct to 34.39 as a cautious full-year outlook frayed investor confidence after it reported in-line fourth-quarter results.

SBM Offshore fell 2.04 pct at 21.13. Heijmans led midcap decliners, off 1.78 pct to 24.25 eur, after the company said its full-year 2007 results were still hit by "major setbacks" at the company's Building division and added that it sees a continuation of the sales slowdown experienced in the second half of 2007.

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