UK/Euro Financial Market Daily Evening Briefing 21-08-2007

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London shares firmer at close reflecting stronger showing on Wall Street
 
UK blue chips were a touch higher at the close, in a day of volatile trade that reflected a stronger showing on Wall Street, after the Treasury Secretary expressed confidence in the Fed's ability to handle the problems facing the market.
   
At the close, the FTSE 100 index was 7.4 points firmer at 6,086.1, after an erratic session that saw the index as high as 6,118.90, and as low as 6,031.80. The FTSE 250 index was down 64.5 points at 10,639.3.
   
Volume was modest 2.59 bln shares changing hands in 587,753 deals.
   
"Again another steady day from the (United) States transferred to the UK," said Mark Priest, a trader at tradindex.com. "I think (Treasury Secretary Henry) Paulson's comments, saying everything will be done to ensure no mass slump in the market, will keep everyone calm."
   
On Wall Street, by London's close, the DJIA was 40.1 points firmer at 13,161.4, while the Nasdaq composite index was 12.27 points higher at 2,520.86.    

At the open, like the FTSE, the Dow struggled to find direction as more credit problems emerged, but investors nerves were tempered by Paulson's comments.
   
"I have great confidence in the Fed," he said on CNBC. Paulson also said that, while the Fed is independent, he often talks with Fed chairman Ben Bernanke about how the Fed is handling the current credit crunch.
   
Paulson also dismissed current turmoil in the market by repeating that overall economic conditions are good, and that the market would ultimately rebound. "Markets ultimately follow the economy," he said.
   
In London, property companies were among the top blue-chip gainers on read across from a strong set of results from midcap Brixton, which was up 5-3/4 pence at 386-1/4. British Land closed 17 pence firmer at 1,215, Land Securities finished 22 pence firmer at 1,750, and Hammerson was 13 pence higher at 1,226.
   
Earlier, Brixton reported higher first-half pretax profit helped by several London deals and an upward re-pricing for industrial and warehousing.

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The company said pretax profit for the period to end-June came in at 192.3 mln stg, compared with 129.4 mln stg last time. Merrill Lynch said the results were very strong and reiterated its 'buy' stance and a target of 418.
   
Meanwhile, Whitbread climbed 7 pence to close at 1,482-1/2, after Morgan Stanley raised its rating on the leisure group to 'overweight' from 'equal weight'.
   
Turning to the blue-chip casualties, investors were under-whelmed by house builder Persimmon's first half results, which came in at around consensus forecasts, but triggered concerns over a possible lending squeeze.
   
Persimmon's shares slipped 27 pence to close at 1,223. The group, which sold just over 8,000 homes in the six months to end-June 2007, said it would be September before a clearer picture of the new homes market emerged, but added that it was "reasonably confident" of meeting its year-end targets.
   
Peer Barratt Developments led the blue-chip casualties, closing 30-1/2 pence down at 909, while midcaps Bovis Homes and Taylor Wimpey both lost ground. Bovis closed down 25-1/2 pence at 751-3/4, while Taylor lost 4-1/2 pence to 342.
   
Weakness was also seen in Cadbury Schweppes, which ended 6-1/2 pence weaker at 546-1/2, after Bear Stearns downgraded its earnings forecasts as it seems likely management will pursue a demerger of its US Beverages operations rather than the previously believed sale.
   
The broker said Cadbury's best case scenario could now be 6 bln stg gross proceeds if it undertakes an IPO, rather than the 7-8 bln stg it had estimated when it assumed a private equity transaction was more likely prior to the sub-prime market woes.
   
Bear Stearns said it has cut its earnings forecasts by an average 13.5 pct a year through 2010.
   
Negative broker comment also provided the spur for shares in DSG International, which closed 3 pence down at 160, after JP Morgan reduced its rating to 'underweight' from 'neutral'.
   
Back among the midcaps, Britvic closed 8-1/2 pence higher at 320 after UBS upped its stance on the drinks group to 'buy' from 'neutral', arguing recent underperformance of the shares has yielded a buying opportunity.

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On the downside, shares in Accident Exchange Group fell 3-1/4 pence to 122-1/2 after the company's trading update failed to impress investors, with broker reaction mixed.
   
In an AGM and interim management statement this morning, vehicle replacement company Accident Exchange said trading in the quarter to July 31 was in line with its own expectations, despite cash collections coming in slightly lower than originally forecast.
   
Elsewhere, recruitment group Michael Page International slumped 18-1/2 pence to close at 420, continuing falls from yesterday, when it reported first-half results.
   
The shares have lost 26 pct since peaking last month. Analysts said the results were solid, but some investors have chosen to take profits.

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Paris shares close up, tracking US, after hesitant day; banks fall back

The CAC-40 index finished up 19.40 points or 0.36 pct at 5,418.78. Among CAC-40 stocks, 28 closed higher, 11 closed lower and 1 was unchanged. On the broader indices, the SBF-80 index closed down 10.70 or 0.17 pct at 6,461.91 and the SBF-120 ended up 11.30 or 0.29 pct at 3,947.83.
   
The CAC-40 flitted around the 5,400 mark in a fluctuating session. The banks led the falling shares for most of the day, as investors reacted to latest rumours about fall-out from the credit crisis, although they pared their losses at the end of the day.
   
Dexia ended down 0.35 eur or 1.76 pct at 19.59, Credit Agricole shed 0.07 or 0.26 pct to 27.28, Societe Generale slipped 0.05 or 0.04 pct to 117.90, while BNP Paribas inched up 0.02 or 0.03 pct to 78.32.
   
Investors reacted to the Bank of England's announcement that it lent 314 mln stg from its standing lending facility yesterday, the first occasion the facility has been used since credit market conditions tightened abruptly last month.
   
The BoE did not disclose who borrowed the money, and did not say whether the loan was taken out by a single bank. Among French banks who were potential borrowers under the facility, Societe Generale declined to comment while Credit Agricole and BNP Paribas did not return calls. Index heavyweight Total fell 0.21 or 0.40 pct to 52.47.
  
Most bluechips ended higher as investors continued bargain-hunting after the severe correction of the past month.
   
Air France-KLM headed the gainers at the close, up 1.00 or 3.66 pct at 28.30. One Paris dealer pointed to buying given that "Air France was totally slaughtered" during the recent correction. Traders also cited an uplift from lower oil prices.
  
ArcelorMittal was another major climber, adding 1.06 or 2.57 pct to 42.34. The steel maker was boosted by a sector upgrade at Credit Suisse, which raised the global steel industry to 'overweight' from 'market weight', saying the key drivers of demand remain intact. The upgrade also lifted tube maker Vallourec, which rose 4.82 or 2.71 pct to 182.55.
   
In a separate development, La Tribune reported that ArcelorMittal has reached an agreement with Algerian unions that were threatening to go out on strike from tomorrow in protest at planned job cuts.
  
In the auto sector, tyre maker Michelin also continued its rebound, up 2.59 or 3.03 pct to 88.10. Car maker Peugeot added 0.44 or 0.74 pct to 59.55, after disclosing that its European new car sales in July had risen 8.8 pct, outpacing the 3.4 pct increase for French rival Renault. Shares in Renault slipped 0.61 or 0.64 pct to 94.29.
  
Retailer Carrefour ended 0.79 or 1.65 pct higher at 48.79 as the market welcomed its deal to sell its Swiss hypermarket activities for 287 mln eur. Cheuvreux analysts called the sale price "decent", while Exane BNP Paribas said the move showed Carrefour is continuing to optimise its business portfolio by trimming non-core assets in order to concentrate on regions offering more attractive prospects.
   
France Telecom, meanwhile, extended its gains from recent sessions, trading up 0.16 or 0.75 pct at 21.40. France Telecom also benefited again from latest newsflow. The telecoms group told Agence France-Presse that its mobile phone unit Orange is planning to outdo Neuf Cegetel in offering free unlimited music downloads by the first half of next year, with a greater slate of available music.
   
Neuf Cegetel, whose largest shareholder is Vivendi mobile phone unit SFR, said yesterday it will offer free music from Vivendi unit Universal Music as part of its triple-play internet offering. Neuf shares were up 0.12 or 0.42 pct at 28.43, after rising 3.59 pct yesterday following its announcement, while Vivendi rose 0.26 or 0.90 pct to 29.16.

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German shares close up; chemicals, pharmas, cars offset financials' losses

The DAX was up 17.22 points or 0.23 pct at  7,424.75 after trading between 7,345.13 and 7,469.86. The MDAX was higher 97.24 points or 1.01 pct at 9,743.90, while the TecDAX  was higher 0.77 points or 0.09 pct at 850.12. DAX futures were lower 23.50 points or 0.32 pct at 74.34.50 while bund futures added 0.41 or 0.36 pct at 113.84.
  
Sentiment was dampened by the results of the ZEW German economic expectations index, which fell more steeply than expected on the back of the US subprime mortgage crisis.
   
Bayer's gains helped shore up the blue chip board, climbing on speculations that Novartis might bid for it. Bayer ended up 2.09 eur or 3.82 pct at 56.77.
   
Other pharma and chemical stocks were mostly higher, with Henkel up 0.66 or 1.91 pct at 35.26, BASF up 1.54 or 1.70 pct at 92.17 and Fresenius Medical Care up 0.25 or 0.71 pct at 35.53. Merck fell 0.72 or 0.78 pct at 91.51.
   
Automotive stocks were also strong outperformers, led by Volkswagen, up 3.08 or 2.09 pct to 150.60. WestLb upgraded its stance on shares in the auto-maker to 'buy' from 'hold' and raised its price target to 180 eur from 115 eur.
   
VW also said car deliveries in July totaled 522,000 units, up 10.2 pct from the same month last year. DaimlerChrysler added 1.22 or 2.05 pct at 60.62, Bayerische Motoren Werke gained 0.12 or 0.27 pct at 43.93, but automotive supplier Continental lost 0.18 or 0.20 pct at 90.68 and truck maker MAN fell 0.85 or 0.89 pct at 94.50.
   
On the downside, financials again took the main beating as turmoil persists in the financial markets, with Deutsche Postbank among the biggest losers. It lost 1.30 or 2.37 pct at 53.56.
   
Munich Re lost 2.53 at 127.47, Deutsche Bank eased 0.76 at 92.71 while Hypo Real Estate fell eased 0.15 at 39.68.
   
Infineon added 0.02 at 10.86 after the chip manufacturer said it had purchased the cell phone chip business of LSI Corp for 330 mln eur plus a performance-based payment of up to 37 mln eur.
   
Deutsche Euroshop was the biggest gainer on the MDAX, up 1.28 eur or 5.51 pct at 24.50 while Gagfah, down 0.25 or 1.77 pct at 13.89, was the biggest loser.
   
TecDAX-listed QSC added 0.08 or 2.12 pct at 3.85 while Carl-Zeiss dipped lower 0.35 to 13.50.

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Amsterdam shares close higher, boosted by Wall Street; DSM leads
 
The AEX closed 1.04 points or 0.21 pct higher at 505.61 after opening at 506.18 and trading in a range of 499.83-507.87. Government bonds traded higher, while the euro stood at 1.3494 usd against 1.3472 usd late yesterday.
   
The AEX initially opened higher but lost its early gains by midday, before recovering again in mid-afternoon ahead of Wall Street's opening and eventually ending the day slightly higher.
   
DSM was the top blue chip gainer, closing 2.65 pct higher at 37.06, while AEX peer Akzo Nobel put on 0.75 pct at 54.66.
   
Arcelor Mittal had camped itself at the top of the index for much of the day, eventually ending the day as the second top gainer, up 2.61 pct at 42.35 after Credit Suisse upgraded the steel sector to 'overweight'.
   
The Dutch stock markets regulator AFM also rejected demands from activist shareholders requesting that Arcelor Mittal release more information about the planned merger between Arcelor and Mittal.
   
Semiconductor stocks performed well, with ASML gaining 2.26 pct at 20.80, while midcap peer ASMI put on 1.50 pct at 18.86. Corporate Express gained 1.29 pct at 8.64 eur, while soon-to-be-delisted property stock Unibail-Rodamco closed 0.98 pct higher at 172.68.
   
Oil-related stocks gained, with Royal Dutch Shell up 0.15 pct at 27.24 and SBM Offshore 0.55 pct higher at 27.25.
   
Fugro led midcap gainers, up 1.99 pct at 48.76. It was followed by Univar, which put on 1.60 pct at 52.58 amid reports private equity fund BC Partners -- which already owns Univar rival Brenntag -- is looking to raise funds to put out a counter-bid, rivaling CVC Capital's bid.
   
Heavyweight AEX financials closed mainly lower amid ongoing credit crisis fears, led down by Fortis, which fell 0.52 pct at 26.69 as it denied it has problems financing its bid for ABN Amro. ING fell 0.47 pct at 29.32, while ABN Amro shed 0.08 pct at 34.02 and Aegon bucked the trend, gaining 0.30 pct at 13.33.
   
Hagemeyer was the lead AEX decliner, falling 2.48 pct at 3.14, not helped by a downgrade to 'accumulate' from 'buy' at SNS Securities.
   
On the midcap, Ordina fell 6.99 pct at 13.30 after reporting largely in-line first-half earnings and issuing a full-year sales outlook that was at the low end of its previous guidance.
   
Local issue Imtech fell 3.66 pct at 58.40 after the Dutch engineering group posted first-half results below market consensus. Pharming lost 4.94 pct at 2.69 eur after strong gains yesterday on news of positive test results for its main product Rhucin.

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