UK/Euro Financial Market Daily Evening Briefing 21-11-2007

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London shares close lower, Northern Rock loses over 12 pct; NY slumps

UK blue-chips closed sharply lower, exacerbated by a slump on Wall Street, with Northern Rock dropping a further 12 pct today, as unease over potential buyers continued.
   
At the close, the FTSE 100 index was down 155.6 points at 6,070.9, off a low of 6,041.8, while the FTSE 250 index was 271.0 points down at 10,228.9. Volume was 2.650 bln shares changing hands in 803,655 deals.
   
In the US, stocks plunged, finding little to placate its worries about the wilting mortgage market ahead of Thanksgiving.
   
By the London close, the Dow Jones industrial average was 125.5 points lower at 12,884.6.
   
Broader stock indicators also down. The Standard & Poor's 500 index lost 16.15 to 1,423.55, and the Nasdaq composite index ended 34.80 lower at 2,562.01.
   
Back in London, banking stocks dropped back again, with Northern Rock the top faller, down 12.2 pence or 12.58 pct at 84.8.
   
The stricken mortgage lender, said it has received additional indicative expressions of interest covering a range of options for the business, one of which contemplates an offer for the company "materially below" yesterday's closing market price of 97 pence.
   
Sector peers were also down, Royal Bank of Scotland was off 15-1/2 pence at 397, Barclays was down 26-1/2 pence at 490 and HBOS fell 28 pence at 713.
   
In earnings news, Daily Mail & General Trust (DMGT) fell 51-1/2 pence to 525-1/2 after it missed analysts' full-year earnings expectations, despite reporting that its business-to-business operations helped annual pretax profit before exceptionals and amortisation rise 11 pct to a record 288 mln stg.

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The average analysts' forecast for DMGT's full-year pretax profits, excluding amortisation and one-off items, was for a 12 pct rise to 289.7 mln stg.
   
Meanwhile, Kazakhmys dropped 87 to 1,254 after Oleg Novachuk, the chief executive of the Kazakh copper miner, gave a downbeat view on the group's earnings and production for the year.
   
"Production will probably be a little down on last year, and so, correspondingly, will financial results," the Interfax news agency quoted Novachuk as saying in a news conference in Astana.
   
Elsewhere, British Land were not helped by its price target being slashed to 1,000p from 1,500 by Citigroup, although the broker did maintain its 'buy' recommendation.
   
British Land shares lost 20 to 853-1/2.
   
Home construction stocks were also under pressure because of fears of a downturn in the housing market.
   
Barratt Developments was down 26-1/2 pence at 460, Persimmon was 47 lower at 752 and Taylor Wimpey was off 6.5 at 184.0. Its mid cap peers were also lower, Bellway was down 52-1/2 at 939-1/2 and Bovis Homes Group was 19 weaker at 618-1/2.
   
There were few blue-chip risers with oil stocks the major climbers on higher prices. BG Group was up 24 pence at 996, Royal Dutch Shell gained 35 pence to 2,003.
   
Also bucking the downward trend was Imperial Tobacco, up 5 at 2,484, after it said is set to launch its brands in the US, putting its products into competition with key US brands including Lucky Strike and Marlboro, after signing a key deal with US lawmakers.

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In the mid-caps, Paragon Group of Companies continued yesterday's slump, down 45 pence at 80 as the group announced the possibility of a rights issue to raise 280 mln stg.   
   
While Northgate fell 55 pence to 730 as ABN Amro reinitiated coverage on the group with a 'sell' rating and price target of 650 pence.
   
ABN Amro said it believes concerns over a slowdown in Spain, a more competitive market for used vehicles in Continental Europe, and increases in Euribor put consensus forecasts for Northgate under pressure.
   
London Stock Exchange shed 147 pence to 1,739 after Banca Monte dei Paschi di Siena said its MPS Finance Banca Mobiliare Spa unit sold its 2.93 pct stake in the UK group at 17.70 stg per share.

UK 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 down over 2 pct as subprime, economic worries grow

The CAC-40 index finished 125.38 points or 2.28 pct lower at 5,381.30. Among CAC-40 stocks, 3 closed higher and 37 closed lower. On the Matif, December CAC-40 futures were trading at 5,409.
   
On the broader indices, the SBF-80 index closed down 155.96 or 2.51 pct at 6,062.81 and the SBF-120 ended down 91.91 or 2.31 pct at 3,890.25.
   
The euro was trading at 1.4830 usd after hitting a new record of 1.4855 usd this morning, as the market continued to price in the probability of another interest rate cut soon from the Federal Reserve.
   
After paring losses early afternoon on news that US jobless claims fell by 11,000 last week, in line with forecasts, the CAC-40 fell back below the 5,400 mark as Wall Street posted more losses in early trading.
   
In Paris, the economic uncertainties sparked widespread selling, as yesterday's rally proved fleeting. Financial stocks were again among the heavy casualties in the sell-off amid persistent worries over their subprime exposure.  Dexia led bluechip fallers, tumbling 1.08 eur or 6.15 pct to 16.49, followed closely by Societe Generale, off 5.95 or 5.92 pct at 94.63 after being downgraded to 'sell' from 'neutral' by Goldman Sachs.
   
Among other financials, Credit Agricole was down 0.96 or 4.32 pct at 21.25, BNP Paribas dropped 2.20 or 3.10 pct to 68.66, while insurer Axa was down 0.78 or 2.95 pct at 25.68.
   
Alcatel-Lucent was another major faller, tumbling 0.32 or 6.06 pct to 4.96, dragged down by last night's warning from Sweden's Ericsson over fourth quarter sales growth.
       
In Paris, Soitec, for which AMD is a major client, slumped 0.71 or 8.05 pct to 8.11. Within the CAC-40, STMicroelectronics gave up 0.51 or 4.76 pct to 10.21.
   
Elsewhere, cyclicals such as auto and construction stocks also saw heavy selling. In the auto sector, Peugeot fell 2.53 or 4.75 pct to 50.72, Michelin shed 3.50 or 4.42 pct to 75.77, and Renault gave up 3.14 or 3.32 pct to 91.33.
   
Among the few risers, EDF added 1.99 or 2.37 pct to 85.79 as investors welcomed a report the utility is about to enter the Chinese nuclear energy market.
   
Le Figaro today published an unsourced report claiming EDF is close to taking a 30 pct stake in the company which will operate the two EPR European pressurised water nuclear power plants that Areva expects to sell to China.
   
Total managed also traded ahead of the market on the back of escalating crude prices, although it gave up its modest gains towards the end of the day to end down 0.11 or 0.20 pct at 54.80.
   
In a separate development, solar panel manufacturer Photovoltech, which is owned by Suez, Total and research centre Imec, said it will invest 45 mln eur between now and 2009 to bring its production capacity up to 140 MWc per year.
   
In other news, SEB fell 7.38 or 6.01 pct to 115.37 after the kitchen equipment maker launched a 47 yuan per share offer to raise its stake in China's Zhejiang Supor Cookware Co. to a majority 52.74 pct. The price is more than double the 18 yuan per share SEB agreed in August last year to pay for its initial 30.24 pct holding.

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German shares close lower as Wall Street slumps, financials drop

The DAX closed 111.89 points or 1.47 pct lower at 7,518.42 after trading between 7,474.51 and 7,569.86.
The MDAX lost 381.32 points or 4.05 pct to 9,041.95, while the TecDAX retreated 27.10 points or 2.99 pct to 879.14.
   
DAX futures were down 78.00 or 1.02 pct at 7,552.00, while bund futures were 0.40 or 0.35 pct higher at 115.19. The euro was trading at 1.4831 usd, compared with 1.4804 usd at midday.
   
Financial stocks were among the biggest decliners today, with Commerzbank at the helm, falling 1.62 eur or 6.45 pct to 23.50 eur. Hypo Real Estate retreated 2.20 eur or 6.23 pct to 33.10 eur, languishing under pressure on the financial sector.
   
Dealers said that technical trading was also playing a major role in the stock's decline after it fell below a key support level at 35 eur per share. A Frankfurt-based dealer said the stock should see a another important support level at around the 33 eur mark. Deutsche Bank was 1.41 eur or 1.69 pct lower at 82.16 eur.
   
TUI reversed early morning gains - dropping 0.97 eur or 5.15 pct to 17.87 eur - after analysts said it is rather unlikely that Russian investor Alexei Mordashov will raise his stake in the shipping and tourism conglomerate, adding his recent purchase of a 3 pct stake should be seen in the light of strategic partnerships that it might create.
   
Speculation of a possible stake increase had been heated up by a report in the Frankfurt Allgemeine Zeitung that said the Russian billionaire is considering increasing his stake to 20 pct.
   
The stock lost further ground in the late afternoon on reports that the company's German airline TUIfly is in talks to merge with Lufthansa's Germanwings into a new entity to be operated under the Germanwings brand.
   
Shares in Continental were 4.00 eur or 4.49 pct lower at 85.00 as they corrected from yesterday's gains and continued their prolonged downward slide. Infineon was 0.35 eur or 4.39 pct lower at 7.62 eur as several traders and analyst pointed to continued worries about pressure on DRAM prices.
   
Bucking today's negative trend, Deutsche Postbank AG was one of only four large-cap gainers, up 1.20 eur or 2.19 pct at 55.92 eur after comments by Deutsche Bank AG CEO Josef Ackermann ignited speculation of a possible bidding war should Deutsche Post decide to sell its banking unit.
       
BASF advanced 0.70 eur or 0.77 pct to 91.41 eur and Bayer rose 0.12 eur or 0.22 pct to 55.27 eur. Utility RWE gained 0.60 eur or 0.65 pct to 92.39 eur, while peer EON outperformed the broader market, easing 0.48 eur or 0.35 pct to 137.75 eur.
   
Over on the MDAX, IKB Deutsche Industriebank slumped 1.21 eur or 12.10 pct to 8.79 eur. Arques Industries gained 0.29 eur or 1.36 pct to 21.69 eur. Over on the TecDAX, Adva slumped 0.63 eur or 12.60 pct to 4.37 eur, while SCM Microsystems gained 0.04 eur or 1.72 pct to 2.36 eur.
   
Versatel added 0.21 eur or 1.52 pct to 14.00 eur, with traders pointing to a boost from several positive broker notes released this morning.
   
Among others, Exane BNP Paribas upgraded its stance on Versatel stock to 'neutral' from 'underperform' and raised its price target to 14.2 eur per share from 10.5, while JP Morgan lifted its price target to 14.30 eur per share from 12.50 and reiterated its 'overweight' rating.

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Amsterdam shares close sharply lower as Wall Street falls

The AEX closed 2.09 pct or 10.31 points lower at 483.53, after trading in the range 480.87-488.53. Government bonds traded higher while the euro stood at 1.4785 usd versus 1.4831 usd late yesterday.
   
Corporate Express led the decliners, falling 7.84 pct to 5.76 eur, continuing yesterday's drop after market peer Office Depot posted a 9 pct drop in net profit in the third quarter.
   
Fortis fell 4.64 pct to 16.22 eur in heavy volumes, with over 31 mln shares exchanging hands. ING also saw heavy trading volumes, and fell 3.16 pct to 24.53 eur. Aegon was off 2.96 pct at 11.46 eur.
   
ArcelorMittal was down 3.64 pct at 46.87 eur. The company said today it is creating a coal mining joint venture in Mozambique with Black Gold Mining (Moc) Lda, and will take an initial 35 pct stake in the venture with an option to become the majority shareholder.
   
Philips slipped 2.62 pct to 26.71 eur as it said it will assist regulatory authorities with investigations into possible anti-competitive activities in the cathode ray tubes (CRT) industry. Philips said competition law authorities in several jurisdictions have started inquiries.

As one of the companies that was active in the CRT business, Philips is subject to one or more of these ongoing investigations.
   
Retailer Ahold was 1.55 pct down at 9.51 eur as it posted third-quarter earnings that beat estimates but failed to ward off concerns over a slowdown in the fourth quarter, according to trading sources. On the midcap, Boskalis Westminster fell 6.19 pct to 35.18 eur while SNS Reaal was off 4.89 pct at 14.20 eur. 

Stork was the only midcap gainer, up 1.56 pct at 44.27 eur on Dutch media reports that it is close to working out a deal with Candover Investments PLC, which tabled a takeover deal earlier this year that was delayed by major shareholders in Stork. Shell was the only blue-chip gainer, up 1.15 pct at 28.03 eur as oil prices continued to gain.

Closing Forex Rate:

 11.1563 - 11.1618

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