UK/Euro Financial Market Daily Evening Briefing 23-10-2007

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London shares closed up, off highs; miners, housebuilders ahead; NY flat

Leading shares closed up, off highs, as miners and housebuilders continued to buoy the market, however investors were given a late scare by a downturn in US stocks on news from Wal-Mart.
   
By the close, the FTSE 100 index was up 54.7 points at 6,514.0, off a high of 6,562.7, with all the broader FTSE indices also higher. Volume was firm with 2.709 bln shares changing hands in 564,611 deals.
   
On Wall Street, US stocks turned mixed after Wal-Mart Stores offered up capital expenditure growth forecasts that came in above expectations. Some analysts have said that the company needs to cut back on store expansion and focus instead on improving its merchandising.
   
At London's close, the Dow Jones industrial average was down 0.80 to 13,566.20, off a high of 13,656.9. Broader indexes were just higher. The Standard & Poor's index added 0.35 to 1,506.70, while the Nasdaq composite index was up 9.83 at 2,763.76.
   
In London, gains in heavyweight mining issues lent support with solid production news from BHP Billiton reassuring the sector following Rio Tinto's disappointing update last week.
   
As it was, BHP Billiton shares added 41 pence to 1,805, while Antofagasta added 37-1/2 pence to 818, Vedanta gained 96 pence to 2,150, and Rio Tinto took on 115 pence at 4,165.
   
Blue-chip housebuilders helped buoy the market, benefiting from yesterday's 6.7 pct rise in the US Homebuilders Index, which was led by Beazer Homes.
   
Persimmon, who announced share buy-backs today, took on 39 pence to 988, while Barratt Development added 18-1/2 pence at 672, and Taylor Wimpey gained 3 pence to 243.
   
Elsewhere, blue-chip banking issues benefited from moves yesterday by mid-cap peer Bradford & Bingley to reassure investors that it was well-placed to deal with the recent credit crunch.
   
Shares in BB gained 24-1/2 pence to 278-1/2 after yesterday afternoon's investor presentation went some way to dispel fears that it could face similar funding problems as rival Northern Rock.
   
The reassuring news provided support for other mortgage banks, with Alliance & Leicester gaining 23 pence to 750-1/2, HBOS adding 18 pence to 843-1/2, and Northern Rock up 4-3/4 pence at 189-3/4.

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Continuing with financial issues, Prudential added 14-1/2 to 744-1/2 after the UK's second-biggest insurer, reported a better-than-expected 15 pct increase in nine-month sales.

"These were very good numbers, driven by Asia. In the UK, everything seems to be going to plan," said Pali International analyst, Marcus Barnard.
   
On the downside, defensives underperformed amid the market's resurgence with Tesco off 10-1/4 at 453-3/4 and Vodafone giving back 2.1 following yesterday's 2.7 pct gains to trade at 177.6.
   
Among the mid caps, M&A rumours gave Cairn Energy a boost, ending up 7-1/2 pct, fuelled by talk of a bid for the UK oil services group at 2,800 pence from BP PLC.
   
"28 stg [per share] is the price going around at the moment", Manoj Ladwa at Trade Index told Thomson Financial News.
   
"We're seeing a fair amount of volume on the back of this, so there may be something to the rumour," he added.
   
Shares in BP were up 7 at 612 by the close, after the oil group's Q3 numbers impressed investors.
   
Meanwhile, Inchcape shares stood out, adding 29-1/2 pence to 476-3/4 after a reassuring trading update.
   
The motors dealer said its third-quarter trading performance continues to be in line with expectations with its like-for-like sales for the period up 3.3 pct.
   
Finally, Autonomy was easily the worst performer dropping 40 pence lower to 915 after in-line third-quarter results this morning failed to excite, with Evolution Securities prompted to cut its stance to 'reduce' from 'add'.
   
The UK business software company, reported a record 57 pct rise in third-quarter profits to 24.9 mln usd, up from 15.9 mln in the year-earlier period, helped by new business and a significant acquisition.

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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 onthe FSE 250 and the AIM, click here

Paris

Paris shares close up, off highs tracking Wall St; Alstom, autos lead gains

Share prices ended higher, clawing back some of the losses over the last three sessions, but pared gains late session to fall in to line with more modest early gains early increases on Wall Street.
   
Bargain-hunting focused on auto stocks, and blue chips gains were led by Alstom after confirmation of a string of major new orders in Morocco.
   
The CAC-40 index ended up 43.78 points or 0.77 pct at 5,705.05 with 30 stocks up, eight down and two unchanged.
   
The euro was quoted at 1.4278 usd against 1.4149 usd late yesterday.

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Milan shares close higher, supported by Q3 results, led by Fiat

The Mibtel index was up 0.67 pct to 30,857 points and the S&P/Mib up 0.46 pct to 39,423. Volume traded was an estimated 7.242 bln eur.
   
Brokers said the market remains volatile with surprises on credit markets continuing to be expected after this summer's sub-prime lending problems. One broker said he sees emerging economies maintaining the level of world economic growth, with only a slight slowdown in these countries.
   
Equity markets are likely to continue to be range-bound ahead of the FOMC meeting on US interest rates at the end of the month, he said.
   
Utilities and telecoms remain favoured as sectors, while financials are mostly out of favour, though one broker said he prefers insurance over banks.
   
Fiat was up 3.23 pct to 23.04 eur ahead of tomorrow's third-quarter results, which analysts say could include an increase in full-year guidance.
   
CNH reported in-line third-quarter results, with a further guidance upgrade after the one three months ago. CNH cited higher forecasts for agriculture machinery sales than expected previously.
   
Construction stocks were also among the leaders, continuing recent volatile trading. Italcementi was up 2.99 pct to 16.11 and Impregilo gained 2.79 pct to 5.275. Buzzi Unicem rose 1.74 pct to 18.70.
   
Autogrill was up 2.31 pct to 13.71 after recent weakness, brokers said. The stock reacts negatively to the weak dollar because of its heavy US operations.
   
Among oils, Saipem added 2.72 pct to 29.79 and Eni lost 0.36 pct to 24.75. Brokers said yesterday's Eni deal with the Kazakh authorities on developing the Kashagan field is broadly positive.
   
One broker said a number of questions remain open on the Eni/Kazakh deal, adding that in principle this is worth 0.60 eur for the stock. Higher oil price trend is another positive for Eni, he said.
   
Banks were on the downside. Brokers said that while these remain under-valued on fundamentals, credit market worries are likely to keep these stocks depressed in the short-term.
   
Unicredit lost 0.54 pct to 5.755 and Intesa Sanpaolo gained 0.68 pct to 5.36. Brokers said these major banks are favoured by large US brokers.
   
BPM was down 0.27 pct to 10.30. Reports say the bank's strategic committee will meet tomorrow to discuss possible mergers. Generali fell 0.52 pct to 30.38.
   
Telecom Italia rose 1.57 pct to 2.1025, off its early session highs, ahead of decision by Brazil regulator on Pirelli's sale of 18 pct to a consortium of Telefonica and Italian banks.
   
Pirelli was up 0.37 pct to 0.8755. One broker said the market is looking for up to an 0.18 eur extraordinary dividend from the sale proceeds from the Telecom Italia stake, though a buy-back is also possible.
   
AEM added 0.28 pct to 2.85 after shareholders yesterday approved its merger with ASM Brescia gained 0.32 pct to 4.715.

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German shares close higher on Wall Street gains

The DAX closed 47.85 points or 0.61 pct higher at 7,842.79 after trading within a range of 7,822.89 and 7,876.62 during the day. The MDAX gained 237.74 points or 2.31 pct at 10,534.21 while the TecDAX fell 19.84 points or 2.02 pct at 984.31.
   
DAX futures gained 20.50 points or 0.25 pct to 7,902.50 while bund futures fell 0.14 points or 0.12 pct to 113.59. The euro was trading at 1.4248 usd compared to 1.4246 usd in afternoon London trade.
   
"Investors shouldn't read too much into today's advance," said a local trader. He said besides an EU ruling against a German law that had limited voting rights in Volkswagen AG to 20 pct regardless of the actual amount of shares they might own, there was little news to prompt investors to reposition.
   
Leading blue-chips higher, shares in Linde gained 2.62 eur or 3.00 pct to 90.00, while Siemens closed higher 1.72 eur or 1.92 pct at 91.47 due to technical trading grounds after it was able to successfully defend an advance above its highest level in the last 200 days.
   
Shares in Thyssenkrupp gained 1.59 eur or 3.78 pct at 43.64, which traders largely traced to several factors including a purely technical rebound from yesterday's results and a rating upgrade of peer Arcelor Mittal to 'overweight' from 'underweight' at HSBC. The bank also raised its target for the merged entity to 95 usd from 53 usd, increasing sector valuations.
   
Shares in BASF were higher 1.21 eur or 1.27 pct at 96.64, as traders pointed to rumours the German chemicals company could raise its full-year guidance next week on higher sales in its petrochemicals and construction chemicals divisions.
   
Peer Merck was also 0.99 eur, or 1.12 pct, higher at 89.00. The company is set to report quarterly earnings tomorrow.
   
On the downside, Volkswagen lost 10.69 eur or 5.93 pct at 169.73, after a EU court banned the 'Volkswagen law', arguing that Germany has prevented the free movement of capital by effectively protecting the car giant against takeover.
   
Dealers said that Porsche had already secured options to buy shares in VW to push it over 50 pct control.
   
This has removed any incentive to buy VW stock, as Porsche is unlikely to buy shares above the current trading price.
   
MAN lost 0.43 eur or 0.35 pct at 122.71, while peer BMW lost 0.29 eur or 0.64 pct at 45.21.   
   
Over on the MDAX, shares in Gea Group gained 1.95 eur or 7.50 pct at 27.95 after a bullish note from Credit Suisse and strong read across from rival Alfa Laval's earnings results.
   
At the other end of the index, Vossloh eased 0.67 eur or 0.88 pct at 75.83 as one of only three decliners.

TecDAX-listed Aixtron gained 0.62 eur or 8.04 pct at 8.33. At the other end, QSC AG was the worst decliner on the index, down 0.16 eur, or 4.52 pct at 3.38.

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Amsterdam shares close higher as Wall Street climbs; TomTom leads

The AEX closed 4.94 points or 0.91 pct higher at 546.37, after trading in the range 544.72-548.60. Government bonds traded lower while the euro stood at 1.4243 usd versus 1.4138 usd late yesterday.
   
TomTom led blue-chip gainers, up 3.71 pct at 56.79 eur as talk entered the market that TomTom may tomorrow release earnings that "will beat even the highest estimates", a trader said. Separately, the European Commission said its inquiry deadline for TomTom's proposed 2 bln eur acquisition of Dutch digital map-making peer Tele Atlas is set for Nov 28.
   
ArcelorMittal added 3.49 pct to 54.82 eur as HSBC upped its stance on the stock to 'overweight' from 'underweight' and raised its target to 95 usd from 53 usd.
   
Industrial supplier Hagemeyer was 3.18 pct up at 4.87 eur after the group presented third quarter earnings largely in line with expectations. Analyst Fernand de Boer at Petercam said the results came in a "little bit" ahead of his own expectations.
   
Staffing giant Randstad was 2.31 pct stronger at 41.55 eur, as T. Gilissen upgraded the issue to 'buy' from 'hold' and ahead of third-quarter numbers due tomorrow, with analysts expecting the company to reach its earnings per share target of at least 0.95 eur.
   
Peer Vedior added 2.09 pct to 16.58 eur. Analysts expect the company to post a solid set of third-quarter figures Thursday.
   
KPN was 1.64 pct higher at 13.0 eur as the telecoms group said it has completed the acquisition of Getronics, after declaring the takeover unconditional last week with KPN in possession of 89.5 pct of Getronics' shares.
   
Akzo Nobel was the only blue-chip decliner, off 2.01 pct at 57.55 eur as its third-quarter results failed to impress. Rabo Securities said Akzo Nobel's results "came out a bit light", stressing that 0 pct volume growth in coatings was "somewhat disappointing".

"The slow volume growth in Coatings is mainly due to a prolonged correction in the North American residential construction industry," Rabo said in a note to clients. It added that decorative coatings improved its operating result, despite a stable top-line, due to several restructuring programmes.

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