UK/Euro Financial Market Daily Evening Briefing 26-07-2007

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London shares slump at close; NY falls further; Legal & General down

UK blue chips slumped at the close as Wall Street fell further with a mixed bag of earnings from a raft of heavyweights weighing down the blue chips as well broader market concerns on the sub prime mortgage market.
   
By close, the FTSE 100 index was down 203.1 points at 6251.2 at the day's low. The FTSE 250 index was down 382.5 points at 11,033. Volume was strong, with 4 bln shares having changed hands in 814,206 deals.
   
"The market has been hit by liquidity selling as well as concerns in the sub prime mortgage market. Investors are staying on the sidelines." said Tim Rees, fund manager at Insight Investment.
   
Across the pond on Wall Street, stocks tumbled in the first few minutes of trade following a mixed durable goods orders report and as investors grew increasingly anxious about escalating oil prices and rising concerns about mortgage and corporate lending.
   
The Dow Jones industrial average was down 218.3 at 13,565.9, the Nasdaq Composite Index was off 46.67 to 2,601.7 and the Standard & Poor's 500 index fell 29.14 to 1,1488.91.
   
The US Commerce Department reported that orders for durable goods increased 1.4 pct in June, the best showing since a 5.1 pct increase in March, having declined by 2.3 pct in May.
   
However, the June strength was concentrated in orders for commercial airplanes, which soared by 28.7 pct. Aircraft orders, which are extremely volatile from month to month, had fallen by 21 pct in May.
   
In other economic news, the Labor Department reported that the number of newly laid off workers filing claims for unemployment benefits fell to 301,000 last week, a drop of 2,000 from the previous week. The performance was better than the slight rise that economists had been expecting.
   
Sales of new homes in the US fell sharply for the second straight month to a level just a touch higher than a seven-and-a-half year low, the Commerce Department said today. The sales fell by 6.6 pct in June to a seasonally adjusted annual rate of 834,000 units.

Economists had expected a 905,000 unit rate. That is the lowest level since March, when about 830,000 units were sold. Sales have not been lower than that since September 1999.
   
Back in London, on the downside Legal & General was the biggest faller, down 12.4 at 138.1, after the UK life insurer released first half new business profit numbers that missed consensus estimates by around 9 pct.
   
L&G said that new life and pensions business profits on an annual premium equivalent basis fell to 178 mln stg from 192 mln stg.

In reaction, analysts at Lehman Brothers noted that there were further losses in the second half from the general insurance business, which reported a swing to a loss of 38 mln stg in the first half of the year, from a profit of 2 mln stg because of windstorms that wreaked havoc in Europe. The broker reiterated its "equalweight" stance on the stock.

Elsewhere, investors were unimpressed by British American Tobacco results, as the shares fell back 46 to 1,598. The world's second-biggest cigarette maker cautioned that growth, at constant exchange rates, will slow in the second half of the year.
   
In the first half of the year, operating profit, or earnings before interest, tax, depreciation and amortisation, climbed 13 pct to 1.492 bln stg. Adjusted diluted earnings per share rose 9 pct to 53.51 pence.
   
According to figures collated from three analysts, the company was expected to report profits of 1.47 bln and earnings of 51.5 pence per share.
   
And, oil giant Royal Dutch Shell was down 42 at 1,937 after rising early today, despite revealing improved earnings in the second quarter, buoyed by strong refining margins and downstream business, which offset the impact of falling oil and gas output, and rising costs.
   
Net profit, on a current cost of supply (CCS) basis and after adding back the charges and deducting gains, rose to 6.896 bln usd in the three months to June, from 6.546 bln usd previously, as against the consensus estimate of 6.760 bln usd.
  
Meanwhile, Shire was fell back from early gains down 7 at 1,209 after impressive numbers with the group raising full-year revenue guidance and announcing 16 pct growth in underlying second-quarter earnings, driven by strong demand for its top selling medicine Adderall XR.
   
Its peer, Astrazeneca was off 84 at 2,591-1/2 after the group reported a 10 pct drop in second-quarter pretax profits and announced a significant increase in a restructuring programme.
   
And, BT Group lost 17-1/4 to 311-1/2, despite reporting an unexpected rise in its share of Britain's broadband market, which helped the UK telecoms giant's profits to improve by 3 pct during the fiscal first quarter. In an early reaction to the results, Nomura said BT's first quarter results were bang in line with forecasts, calling it more of the same.
   
Nomura said that divisionally there were no surprises, but added that the market may be disappointed there is absolutely no sign of any margin progression in the Global Solutions Business.
   
In further results news, Rolls-Royce Group lost earlier gains to trade 34-1/4 pence lower at 496-1/4, after reporting first half pretax profits of 377 mln stg, against 870 mln stg for H1 2006 and on underlying group sales of 3.75 bln stg, reflecting organic growth across the business.
   
Reed Elsevier also lost early gains and traded 25 pence lower at 601-1/4, despite a strong first half results statement, backed up by positive broker comment.
   
Crispin Davis, chief executive of Reed Elsevier, said the Anglo-Dutch publisher is seeking acquisitions to boost its business to business division.   

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In reaction, Seymour Pierce reiterated its 'outperform' stance and UBS maintained its 'buy' rating and price target of 740 pence.
   
Fashion retailer Next was 46 pence lower at 1,798 after Citigroup cut its price target and Panmure Gordon cut estimates.
   
Turning to the upside Resolution was one of 3 risers up 15-1/2 at 631-1/2 supported by yesterday's news that it was to merge with with Friends Provident in a deal worth 8.6 bln stg.
   
Investec was the top faller down 49 at 584-1/2 after an interim management statement said the majority of its businesses have continued to perform well in the first quarter ended June 30 and that the outlook for its business remains unchanged.
   
The UK and South African financial services group said loans and advances  grew by 8.1 pct to 11.0 bln stg since the year-end and third party assets under  management increased by 1.8 pct to 57.1 bln stg.
   
Carphone Warehouse was off 16-1/2 pence to 336-1/4, after reporting total distribution revenues in the first quarter rose 11.7 pct to 706 mln stg, driven by continued strong connections growth and good performances from ancillary revenue streams.
   
Retail revenues during the period increased 12.9 pct to 445 mln stg, with like-for-like retail revenue growth at 3.6 pct, the mobile phone retailer said in a statement.
   
Arm Holdings fell back 2-1/2 at 145-1/4 after the technology design group reported a marginal drop in Q2 pretax profits while a disappointing performance at the Physical IP Division (PIPD) unit offset progress at its Processor Division.
   
Elsewhere, Kesa Electrical edged 10-1/2 lower at 312-1/4 despite "good" first half performance, driven by "stronger than anticipated" sales in the second quarter, which benefited from continued demand for electrical products and improved sales of 'white goods'.
   
Debenhams was down 7-3/4 at 123-1/2 after Morgan Stanley downgraded to 'underweight' from 'equal weight' and reduced its target to 110 pence with the broker saying it sees no recovery in sight.
   
Looking at the midcap upside, EMI Group was one of 4 risers up 1-1/2 at 249-1/4 on ongoing bid speculation rumours.

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Vienna shares close lower, as banking shares lead general retreat in mkt

The ATX closed down 3.31 pct or 158.28 points at 4,628.00. The ATX Prime closed down 3.32 pct or 79.09 points at 2,304.29.
  
Banking shares Erste Bank and Raiffeisen International led ATX heavyweights lower by taking part in a global turndown in banking shares after disappointing home sales data in the US led to new market worries about the strength of the mortgage and corporate lending sectors.
   
Erste Bank shed 5.32 pct to 54.05 eur, while Raiffeisen shares ended the day down 4.77 pct at 111.70 eur.
  
A-TEC Industries posted the sharpest percentage loss on the ATX, falling 6.85 pct to 161.15 eur, as the company's chairman said he expected A-TEC to have a 25-30 pct stake in any company resulting from a merger between Norddeutsche Affinerie and Cumerio.
   
Shares in Mayr-Melnhof Karton slumped 5.77 pct to 81.51 eur, in-line with the sharply lower trend among paper sector stocks after peer Stora Enso posted disappointing quarterly results and warned that the industry faced rising input costs.
   
Intercell shares closed down 4.85 pct at 25.50 eur in trading that market observers attributed to the sharply negative sentiment towards biotech shares following GPC Biotech's plunge at the end of last week.
   
Wienerberger shed 3.89 pct to 46.75 eur, as worries about the housing sector in the US continued to weigh on construction-related shares. Other strong declines on the ATX included those posted by Telekom Austria, down 3.28 pct to 17.69 eur, and BWIN, 3.09 pct lower at 21.95 eur.
   
RHI, which closed down 2.81 pct at 38.45 eur, managed to slightly outperform the sharply weaker ATX on news that Berenberg Bank had raised its rating to 'buy' from 'hold' after the refractories company issued its half-year results this morning.
   
Index heavyweight OMV followed the downward trend among oil shares by closing 2.08 pct lower at 46.61 eur, while Verbund shares lost 1.81 pct to 36.33 eur, outperforming on news that UniCredit (CA IB) had reiterated its 'buy' rating and raised its target to 41 eur.
   
Andritz also managed to significantly outperform the ATX by closing down 0.55 pct at 50.81 eur on market reports that Goldman Sachs had raised its target to 59 eur to reflect the solid outlook for the capital goods sector.
   
Uniqa, down 0.44 pct to 25.00 eur, and Wiener Staedtische, 0.47 pct lower at 53.00 eur, displayed the defensive qualities associated with insurance stocks. Flughafen Wien only shed 0.39 pct to 76.20 eur, but the share had already suffered a 2.67 pct loss in trading yesterday.
   
Boehler-Uddeholm was the only ATX share not to post a loss today, ending trading unchanged at 73 eur, which is not coincidently the offer price that voestalpine, which closed down 1.33 pct at 60.83 eur, has put forward for Boehler-Uddeholm shares.

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Madrid shares close at lows as blue chips slide on US falls

Share prices closed at session lows, as blue chips took a beating weighed down by declines on the US markets. The IBEX-35 index closed down 397.3 points or 2.66 pct at 14,540.4, after trading in a range of 14,540-15,012.
   
Equities opened higher, lifted by Wall Street's overnight gains, but had dipped into the red by mid-morning amid concerns over global credit markets, with trading cautious ahead of further key US data.
   
The market moved further into negative territory over the afternoon, however, as more weak housing data in the US deepened concerns about the credit market and sparked declines on Wall Street.
   
Companies in focus on the domestic front were those reporting first half earnings, with Repsol YPF the main loser, down 1.20 eur or 4.26 pct at 29.96,  on a weak set of figures, which a lacklustre conference call failed to offset. ESR analysts noted that the stock still looks expensive relative to its peers.
   
Santander fell 0.40 or 2.88 pct to 13.50, giving up earlier gains fuelled by a robust set of first half results, boosted by capital gains and a firm showing from its Abbey unit.
   
Sabadell, also a results reporter today, shed 0.13 to 7.83, while BBVA was off 0.55 at 17.77.
   
Telefonica fell 0.45 or 2.59 pct to 16.90, while amongst constructors, Acciona underperformed to shed 8.80 or 4.37 pct to 192.70. The group reports first half results tomorrow morning ahead of the market opening.
   
Peer Ferrovial was off 2.40 or 3.59 pct at 64.45, while Sacyr fell 1.07 or 2.90 pct to 35.77.
   
Amongst today's few gainers, Acerinox put on 0.29 to 18.64, while Astroc added 38.74 pct to 12.75 and possible merger partner Aisa was up 2.89 pct at 18.50. Earlier, Astroc chairman Enrique Banuelos resigned.

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Amsterdam shares close lower, tracking Wall Street; DSM carries the day

The AEX closed 2.53 pct lower at 533.04 after opening at 549.58 and trading in a range of 533.04-549.84. Government bonds traded higher and the euro stood at 1.3721 usd versus 1.3716 usd late yesterday.
   
Unibail-Rodamco declined, giving up 4.55 pct at 169.49 eur, while steel giant Arcelor Mittal weakened 4.75 pct at 45.06 amid news that it may be considering making the largest foreign investment in India's history by funding in two steel plants for a total of 18 bln usd.
   
Reed Elevier, which received positive reactions today on its results for the first half of 2007, declined 4.20 pct at 13.43. Publishing peer Wolters Kluwer meanwhile shed 3.43 pct at 21.66.
   
Philips lost 3.59 pct at 29.73, Heineken slipped 2.98 pct at 45.20 and Corporate Express dipped 3.38 pct at 10.29.
   
TNT declined 3.47 pct at 31.09. SNS Securities said today that the share has been punished lately by an overreaction to talk about bringing back protective measures like "golden shares" in the Netherlands, which the brokerage said was unlikely. SNS upgraded TNT to 'buy' from 'add' with a 38 eur price target versus and earlier 39 eur.
   
DSM led the diminishing pack of blue-chip gainers at market close after rising 3.03 pct to 37.72 amid positive reactions to its second-quarter earnings and multiple brokerage upgrades.
   
TomTom closed 0.24 pct higher at 45.19 after performing well throughout the day and being upgraded to 'accumulate' from 'reduce' at SNS Securities with a price target of 50 eur versus a previous 28.50. The brokerage said in a note that judging by TomTom's second-quarter earnings that were released on Monday and its takeover offer for Tele Atlas, the brokerage had underestimated the share.
   
Tele Atlas, meanwhile, declined 1.63 pct at 21.00 eur. Among major midcap decliners, real estate share Corio lost 6.40 pct at 52.21 while peer Wereldhave slipped 4.69 pct to 91.25 and local listing Prologis was 3.67 pct lower at 11.80 after announcing flat adjusted earnings for the second quarter, as well as an agreement to sell assets in France for 425 mln eur.
   
Aalberts Industries was down 5.42 pct at 19.00 and BAM was 3.69 pct lower at 20.33 while construction peer Heijmans remained the only major midcap gainer, rising 1.23 pct to 41.06 eur.

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