UK/Euro Financial Market Daily Evening Briefing 27-02-2008

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London shares close weak off lows; NY firmer; banking sector down

At close, the FTSE 100 index was down 10.9 points at 6,076.5, off session lows of 5,989, while the FTSE 250 index was 37.4 points ahead at 10,421.1. Volume was light, with 2.4 bln shares changing hands in 677,573 deals.

"The FTSE got sold off straight from the outset today with the banks being pulled lower in light of the HBOS figures," said Paul Chesterton, senior sales trader at CMC Markets. "The banks had had a good recovery over the recent reporting period and I think many investors were looking for an excuse to take short-term profits," added Chesterton.

In the US, Wall Street advanced from lows after Federal Reserve Chairman Ben Bernanke said the central bank will remain vigilant should inflation accelerate due to a record rally in commodities. Stocks bounced back after the release of Bernanke's prepared comments, which will be given during testimony on Capitol Hill later Wednesday. He said the Fed will remain open to future rate cuts to help the sluggish economy.

At London's close, the Dow Jones Industrial Average index was ahead 49.1 points at 12,734. Separately, the Nasdaq Composite index was 9.12 points higher at 2,354.55, while the Standard & Poor's 500 index was up 3.76 points at 1,384.62.

Turning to UK equities, HBOS shares topped the FTSE 100 losers' board, dropping 48 pence to 657 after reporting full-year underlying pretax profit of 5.708 bln stg, a touch below the consensus forecast of 5.761 bln stg.

Merrill Lynch, which has maintained its 'neutral' rating on the stock, noted that the results were modestly below its expectations. Other banks fell bank after recent gains Alliance & Leicester shed 6 to 594 and in the midcaps Bradford & Bingley was down 4 at 202-1/2.

Royal Bank of Scotland was weak after a placing in the group of 50 mln shares at 400 pence each and also ahead of the company's results tomorrow.

RBS shares lost 3-1/2 at 409-3/4. And, Lloyds TSB was down 6 pence at 476-1/4 following a placing of 30 mln shares in the group at 467 pence per share.

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Meanwhile, Old Mutual shed 4.8 pence to 132.2, reflecting the weaker market and profit taking following its full-year results. Merrill Lynch said, in its view, Old Mutual reported a solid and generally better-than-expected set of results.

Away from financials, Astrazeneca shares were down 27 pence at 1,980, after reporting it has stopped late-stage trials in non-small cell lung cancer for its cediranib-based Recentin product.

Moving to the upside, commodity stocks held back some of the blue-chip losses on sector consolidation hopes and as gold and oil hovered near record highs.

Vedanta Resources was the top FTSE 100 riser, up 127 at 2,199 with talk of Chinese stake building, while Xstrata was 47 higher at 4,135 on rumours that Anglo American was to bid 5,000 pence a share for the group.

Anglo American was 50 higher at 3,330. Other miners were also higher with Kazakhmys up 39 pence to 1,589 and Antofagasta gained 12-1/2 at 833-1/2.

Elsewhere, Schroders was gained 28 at 977 on rumours of a bid for the group. A broker upgrade helped shares in United Utilities gain 14-1/2 at 715-1/2 after Credit Suisse raised its recommendation on the group to 'outperform' from 'neutral' in a UK water sector review.

Its peer Severn Trent was 25 higher at 1,450 as investors decided to put money in stocks with defensive characteristics, albeit Credit Suisse put the group on its least-preferred pick. Corporate results also dominated for FTSE 250 stocks.

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Reacting to the results, UBS upgraded its rating to 'buy' from 'neutral' and ABN Amro reiterated its 'buy' stance. Barratt Developments was 12-1/4 higher at 436-1/4 after it posted a first-half pretax profit increase.

Landsbanki also initiated coverage on the housebuilder with a 'buy' rating. Well-received results also gave a boost to Kier Group up 87 pence at 1,493, as the group said its first-half pretax profit rose 23.2 pct to 44.6 mln stg, with Landsbanki repeating its 'buy' stance.

Away from results, property manager Mapeley remained supported by yesterday's bid approach news, gaining 75 pence at 1,825. Turning to the downside, LogicaCMG was 4-1/4 lower at 105-1/4, after its full-year results this morning showed operating profit below expectations.

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Paris shares close flat, erasing losses on Wall St; Bouygues plummets

The CAC-40 index closed down 4.25 points, or 0.09 pct, at 4,968.82.
Twenty-three CAC-40 stocks closed lower and 17 ended higher.
The SBF-120 index closed down 5.22, or 0.14 pct, at 3,601.33.

On the Matif, March CAC-40 futures were trading at 4,988. The euro traded at record highs against the dollar, last quoted at 1.5141 usd. Construction and communications conglomerate Bouygues tumbled 3.28, or 6.45 pct, at 47.57, as disappointment over full-year 2007 figures outweighed any relief offered by a higher dividend payment.

The shares lost 2.25, or 4.23 pct, at 50.95. Credit Agricole ended down 0.12, or 0.63 pct, at 18.80, Dexia shed 0.19, or 1.14 pct, at 16.52 and Natixis gave up 0.06, or 0.59 pct, to end at 10.19.

BNP Paribas was down 1.05, or 1.62 pct, at 63.92, while Societe Generale rose 1.15, or 1.69 pct, at 63.92. Elsewhere, Lafarge shares fell 1.15, or 0.98 pct, at 115.75, as mixed full-year earnings and a conservative outlook from Swiss peer Holcim dented sentiment.

Not all earnings newsflow was negative, however. French retailer PPR rose 0.70, or 0.73 pct, at 96.19 as investors cheered consensus-beating net profit for 2007 and the group's confidence for the year ahead. Utility group Gaz de France climbed 0.88, or 2.35 pct, at 38.26, buoyed by stronger-than-expected full 2007 earnings and 2008 guidance.

Shares in future merger partner Suez rose in line with GDF, adding 0.96, or 2.30 pct, at 42.63. Among other risers, STMicroelectronics added 0.18, or 2.15 pct, at 8.57, following news the French government is to buy a 2.85 pct stake in the chipmaker via Areva, at between 10 and 14 eur per share.

Seamless tube-maker Vallourec gained 3.11, or 2.21 pct, at 143.63, after Merrill Lynch upgraded the stock to 'buy' from 'neutral' with a 175 eur-a-share target.  Tyre-maker Michelin was up 2.64, or 3.97 pct, at 69.14, also helped by a Merrill Lynch note.

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German shares close higher as Hypo Real Estate offsets weak financials

The DAX ended higher 11.88 points, or 0.17 pct, at 6,997.85 after trading between a low of 6,881.23 and a high of 7,017.70. The MDAX was down 63.28 points, or 0.67 pct, to 9,430.51, while the TecDAX closed lower 7.12 points, or 0.86 pct, to 816.69.

DAX futures were higher 3.00 points, or 0.04 pct, to 7,019.00 while bund futures fell 0.13, or 0.11 pct, to 115.25. The euro was at 1.5139 usd, compared with 1.5041 usd in early afternoon London trade.

Financials were the main drag, led by Deutsche Postbank, down 0.37 or 0.56 pct at 66.14. Commerzbank lost 0.07 or 0.33 pct at 20.92. Allianz was largely on line with a gain of 0.12 or 0.12 pct at 16.30 while Munich Re added 1.01 or 0.85 pct at 120.38.

Hypo Real Estate was the biggest outperformer on the blue chip board, adding 0.83 or 4.31 pct at 20.10. The biggest loser on the board was Deutsche Boerse, down 2.99, or 2.60 pct, at 112.02.

Deutsche Boerse announced its unit Eurex has signed agreements to acquire another 20.85 pct stake in Leipzig-based European Energy Exchange AG (EEX) for 55.15 mln eur, thereby increasing its shareholding to up to 44.07 pct from the current 23.22 pct.

Daimler added 0.60 at 57.74, Continental AG gained 0.52 at 68.90 while Volkswagen was up 0.13 at 150.60.

Henkel, up 0.45 or 1.47 pct at 31.01, was also among the big gainers on news of a sale of the household goods manufacturer's stake in Ecolab and on a cost-cutting programme. The company released fourth-quarter figures which were at best mixed.

Over on the MDAX, K&S fell 13.57 or 6.49 pct at 195.64 on profit taking from strong gains in recent weeks. Arcandor added 0.58 or 4.67 pct at 13.01 as the strongest gainer. Pfeiffer Vacuum lost 2.44 or 4.07 pct at 57.56, making it the weakest on the TecDAX. Tele Atlas rose 0.70 or 2.55 pct at 28.14.

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Amsterdam shares close lower as financials pull back; Wolters slumps

The AEX closed down 1.76 points, or 0.38 pct, at 462.58 after opening at 461.01 and trading in the range 455.77-466.11. Government bonds traded mixed, while the euro stood at 1.5112 usd versus 1.4878 usd late yesterday. Wolters Kluwer led fallers, off 8.54 pct to 17.78 eur, after the company reported full-year results and guidance for 2008 that failed to impress investors.

Financials lost some of the gains made over the past two days, as confidence in the sector receded somewhat after bad news from HBOS in the UK.

ING fell 1.50 pct to 23.71 eur, while Aegon slipped 1.15 pct to 10.31 eur and Fortis was off 0.99 pct at 15.03 eur. DSM was off 1.44 pct at 30.16 eur amid news it has received a grant from the US Department of Energy as part of a technical consortium involved in bioproducts and biofuels research.

LogicaCMG led midcap decliners, off 4.76 pct at 1.40 eur, while Wessanen was off 0.77 pct at 9.07 eur after a price cut to 8.80 eur from 9.30 at Rabo Securities.

Aalberts was down 0.41 pct to 24.48 eur ahead of full-year earnings out tomorrow. The company is expected to report a double-digit rise in full-year earnings per share, although the 2008 outlook will focus attention as concerns over a slowing market weigh.

CSM led midcap gainers, up 10.82 pct to 20.48 eur, as confidence that the Dutch bakery supplies group can withstand higher raw materials overshadowed a disappointing operational result, prompting also an upgrade to 'buy' from 'add' at Petercam.

Ahold led blue chip risers, putting on 3.16 pct to 9.15 eur as Merrill Lynch upgraded the stock to 'buy' from 'neutral'

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