UK/Euro Financial Market Daily Evening Briefing 27-09-2007

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London shares close firmer; NY higher; banks rally on Northern Rock

UK blue chips closed firmer today, as Wall Street experienced modest gains early on, with the UK banking sector finishing higher on reports of a bid approach for Northern Rock, and other reports it is opening its books to hedge funds.

At the close, the FTSE 100 index was up 53.4 points at 6,486.4, having dropped from a high of 6,508.0 and rallied from a low of 6,433.0.

All the the broader FTSE indices ended higher.

Volume was solid, with 3.42 bln shares changing hands in 665,995 deals.

On Wall Street, by London's close, the DJIA was 4.8 points firmer at 13,882.9, while the S&P index was up 1.7 points at 1,527.1, and the Nasdaq Composite index was ahead 5.69 points at 2,704.72.

Stocks rose slightly as investors bet that a steep decline in August new home sales will give the Federal Reserve another reason to cut interest rates.

The Commerce Department reported that sales of new homes plunged 8.3 pct in August to a seasonally-adjusted annual rate of 795,000 units, the lowest level in seven years. The snapshot of the slumping housing market was worse than expected -- economists surveyed by Thomson/IFR anticipated, on average, a drop of 4.6 pct.

Back in London, good gains were seen from the banking sector today, with Northern Rock closing up 11-1/2 pence at 193-1/2, on talk that Nueva Rumasa, led by Spanish businessman Jose Maria Ruiz-Mateos, plans to bid for 10 pct of the beleaguered UK mortgage lender in the next few days, El Mundo reported, without naming its source.

Also aiding the rally was news in the Daily Telegraph that Northern Rock has opened its books to US hedge funds, although it cited no sources.

Its peers were also higher, with Alliance & Leicester closing at the top of the FTSE 100 leaderboard, up 62 pence at 795, HBOS 43 pence firmer at 916, and midcap Bradford & Bingley 18-3/4 pence ahead at 310.

Housebuilders also rallied, as UK house prices registered a decent gain in September, indicating that the turmoil in the credit market has yet to dent confidence significantly.

In its monthly survey of the housing market, the Nationwide said house prices rose by a monthly 0.7 pct in September, and the average UK house now costs 184,723 stg.

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The Mibtel index was up 0.11 pct at 31,114 points while the S&P/Mib fell 0.03 pct to 40,059.

Volume traded was an estimated 5.631 bln eur.

Brokers said the market gave up earlier gains on the stronger overnight US and Asia markets in the absence of clear news on economic fundamentals.

One broker said the market should not be surprised by the weak US housing data this afternoon, given subprime mortgage worries in the last month or so.

Italcementi was up 3.30 pct to 15.83 eur, bouncing back after recent worries on prospects for housing and construction sectors. Buzzi Unicem was up 0.99 pct at 18.18. Impregilo lost 0.87 pct to 4.775.

Parmalat gained 2.93 pct to 2.53 after announcing 23 mln eur in receipts in settlements of two out its raft of legal claims. Brokers said the settlements are small, but the legal claims are a key issue for the stock.

Prysmian was up 2.92 pct at 19.94 on positive news flow, including Monday's entry into the S&P/Mib index and yesterday's 118.7 mln eur order in Spain.

In the banking sector, Banco Popolare fell 2.44 pct to 16.02, still reacting to yesterday's Credit Suisse cut in its target to 20.5 eur from 25.0.

One broker said Banco Popolare is partly trading as a proxy for Banca Italease, which is falling on a slower than expected recovery plan after hefty derivative write-downs earlier this year.

Italease was up 0.45 pct to 12.98.

Italease is seen falling to 10 eur and there is insufficient Italease stock to lend for shorting purposes so investors are shorting Banco Popolare, he said.

Unicredito was up 0.75 pct at 6.04 ahead of completion of its merger with Capitalia, effective October 1. Capitalia was up 0.78 pct to 6.755.

Ubi Banca eased 0.05 pct to 18.89. Brokers see its conservative policies being favoured in these turbulent times.

Generali fell 0.32 pct to 31.00 ahead of its business plan update this evening and a presentation tomorrow morning to analysts.

Fondiaria-SAI was up 1.76 pct at 32.91.

Among oils, Saipem lost 1.72 pct to 29.66. Eni was up 0.15 pct at 26.17. Brokers said Eni's problems with the Kazakh government over delays and cost overruns at the Kashagan field are discounted in the share price.

AEM rose 1.42 pct to 2.6825, extending yesterday's gains on further restructuring prospects for utility sector.

Finmeccanica was up 0.45 pct at 20.23 after reports the US Air Force will reopen the bidding for a 15 bln usd helicopter order, won previously by Boeing.

One broker said a Finmeccanica win of the deal would be worth 2 eur to the share. Another said the stock has already risen well recently.

Fiat added 0.65 pct to 21.59 after yesterday's strong rise on a US investor roadshow.

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The AEX closed up 2.87 points or 0.53 pct at 542.24, after opening at 542.55 and trading in the 541.59-544.42 range.

Government bonds were mostly higher and the euro stood at 1.4150 usd, against 1.4214 usd late yesterday.

DSM closed 3.81 pct higher at 38.11 eur after leading gainers throughout the day on positive investor reception of its updated strategy, which includes plans to divest non-core business, a share buyback, an increased dividend and raised targets for the long-term as well as full-year operating profit. DSM was also upgraded to 'buy' from 'add' at Petercam.

Randstad closed 3.35 pct stronger at 37.92, with one analyst noting the share had been "punished heavily" of late, partly due to concerns about the German economy, and was the most likely to recover fast.

Staffing peer Vedior, which announced today it has agreed to acquire e-business company B2B Workforce for an undisclosed sum, firmed 2.33 pct at 15.38 while midcap sector peer USG People was 0.61 pct stronger at 19.93.

Hagemeyer added 2.86 pct at 2.88 while Fortis gained 2.63 pct at 21.04.

TNT climbed 1.46 pct to 29.10 after performing well throughout the day on an upgrade to 'buy' from Rabo Securities, while former sister company KPN put on 0.99 pct at 12.24 amid news chief executive Ad Scheepbouwer will extend his contract and stay with the company until 2011, a move ING said was "positive for the shares" in a note to clients.

Philips added 1.19 pct at 31.36, Ahold ascended 0.66 pct to 10.69, and Akzo Nobel rose 0.88 pct to 58.37.

TomTom led decliners, down 3.43 pct at 56.01 eur, with dealers pointing to profit-taking fuelled by recent rises in the share price, while ASML eased 2.14 pct to 22.90, Heineken slipped 1.00 pct to 45.59, Unibail-Rodamco dropped 0.55 pct to 179.91 and SBM Offshore slipped 0.25 pct to 27.67.

Boskalis led gainers on the midcap, surging for the second day in a row and closing 5.02 pct stronger at 35.75 with dealers saying investors are still responding to the passage of US legislation that will fund dredging projects. As the only foreign dredger allowed to operate in the US, investors expect Boskalis to benefit. Trading in Boskalis options also began on Liffe NYSE Euronext today.

Among other companies in the industrial and engineering sectors that were on the rise in what one trader said was an ongoing recovery from recent losses, Heijmans added 2.69 pct at 31.74, while building peer BAM gained 1.04 pct at 18.53 and industrial supplier Aalberts Industries climbed 2.26 pct to 16.72.

Fugro was 3.09 pct stronger at 57.10, while Wereldhave was 2.76 pct higher at 83.80, Crucell was up 2.18 pct at 14.06 and CSM closed 1.76 pct higher at 24.24 a day after announcing a reorganisation of its Purac unit, which SNS Securities said should improve results substantially.

Stork closed 2.94 pct higher at 46.19 amid news a labour union has met with the group's largest shareholders says it expects the parties involved with discussing Stork's future to have a solution within 3-4 weeks.

Ordina led midcap decliners at close, losing 1.91 pct at 12.81 while IT peer LogicaCMG dipped 0.92 pct to 2.16 and Getronics was off by 0.16 pct at 6.20.

Wessanen was 1.22 pct lower at 10.52, Oce declined 0.78 pct at 15.19 and Tele Atlas, which made news today announcing a three-year contract with Transics, closed 0.44 pct lower at 20.30.

Among local listings, engineering group Arcadis added 1.03 pct at 50.00 after announcing a new contract worth 10 mln eur per year for at least three years, and Imtech surged 5.59 pct at 57.64 after announcing German orders worth 250 mln eur.

Another local share in the news, software group Unit 4 Agresso, closed 0.20 pct lower at 20.36 after announcing a new partnership that will expand its activities to Africa and the Middle East.

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German shares close higher boosted by Wall Street and Asian markets

German shares closed higher today boosted by a higher opening on Wall Street today and strong advances on Asian markets, which closed higher this morning.

The DAX closed up 49.64 points or 0.64 pct at 7,853.79 after having traded between a high of 7,882.18 and a low of 7,837.34.

The MDAX gained 97.87 points or 0.95 pct to 10,398.15 while the TecDAX declined 3.94 points or 0.41 pct to 960.29.

DAX futures were up 42.00 points or 0.53 pct at 7,937.00 while bund futures were up 0.02 points or 0.02 pct at 112.31.

The euro was trading at 1.4149 usd compared with 1.4152 usd in late afternoon trading in London.

Along with the strong showings on the DJIA, Nikkei and Hang Seng, market expert Mirko Pillep from Helaba bank said that technical trading grounds could be responsible for today's gains.

"After the DAX passed over the important resistance barrier at 7,806, we saw upward pressure pushing it towards 7,900," he said.

Leading blue chips higher, Lufthansa added 0.53 eur, or 2.67 pct, to 20.35, as recent gains continue and an article in Boersen-Zeitung yesterday said German flag carrier hedged against rising oil prices.

Allianz gained 3.00 eur, or 1.87 pct, to 163.49, after HSBC initiated coverage of the insurer with an 'overweight' rating and a price target of 200 eur per share saying several catalysts in the next 12 months could boost the share price.

Siemens jumped 1.76 eur, or 1.86 pct, to 96.23, as the company said it won a contract to supply 62 turbines to New Zealand's Meridian Energy Ltd. In addition, the company said it is now expecting to close the acquisition of Dade Behring during the fourth quarter of 2007 and not in the first quarter of 2008, as previously announced.

Deutsche Postbank rose 0.87 eur, or 1.73 pct, to 51.20 as the company said it had received EU regulatory clearance for the sale of its 50 pct stake in PB Versicherungen to Talanx, Germany's third-largest insurance group.

TUI climbed 0.30 eur, or 1.69 pct to 18.08, as positive momentum continued from yesterday after LSE-listed TUI Travel PLC said it has continued to trade in line with its expectations as demand has picked up across all markets following a relatively weak start to the summer.

On the downside of the DAX, Merck lost 4.03, or 4.29 pct, to 90.00, as the shares retreated from strong advances earlier this month.

BMW declined 0.70 eur, or 1.50 pct, to 45.98, after having announced its strategic review.

SAP slipped 0.41 eur, or 1.00 pct, to 40.74, as rumours circulated that the software manufacturer will slash its third-quarter guidance before it reports its quarterly figures on Oct 18.

Deutsche Boerse fell 0.82 eur, or 0.85 pct, to 95.79, while RWE closed down 0.44 eur, or 0.50 pct, at 87.77 as the company agreed to auction electricity volumes of 6,300 MW to industrial clients over the next four years to end a dispute with the German cartel office over how to pass on costs of carbon dioxide certificates to customers.

On the MDAX, Praktiker Bau was the top gainer, adding 1.59 eur, or 6.47 pct, to 26.16.

MTU lost 1.72 eur, or 3.88 pct, at 42.59, being the worst performer.

TecDax-listed Aixtron rose 0.46 eur, or 7.08 pct, to 6.96, being the top performer, while Draegerwerk plummeted 3.54 eur, or 5.35 pct to 62.66.

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