UK/Euro Financial Market Daily Evening Briefing 28-11-2007

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London shares close sharply higher; NY jumps on renewed rate cut hopes

At the close, the FTSE 100 index was up 165.5 points at 6,306.2, off a low of 6,041.8, while the FTSE 250 index was 300.0 points higher at 10,591.5.
   
Volume was 2.776 bln shares changing hands in 851,146 deals. In the US, Wall Street shot higher, driving the Dow Jones industrials up more than 200 points for the second day in a row after a top Federal Reserve
official hinted that the central bank may lower interest rates again.
   
Fed Vice Chairman Donald Kohn told the Council on Foreign Relations that tight financial conditions may merit "offsetting" policy from the central bank. By the London close, the Dow Jones industrial average was 227.3 points higher at 13185.7.
   
Broader stock indicators also down. The Standard & Poor's 500 index added 27.70 1455.95, and the Nasdaq composite index ended 63.93 higher at 2644.73. Rate cut hopes were further boosted by news oil prices had dropped after a bearish inventories report from the US Energy Information Agency, which showed a smaller-than-expected dip in US crude stocks and a build in inventories at the key WTI delivery point in Cushing in Oklahoma.
   
Back in London, the top riser was Sage, up 19.5 pence at 213.0, after the business management software solutions supplier said its full-year pretax profit increased to 223.3 mln stg from last year's 221.2 mln stg on significant revenue growth.
   
Merrill Lynch kept its 'buy' rating on Sage saying the main news was its 7 pence dividend, which gives a yield of 3.5 pct. Merrill said this should be viewed as a positive since one of the major criticisms of Sage has been their low dividend yield compared to the high cash flow generated by the business, in its view.
   
Compass rose 27 at 316-1/4 after the group presented a solid set of full-year earnings.  The troubled food service group posted a 41.7 pct increase in full-year underlying pretax profit, boosted by its management and performance programme (MAP), which it said had "transformed the performance of the business".
   
Compass raised its total dividend 7 pct to 10.8 pence per share. In reaction to the results, Panmure Gordon raised its rating to 'hold' from 'sell', citing the "tasty" dividend increase.

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Elsewhere, British Airways took on 25 pence at 342-1/2, against a background of the drop in crude price and a broker upgrade.
   
Earlier, Deutsche Bank upgraded its stance on BA to 'buy' from 'hold', saying it believes the UK flagship carrier is relatively insured against a recession, because of its position in the market.
   
In other news surrounding BA, it emerged it has started talks with Alitalia's advisor Citi to fathom whether there is still leeway to take part in the privatisation of the Italian carrier, the daily Finanza & Mercati said
without giving a source.
   
Jet engine maker Rolls-Royce Group was given a boost by news it has won an order of undisclosed value to supply engines for six Airbus A330 freighters to US aircraft lessor Aircastle Ltd. Rolls-Royce said deliveries of the Trent 700s to Aircastle would take place in 2010 and 2011.
   
Rolls-Royce shares rose 18-1/2 to 519-1/2. DSG International closed 5.7 higher at 118.2 after Europe's largest electricals retailer reported first half results in line with market expectations, said it is well placed for Christmas but expressed caution on the outlook for 2008.
   
Also on the upside was Prudential adding 36-1/2 at 660-1/2, after it said it plans to outsource 3,000 jobs, including 1,750 in the UK, in a move aimed at cutting annual costs by 60 mln stg.

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Under the plan, 1,750 back-office positions in Stirling and Reading and a further 1,250 in Mumbai, India, will be transferred to UK outsourcing company Capita Group.
   
There wasn't a single Footsie faller by the close of play. Turning to the second line, positive broker sentiment provided the spur for Paragon, up 14-1/4 pence at 138-1/4, with Credit Suisse upgrading its stance on the company to 'outperform' from 'neutral', while lifting its target to 175 pence from 145.
   
The broker said that securitisation data released late on Friday showed an improvement to buy-to-let (BTL) arrears performance, relieving some of its concern. Elsewhere, Burren Energy was up 43 pence at 1,116, after it emerged that Eni could make a renewed offer for the company.

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 on the FTSE 250 and the AIM, click here

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Paris shares up sharply as hopes of Fed rate-cut fuels bargain-hunting

The CAC-40 index finished up 127.04 points or 2.34 pct at 5,561.21. Among CAC-40 stocks, 38 closed higher and 2 closed lower. On the Matif, December CAC-40 futures were trading at 5,545. On the broader indices, the SBF-80 index closed up 140.52 or 2.27 pct at 6,338.15 and the SBF-120 ended 91.62 or 2.33 pct higher at 4,026.58.
   
The euro was at 1.4753 usd compared to 1.4830 usd late yesterday. Moderate morning gains were reinforced by a strong opening on Wall Street, where investors cheered comments from Fed vice chairman Donald Kohn hinting that recent financial turbulence could merit a further rate cut from the central bank.
   
Among the big climbers in Paris, financials continued to come off lows, buoyed by yesterday's news of Citigroup's capital injection from an Abu Dhabi investment fund.
   
Dexia rose 0.80 eur or 4.62 pct to 18.10, Credit Agricole gained 0.88 or 3.97 pct to 23.03, BNP Paribas added 2.64 or 3.68 pct to 74.43, while Societe Generale was up 3.15 or 3.22 pct at 101.02. Investors also returned to other stocks that have wilted in recent weeks, notably in the auto sector. Renault  jumped 4.99 or 5.32 pct, leading the CAC-40 at the close, Michelin gained 3.45 or 4.58 pct to 78.81, while Peugeot added 1.47 or 2.93 pct to 51.70.
   
Alcatel-Lucent also rebounded from annual lows, climbing 0.24 or 4.75 pct to 5.29, while Accor regained 2.55 or 4.73 pct to 56.55 after the shares' recent losses. Outside the CAC-40, Thales rose 1.98 or 5.17 pct to 40.25 as investors voiced relief that the group has ruled out a merger with Safran.
   
According to a Paris-based dealer, the news removes the uncertainties around Thales created by the prospect of a lengthy merger and restructuring process, and clears the way for investors to focus on the share's attractive profile.
   
Conversely, Safran plunged 1.26 or 8.54 pct to 13.50, with dealers pointing to the disappearance of the share's speculative appeal and negative comments on Safran's dollar sensitivity.
   
Elsewhere, Sodexho Alliance regained some of its heavy losses since its full year results, adding 2.82 or 6.86 pct to 43.90, as a positive earnings report and comments from UK peer Compass restored confidence in the French catering and services group.
   
In the IT sector, Capgemini rallied after two days of losses, adding 1.68 or 4.52 pct to 38.82. The note benefited other IT services stocks, with Atos Origin up 1.02 or 2.82 pct at 37.15 and Dassault Systemes rising 1.72 or 4.41 pct to 40.71. Among construction groups, Lafarge was up 0.65 or 0.63 pct at 103.91 and Vinci was up 0.14 or 0.26 pct at 53.29, while among property players, Unibail-Rodamco was 0.98 or 0.65 pct higher at 151.75 and Nexity fell 0.70 or 1.86 pct at 36.93.
    
But building materials group Saint-Gobain surged 2.93 or 4.60 pct to 66.65 after the European Commission announced a smaller than expected fine of 133.9 mln eur following its probe into price fixing by flat glass manufacturers. Fimalac, meanwhile, dropped 1.36 or 2.93 pct to 45.03 after publishing its full-year results, with analysts bemoaning the absence of specific 2008 guidance.

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German shares close higher, helped by stronger Wall Street opening

The DAX closed 192.31 points or 2.55 pct higher at 7,723.66 points, after trading between 7,729.00 and 7,536.54. The MDAX advanced 294.07 points or 3.61 pct to 9,589.40 points, while the TecDAX won 33.98 points or 3.75 pct to 939.34 points.
   
DAX futures were up 170.00 points or 2.24 pct at 7,756.00, while bund futures were 0.50 or 0.43 pct lower at 114.45. The euro was trading at 1.4754 usd, compared with 1.4750 usd in afternoon trading.
   
Leading blue chips higher, Commerzbank won 1.29 eur or 5.32 pct to 25.54, helped by a rebound in banking stocks recovering from heavy losses last week, traders said.
   
Hypo Real Estate added 1.61 eur or 4.76 pct to 35.45. Peer Deutsche Bank was up 3.56 eur or 4.21 pct at 88.04, while Deutsche Postbank added 2.22 eur or 3.86 pct to 59.68.
   
MAN was up 5.24 eur or 5.07 pct at 108.53 as traders pointed to renewed speculation it might be an alluring takeover target after the stock's share price has dropped recently.
   
At the other end of the DAX, Bayer was the only decliner, losing 0.11 eur or 0.20 pct to 55.76.
   
Merck won 0.82 eur or 0.97 pct to 85.51, while Deutsche Telekom won 0.16 eur or 1.06 pct to 15.20. ThyssenKrupp was down 0.20 eur or 0.54 pct at at 37.10, as losses for the steel manufacturer continued amid general pressure on the sector.
   
Over the MDAX, Aareal Bank surged 2.31 eur or 9.07 pct to 27.78 as the top performer.
   
At the other end of the MDAX, IKB Deutsche Industriebank fell 0.51 eur or 5.96 pct to 8.05 after media reports that the hard-hit bank might have higher loan loss risks than earlier thought.
   
TecDAX-listed QSC added 0.39 eur or 13.45 pct to 3.29 as the top gainer on the index.
   
Tele Atlas was the worst performer on its index, losing 1.40 eur or 4.82 pct to 27.65.

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Amsterdam shares close up, tracking Wall Street; ASML leads gainers

The AEX closed up 7.97 points or 1.62 pct at 500.21, after opening at 494.31 and trading in the range 487.99-501.39.
   
Government bonds traded lower while the euro stood at 1.4747 versus 1.4825 usd late yesterday. Heavyweight financials all traded higher, led by ING which finished 2.64 pct higher at 26.05 eur, while Aegon gained 2.26 pct to 12.23 and Fortis put on 1.79 pct to 18.15.
   
Tech stocks also performed well in Amsterdam, with ASML leading AEX gainers, eventually closing 4.15 pct higher at 23.36, while midcap peer ASMI gained 2.87 pct to 15.75.
   
Randstad added 3.43 pct to 32.27, while peer staffer Vedior gained 2.98 pct to 12.10. Midcapper USG People rose 2.38 pct to 16.78.
   
Reed Elsevier put on 3.24 pct to 12.12 as it said the 4 bln usd sale of its Harcourt US Schools Education business to Houghton Mifflin Riverdeep Group has received clearance from the US Department of Justice.
   
Among the three decliners on the AEX, TNT slipped 0.82 pct to 26.64 as JP Morgan downgraded the stock to 'neutral' from 'overweight' and slashed its target to 28.5 eur from 40.6.
   
TomTom closed down 0.25 pct at 62.64 following a sharp afternoon decline as the European Commission said its initial market investigation into the company's proposed takeover of Tele Atlas raises serious doubts with regard to vertical competition concerns.
   
Midcap takeover target Tele Atlas slid 4.34 pct to 28.99. Staying on the midcap, industrial stocks performed well, led by Boskalis Westminster which added 7.41 pct to 40.00, while BAM rose 7.17 pct to 15.99. IT services companies gained, with LogicaCMG adding 7.36 pct to 1.75 and Ordina putting on 4.61 pct to 12.03.
   
Shares in Stork gained 6.85 pct to 47.60 eur as Candover Investments announced a revised bid of 48.40 eur per Stork share and said it will sell the Dutch engineering company's Food Systems unit to LME Holding for 415 mln eur, bringing to an end a drawn-out takeover battle.
   
Broker Van der Moolen put on 1.53 pct to 3.31 after its CFO confirmed to Thomson Financial News that it is in talks with several interested parties on the sale of its US specialist unit, according to trading sources.
   
Midcap health food retailer Wessanen added 1.45 pct to 11.16 following an upgrade to 'buy' from 'accumulate' at KBC.
   
Among local issue stocks, cable maker Draka surged 14.83 pct to 24.54 surged after the company raised its full-year outlook during a trading update this morning, while plumbing materials companyr Wavin moved 6.06 pct higher to 9.10 amid news Goldman Sachs cut its price target to 13 eur from 18, but kept the stock at 'buy'.

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