UK/Euro Financial Market Daily Evening Briefing 29-08-2007

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London shares close higher, subprime issues sidelined for bargain hunting
 
London shares showed some resilience to close firmer, with investors temporarily shrugging off subprime concerns to refocus on fundamentals and valuations, with Whitbread closing strongly following a solid first-half update.
   
The FTSE 100 index finished up 30.0 points at 6,132.20, with the broader FTSE 250 up 98.10 points at 10,891.9. The other indices ended mixed. Volume was low with 2.1 bln shares changing hands in 509,956 deals.
   
On Wall Street, investors also opted to sideline bigger concerns in the absence of any earnings or economic news to look for bargains.
   
A short while ago, the DJIA was up 131.07 points, or 0.94 pct, at 13.174.92, after falling 280 points on Tuesday. Broader stock indicators also rose. The Standard & Poor's 500 index added 13.79 points to 1,446.15, while the Nasdaq composite index gained 29.06 points to 2,529.70.
   
Back in London, Whitbread ended up 54 pence at 1,612 after announcing strong sales growth in a trading update.

The leisure and hospitality group improved its performance for the 24 weeks to Aug 16, with all businesses reporting an increase in like-for-like and total sales growth, adding it was confident of good growth prospects.
   
Whitbread, however, was forced to shelve plans to return the cash to shareholders following the 925 mln stg sale of its David Lloyd Leisure fitness clubs chain in June.
   
It said while it remained "committed" to executing the framework it set out to shareholders at the time of the DLL sale, it would be putting on hold its plan to increase debt through an issue of bonds secured on the group's hotel and restaurant assets.
   
Elsewhere, Segro jumped 10 pence to 524 after reporting a 5.3 pct jump in basic net asset value boosted by development activity, good asset management and profitability, both in the UK and in Continental Europe.
   
The company, formerly known as Slough Estates, reassured investors by saying it would push ahead with its development programme in Britain and continental Europe, despite the more challenging trading conditions and the current turmoil in financial markets.
   
Standard Life finished 6 pence firmer at 290.5, helped by a broker upgrade by Morgan Stanley, which raised its rating to 'overweight' from 'underweight' while raising its target to 382 pence from 324.
   
Banks also fared better today following yesterday's heavy losses, with Barclays recovering 11 pence to 600 after press reports suggested its exposure to the failed German bank Sachsen and other SIV-lite vehicles may not be more than 75 mln stg.

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Elsewhere, Antofagasta recovered from earlier falls in tandem with the sector to add 8-1/2 pence at 692, as investors refocused on the copper producer's strong first half results.
   
The Chilean copper miner reported an 8.4 pct increase in first half pretax profits, to 1.437 bln usd from 1.325 bln in the year-earlier period, against analysts' expectations of 1.344 bln usd.

In reaction, Landsbanki said the results were excellent, and raised its target to 800 pence from 600, while maintaining its 'buy' rating.
   
Bucking today's trend, Housebuilder Persimmon lost 9 pence at 1,155 after going ex-dividend today, with peer Barratt Development shedding 6 pence at 905.
   
Among the midcaps, PartyGaming was the best performer, up over 23 pct or 5-1/4 pence to 28, after the online gaming firm reported a 29 pct increase in earnings from continuing operations in the first half.
   
The group also said trading to date in the second half has been in line with management's expectations. In reaction, Daniel Stewart reiterated its 'buy' rating and 38 pence target on Partygaming.
   
And Petrofac shares gained 9-1/2 pence at 423-1/4 on news the firm has exchanged its 29 pct interest in UK North Sea Block 9/28a, which contains the Crawford field, for an additional 3.11 pct of Block 211/18a with Valiant Petroleum.
   
The oil and gas facilities service provider said it now holds 43.11 pct of Block 211/18a, which contains a 64.25 pct share of the West Don field.

Petrofac also said it has concluded an agreement with the owners of the adjacent block which will give it a further 27.7 pct stake in West Don.    

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Elsewhere, LogicaCMG shed 2.75 pence at 156 following disappointing interim results and as news on a management appointment failed to reassure.
   
The firm said its pretax operating profit for the six months to June 30 was 29.2 mln stg, compared with 26.8 mln a year earlier, in line with the consensus forecast.
   
The Anglo-Dutch computer services company also announced a new chairman and said it was making progress in its search for a new chief executive.
   
Johnston Press shares were also weak after results today, down 0-1/4 pence to 370-3/4 as the newspaper group reported a 4.8 pct fall in first-half pre-exceptional operating profits to 96.7 mln stg.
  
In macro news, a leading government agency has provided further evidence that higher borrowing costs are taking their toll on the housing market in England and Wales.
   
The Land Registry revealed that house prices in England and Wales rose by 0.1 pct in July from the previous month, taking the average house price up to 181,460 stg.

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Paris shares end higher on bounce as Wall St climbs, results satisfy

The CAC-40 index ended up 45.85 points or 0.84 pct at 5,520.02, reversing early-session losses. 32 CAC-40 stocks closed up, one was unchanged and seven and were down.
   
Accor headed gainers, jumping 3.48 or 5.86 pct at 62.91, after posting strong first half results, expressing confidence in the full year and announcing a new 500 mln eur share buyback plan.
   
Accor said the first half's good activity should continue in the second half, with sales data for July already showing strong gains from a year earlier in most business segments. Its operating profit forecast of 870-890 mln eur for the year was higher than some analysts had expected.
   
Carrefour added 1.71 or 3.39 pct at 52.14, ahead of first half results due tomorrow.
   
Suez was up 0.64 or 1.67 pct at 38.93, and Gaz de France was up 0.19 or 0.56 pct at 34.09. GDF's first half results showed the negative impact of the mild winter was smaller than expected, while investors digested new comments about the planned Suez-GDF merger.
   
GDF's CEO said there was no impasse despite the delays and added that he will express regret if the merger does not occur but will not resign. While the merger plan was arranged by the previous French government, the current one has been less than enthusiastic about ensuring it happens.
   
Veolia Environnement put in strong gains, up 1.29 or 2.43 pct at 54.42 after the surprise release of much better than forecast first half results.
   
"Core EBIT beat our forecasts and net income was well above consensus," said an analyst at a leading European brokerage.
   
He said Water, Waste & Energy Services both put in a better than expected performance but Transport came in below expectations.
   
Just ahead of the market close Veolia said Sidem, a subsidiary of its Veolia Water unit, won an 805 mln usd order to build a new desalination plant in the United Arab Emirates.
   
Automakers and banks posted the greatest declines. Renault was down 2.32 or 12.34 pct at 97.00, after investors gave a pessimistic interpretation to comments by CEO Carlos Ghosn that the company later said were not negative. It reaffirmed its sales targets through 2009 and said it is still expanding. Peugeot was down 0.21 or 0.34 pct at 60.70.
   
Societe Generale was down 0.12 or 0.10 pct at 116.42. Subprime concerns were continuing to weigh on the sector as the large French banks are poised to report their first half results starting tomorrow. Credit Agricole was down 0.08 at 26.89.

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German shares close slightly higher led by Lufthansa

The DAX closed 8.94 points or 0.12 pct higher at 7,439.18, having traded between 7,353.82 and 7,451.97.  The MDAX added 52.50 points, or 0.53 pct, to 9,950.65, while the TecDAX gained 2.50 points or 0.28 pct to 887.56. DAX futures were 91.50 points or 1.24 pct higher at 7,476.50 while bund futures fell 0.20 or 0.18 pct to 113.85.
   
Lufthansa soared as the top performer on the blue chip board on speculation that Emirates was interested in acquiring the airline for 30 eur per share, which represents a premium of 40 pct.
   
Traders and analysts largely discounted the rumour and Emirates Airline denied it was interested in acquiring the German airliner.
   
Metro was the second best performer, adding 1.73 eur or 2.90 pct at 61.46 followed by Henkel, up 0.57 or 1.59 pct at 36.44.
   
DaimlerChrysler closed 0.59 eur better or 0.94 pct at 63.26 after it announced a 7.5 bln eur share buyback programme for a 12-month period to August 2008. About 3.5 bln eur of the amount would be bought back this year.
   
Car stocks were generally higher, with Volkswagen up 0.61 eur or 0.41 pct at 149.81, Bayerische Motoren Werke up 0.11 or 0.25 pct at 43.41, while Continental eased 0.75 or 0.81 pct at 92.41.
   
On the downside, Siemens led with a loss of 0.88 eur or 0.99 pct at 88.14, followed by Merck KgaA, down 0.89 or 0.97 pct at 90.59.
   
Shares in Merck KgaA were lower since morning after it said the Phase II trial of Matuzumab to treat metastatic colorectal cancer did not meet its predefined endpoint.
   
Financial shares were largely underperformers with Deutsche Postbank up 0.49 or 0.93 pct at 52.94, while Deutsche Bank added 0.05 or 0.06 pct at 90.10, Hypo Real Estate was unchanged at 39.95, Commerzbank lost 0.05 or 0.17 pct at 29.38, Allianz fell 0.34 or 0.22 pct at 154.42 and Munich Re fell 0.44 or 0.35 pct at 79.57.
   
Over on the MDAX, Arcandor was the biggest loser, down 0.72 or 3.84 pct at 18.01. GAGFAH added 0.66 or 4.73 pct at 14.60.
   
GPC Biotech was the weakest on the TecDAX, down 0.33 or 4.18 pct at 7.57. Nordex rose 1.95 or 6.02 pct at 34.42.

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Amsterdam shares close higher, buoyed by Wall Street's gains

The AEX closed 2.78 points or 0.55 pct higher at 510.79, after trading in the range 503.14-511.35. Government bonds traded broadly higher while the euro stood at 1.3654 usd versus 1.3628 usd late yesterday.
   
Steel giant ArcelorMittal led blue-chip gainers, gaining 2.33 pct to 46.48 eur, boosted by Morgan Stanley's upgrade on the European steel industry to 'in-line' from 'cautious' in a sector review, which saw Arcelor as one of its top picks.
   
Retailer Ahold gained 1.32 pct to 9.23 eur as Morgan Stanley resumed coverage at 'overweight', saying it believes Ahold has the capacity to double up on its 3 bln eur capital return in 2008.
   
Wolters Kluwer added 1.26 pct to 20.90 eur, while Reed Elsevier gained 1.47 pct to 13.09 eur.
   
ABN Amro gained 0.80 pct to 33.91 eur. Earlier, the Dutch bank said its Sept 20 EGM will cast no formal vote on the two takeover offers from Barclays and the Royal Bank of Scotland-led consortium. Meanwhile, Fortis closed flat, 0.04 pct down at 53.52 eur, as a press report suggested that it might provide further details on its share issue by the beginning of next week at the latest. ING was 0.31 pct off at 28.94.
   
ASML Holding added 0.81 pct to 21.15 eur after saying its intended capital repayment and reverse stock split will take place on Sept 28. Peer ASMI was 0.31 pct higher at 19.19 eur.
   
Staying on the midcap, Vopak added 3.03 pct to 40.40 eur after an upgrade to 'buy' from 'hold' at ABN Amro.
   
SBM Offshore led decliners, closing 2.48 pct lower at 27.93 eur, with the market concerned that the company's raised outlook -- given last night after reporting first-half numbers after the market's close -- was only in-line with consensus despite much stronger than expected interims.
   
Staffing stock Randstad fell 1.25 pct to 40.26 eur, Vedior was off 2.46 pct at 16.29 eur and, on the midcap, USG People slumped 2.28 pct to 23.11 eur. This morning, a research note from ABN Amro highlighted what the broker perceives to be a slowing growth in the Belgian staffing sector, noting that "in the previous cycles, Belgium has proven to be a frontrunner in terms of European staffing trends". USG and Randstad are both highly active in Belgium.
   
Heineken fell 2.16 pct to 44.42 eur, despite posting better-than-expected first half results, with analysts' citing ongoing investor skittishness and the brewing giant's unremarkable performance in the US in the first half as causes.
   
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