UK/Euro Financial Market Daily Evening Briefing 29-10-2007

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London shares close up, resource sector leads ahead of Wed's US rate vote

Leading shares closed firmer Monday, back above the 6700 level with a robust performance from the resource sector accounting for much of today's gains as Wall Street edged cautiously higher ahead of
Wednesday's key interest rate decision.
   
By the close, the FTSE 100 index was 44.7 points higher at 6,706.0, although down from the session high of 6,726.9. The FTSE 250 index finished up 43.2 points at 11,552.8. Volume was below average.
   
Across the pond, Wall Street advanced in morning trade as investors undeterred by surging oil prices eagerly anticipated an interest rate cut from the Federal Reserve.
   
The Fed begins its two-day meeting tomorrow, and the market widely expects a rate reduction the following day. Central bankers lowered rates by a half-point in September to help combat a sluggish economy and turmoil in the credit markets.
   
A short while ago, the DJIA was up 49.7 points at 13,855.8 with the Nasdaq up 10.28 at 2,814.85 and the S&P500 up 4.8 at 1,540.2.
   
Turning to the UK blue chips risers, with gold prices near 800 usd per ounce, platinum at an all-time record and copper surging towards 8,000 usd -- miners were once again the main focus.
   
A 3 bln aud bid by Xstrata for Australian nickel miner Jubilee Mines also boosted the sector, as did JP Morgan upgrading price targets following a quarterly review of metals pricing.
   
Vedanta added 74 to 2,230, Xstrata took on 48 pence to 3,576, and Rio Tinto was 60 pence higher at 4,477, and BHP Billiton was up 25 pence to 1,868. Antofagasta was 11 pence higher at 860, despite having been singled out by JP Morgan for a downgrade, to 'underweight' from 'neutral'.
   
Oil majors also gained as crude prices continued to break records, moving inexorably towards the 100 usd a barrel mark.

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Royal Dutch Shell was 13 higher at 2,144 and BP gained 5 to 634 and Tullow Oil was 10 stronger at 640. Cairn Energy bucked the trend, dipping 57 to 2,406 after downgrades from UBS and Dresdner Kleinwort.
   
Elsewhere, renewed bid talk surrounding Compass saw the stock gain 12 to 341-3/4 and top the leaderboard although there were no new names to add to the list of usual suspects.
   
Among today's key news stories, Resolution traded 1-1/2 pence firmer to 728 after it withdrew support for Standard Life's 4.92 bln stg takeover offer, in the wake of rival Pearl's 4.94 bln hostile offer, although it stopped short of recommending the improved offer to shareholders.
   
Pearl's founder, Hugh Osmond reacted angrily to his Resolution chairman Clive Cowdery's decision not to recommend his offer and said Pear would not vote its 24 pct Resolution shareholding in favour of any merger involving Standard Life stock.
   
This impasse raised hopes among speculators of a bidding war in the sector which in turn helped Aviva add 2 to 731 although Standard Life eased 2-1/2 to 276.
   
Among other casualties and heading the blue-chip fallers list were UK housebuilders ahead of Taylor Wimpey's trading update due Wednesday where analysts expect the builder to paint a subdued picture regarding the domestic building market.
   
Hammerson eased 30 to 1021, Barratt Developments fell 20 to 630 and Taylor Wimpey dipped 8-1/2 to 230-1/2.
   
Sugar and ingredients group Tate & Lyle was also in subdued form, finishing off 9-1/2 at 441-1/4 ahead of Wednesday's interim results with the City already primed following its profits warning back in September.

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Back on the M&A theme, Sainsbury dropped 13 pence to 553, as the supermarket group's future hangs in the balance. Delta Two has two weeks to secure another 500 mln stg from the Qatari government, or it will be forced to abandon its bid for the supermarket group.
   
Not surprisingly, the miners were the best midcap performers. Talvivaara Mining, floated in May, headed the leaderboard, up 17 at 297.
   
Construction services provider Kier Group rose 63 pence to 2,113, after a trading statement came in in line with expectations and Altium Securities reiterating its 'buy' stance and price target of 2,250 pence. Kier said it has made a good start to the new financial year, with first-quarter trading in-line with its expectations, putting it on track to achieve its full-year targets.
   
And finally, Homeserve gained 86 at 1,764 after Citigroup raised its price target to 2,400 pence from 2,275 and re-iterated its 'buy' recommendation this morning on valuation grounds.

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 trading on the FTSE 250 and the AIM, click here

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Paris shares close higher led by auto stocks, anticipation of rate cut

Share prices closed up, led higher by auto stocks and with investors awaiting a decision on a possible rate cut from the US Federal Reserve later in the week.
   
The CAC-40 index closed 41.32 points or 0.71 pct higher at 5,836.19. Among CAC-40 stocks, 26 closed higher and 14 closed lower.
   
"I think it's the anticipation of a decision on a rate cut in the US that is supporting the market," said one Paris-based trader. "Apart from that, I'm struggling to understand why the market is rising," he added.
   
The euro was at 1.4411 usd, compared to 1.442 usd at midday.

Milan

Milan shares close higher, led by Snam RG

The Mibtel index was up 0.37 pct to 31,299 points and the S&P/Mib up 0.36 pct to 40,165. Volume traded was an estimated 5.563 bln eur.
   
Brokers are increasingly expecting the FOMC to cut US interest rates by another 25 pct points after the 50 point cut earlier this summer.
   
Snam RG posted "good numbers. Being in-line with expectations was comforting," said one broker. The results were mostly at the top of a range of analysts expectations for different profit lines. Snam, up 2.66 pct to 4.52 eur, extended early session gains after an afternoon conference call with analysts on full year targets and comments on stable debt and operating costs in 2008.
   
Among other utilities, Terna was up 0.91 pct to 2.7325, Enel added 0.47 pct to 8.26 and AEM was down 0.03 pct to 2.88. Saipem added 0.13 pct to 30.50 after its third quarter results this afternoon, beating analyst expectations and reiterating its full year targets. Eni, which controls Snam and Saipem, gained 0.72 pct to 25.34.
   
Banks were mostly on the positive side after being knocked down last week. Unicredit gained 1.16 pct to 5.67, also supported by an ING 'buy' rating with a lower 7.02 eur price target from 7.69. Intesa Sanpaolo rose 0.84 pct to 5.40.
   
Unipol was up 1.66 pct to 2.5975 on continued hopes for a bumper dividend or a share buy-back, given its large excess capital. Mediobanca lost 0.84 pct to 16.02, tracking the lower trend in Generali, down 0.93 pct to 33.12, in which it is the largest investor.
   
Generali saw profit-taking after last week's rise on hedge fund Algebris's campaign to improve Generali corporate governance. Brokers said that they don't see Generali making many changes.
   
Mediobanca announced first quarter results to Sept 30 over the weekend, inflated by one-off gains not expected by analysts.
   
Other stocks on the downside included Fiat, off 1.40 pct to 21.83. One broker said that there were rumours of a placement, though this was not confirmed.

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German shares close higher led by retailer Metro

The DAX closed 60.50 points or 0.76 pct higher at 8,009.67 after trading between a low of 7,986.71 and a high of 8,016.47 today. The MDAX added 21.15 points or 0.20 pct at 10,610.49, while the TecDAX gained 15.02 points or 1.52 pct to 1,004.13. DAX futures added 30.50 points or 0.38 pct at 8,055.50, while bund futures ascended 0.07 points or 0.06 pct at 113.81.
   
By and large, broker comments were responsible for several of today's gainers and decliners as the calendar was largely devoid of company earnings and newsflow was slight.
   
In addition, expectations that the US Federal Reserve will cut interest rates on Wednesday are supporting share rises, according to traders.
   
Leading blue chips higher, Metro shares added 1.99 eur or 3.37 pct, at 61.09, as dealers pointed to a report in the Frankfurt Allgemeine Sonntagszeitung that the retailer was in talks with at least two potential bidders to sell its Extra discount supermarket chain.
   
"New speculation on portfolio changes at Metro could support shares over the short-term. But the retailer is scheduled to report third-quarter figures tomorrow and those will likely take precedence for a little while," a local trader said.
   
ThyssenKrupp followed, adding 1.48 eur or 3.28 pct to 46.54, as rising commodity prices boosted metals stocks.
   
Volkswagen gained 5.83 eur, or 3.21 pct, at 187.63 as dealers pointed to a price target upgrade from Goldman Sachs on the automaker's stock to 240 eur per share from 185, while the brokerage reiterated its 'buy' rating.
   
Traders said a price target upgrade from Chevreux, which lifted its price target to 163 eur from 140 based on new operating leverage estimates, was also helping VW shares. TUI gained 0.51 eur or 2.62 pct to 20.00.
   
Siemens was up 2.19 eur or 2.39 pct at 94.01, as dealers pointed to a boost it received on the back of positive comments made by Deutsche Bank. The brokerage reiterated its 'buy' rating and 91.82 eur per share price target.
   
"As we have seen from peer results to date end-market demand remains robust, but we think the bigger issue is where the new CEO [Peter Loescher] wants to take the company," the brokerage said in a note to clients.
   
Among decliners, Deutsche Postbank was today's sharpest faller, losing 0.57 eur or 1.17 pct to 48.00.
   
Bayer lost 0.49 eur or 0.84 pct at 57.79, after the pharmaceutical giant shelved plans to seek approval for its Betaferon multiple sclerosis drug after a study failed to show that increased dosage of 500 microgram is beneficial.
   
Deutsche Telekom fell 0.12 eur or 0.84 pct to 14.16, while Munich Re lost 0.70 eur or 0.52 pct to 133.51. MAN was down 0.35 eur, or 0.29 pct at 119.79 as dealers said takeover speculation eased surrounding a possible bid from Scania.
   
Over on the MDAX, Wacker Chemie rose to the top, adding 10.01 eur or 6.21 pct to 171.15. Meanwhile, MTU Aero Engines lost 2.51 eur, or 6.24 pct at 37.71 as traders said pressure on the company since it released third-quarter figures last week continued.
   
TecDAX-listed Ersol Solar Energy added 7.72 eur or 9.51 pct to 88.91, while QSC fell 0.16 eur or 5.26 pt to 2.88.

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Amsterdam shares close higher as Wall St opens up

The AEX closed 3.69 points or 0.67 pct higher at 550.85, after opening at 551.15, reaching a late morning low of 549.38 and a late afternoon high of 551.69. 
   
Midcappers took the floor today among gainers, with USG People surging 8.29 pct following the release of well-received third quarter results. In the wake of the rising issue, Vedior went up 3.22 pct to 15.73 while Randstad fell 1.83 pct to 38.15.
   
Pharming also rose sharply following news that the company completed its randomised treatments in its North American clinical trial, assessing the safety and efficacy of Rhucin to treat acute attacks of hereditary angioedema (HAE), with all patients responding favourably. The share lifted 3.76 pct to 3.31.
   
Local issue Kardan added 5.99 pct at 13.27 amid reports that the Israeli real estate company is in merger talks with Israeli Dankner Investments. The combination would create a company worth 250 mln usd. The company was unavailable for comment.
   
TomTom led AEX gainers, up 3.66 pct to 66.31 eur after the company said it will hold an EGM on November 13 to discuss its offer for Tele Atlas. Tele Atlas closed up 0.57 pct to 23.13, also ahead of third quarter results expected tomorrow.
   
ArcelorMittal rose 3.20 pct to 57.79 eur amid reports the company is mulling taking Chinese steel makers to EU market regulators over alleged dumping of cheap steel by China on the European market.
   
Among financials, Aegon traded 0.86 pct higher to 14.01 and ING put on 0.36 pct to 30.45. Fortis was the exception, shedding 0.77 pct to 21.98 eur, with analysts saying that the issue could have been affected by UBS' profit warning. UBS said it was concerned over its fourth-quarter performance, and warned it may face further subprime-related writedowns.   

Among smallcaps, Macintosh Retail Group closed 4.33 pct higher to 25.04 after the company said it will make a 55 eur friendly bid for Belgian shoe retailer Brantano, which itself rose on the Bel 20 following the news.
   
Arcadis advanced 1.37 pct to 55.67 eur after announcing a 6 mln stg acquisition in the UK. Royal Dutch Shell added 0.59 pct to 30.55 eur as oil prices reached record highs. SBM Offshore slid 0.67 pct to 26.87.
   
Other decliners on the AEX included TNT, down 1.09 pct to 28.09 eur after the company posted third-quarter earnings that were below expectations. KPN weakened 0.82 pct to 13.34 pct ahead of third quarter results expected tomorrow.

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