UK/Euro Financial Market Daily Evening Briefing 29-11-2007

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London shares close up after volatile session; miners in demand; NY rally
 
At the close, the FTSE 100 index was 42.9 points higher at 6,369.1, below the early morning peak of 6,363.5 after a topsy-turvy session, having rallied from a midmorning low of 6,273.4. All the broader FTSE indices ended higher.

Volume was low, with 2.483 bln shares changing hands in 788,746 deals. On Wall Street, by London's close, the DJIA was 29.60 points firmer at 13,219.00, with the S&P 500 index up 1.90 points at 1,470.90, and the Nasdaq composite index ahead 10.13 points at 2,673.04.
   
US stocks recovered from earlier falls as investors digested a mixed bag of corporate and economic news today, including weaker-than-expected earnings from retailer Sears and a strong reading on US economic growth in the third quarter. Some pushback had been expected after the DJIA posted its biggest two-day rally in five years on Tuesday and Wednesday, but the optimists managed to hold sway by London's close.
   
Meanwhile oil prices rose today, but were off from earlier highs after a pipeline that supplies 19 pct of domestic crude imports partially reopened following an overnight fire.
   
The government said it was prepared to release oil from the Strategic Petroleum Reserve if needed. Gains in oil majors provided a prop for blue chips in London today as crude prices firmed, with BP up 10-1/2 pence at 587-1/2, and BG Group ahead 19 pence at 984.
   
But strength in heavyweight mining issues played a big part, with the price of copper and other metals rising today, and amid ongoing takeover rumours. Vedanta Resources took on 158 pence at 2,192 after vague talk of a 2,500 pence a share bid for the firm circulated, although the firm denied market speculation that it is in takeover talks.
   
Anglo American jumped 199 pence higher to 3,154 after late chatter that Xstrata -- 152 pence higher at 3,313 -- was considering a 3,600 pence a share bid for its blue chip rival. And Rio Tinto added 237 pence at 5,637 on talk that predator BHP Billiton -- up 49 pence at 1,618 -- is considering raising its offer for the world's biggest copper producer.
   
Meanwhile Antofagasta added 52 pence at 755 as copper prices rose, shrugging aside news its nine-month profits fell 6.1 pct on lower copper sales and realised prices and easier tolling charges. Antofagasta's nine-month EBITDA declined to 2.15 bln usd from 2.30 bln as sales dipped 4.8 pct to 2.84 bln.
   
However mortgage bank Alliance & Leicester was the stand-out blue chip leader, up 50-1/2 pence to 686, a near 8 pct jump in value, after the firm reassured investors on its liquidity outlook.
   
In a pre-close trading statement, A&L said excluding an impairment loss charge, 2007 core operating profit is expected to be ahead of forecasts. A&L added that it has put in place additional funding facilities to pre-fund its "maturing medium term wholesale funding, commercial paper and certificates of deposit into the third quarter of 2008".

Meanwhile midcap mortgage lender Bradford & Bingley added a modest 0-1/4 pence at 303 after saying it is on course to meet analysts' expectations for a 6 pct rise in full-year profit, adding that it remained adequately funded despite the credit crunch.
   
In its trading update, B&B said it expects its underlying profit for the year to Dec 31 2007 to be in line with the current analyst consensus forecast of 356.6 mln stg, up from 336.1 mln the previous year.
   
But on the downside, blue chip Royal Bank of Scotland ended off lows but still shed 1-1/4 pence at 443-1/4 after rumours circulated that the bank may be about to announce a 12 bln stg write-down due to its sub-prime exposure.

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RBS will release its pre-close trading statement next Thursday and has said little to to dispel uncertainty around its positions. Elsewhere among the banks, Barclays was a big faller, down 14 pence at 540 having rallied earlier this week after a reassuring trading update, while HBOS lost 4 pence at 785.
   
And HSBC shed 5 pence at 814 after ABN Amro cut its stance to 'sell' from 'hold,' and reduced its target to 700 pence from 920 pence. ABN Amro said, in its view, a sharp rebasing of HSBC's earnings is required as the bank realigns a disparate collection of businesses within its core strengths.
   
Retailers were a negative focus once again, with the bad news from Sears in the US adding to ongoing concerns in the domestic sector. Kingfisher ended 2.3 pence lower at 157.7 pence after initial relief at the home improvement group's third-quarter trading statement today gave way to ongoing concerns about the impact of the weak UK housing market on the group.
   
The retailer, currently seeking a new chief executive, reported a 1 pct fall in third-quarter retail profit, reflecting a tough UK trading environment. The company also cautioned that it expects UK demand to deteriorate further over the coming months.
   
DSG International was also a big casualty again, shedding 4.7 pence at 113.5 after yesterday's H1 results, with JP Morgan cutting its target to 125 pence from 130 and lowering 2008 forecasts for the electricals retailer by around 3 pct.
   
Elsewhere clothing retailer Next shed 8 pence at 1,727, Marks & Spencer was down 14-1/2 pence at 594-1/2, and Argos-owner Home Retail Group dropped 5-1/4 pence at 350-1/4 reflecting the gathering clouds for retailers.
   
And staying on the high street, Mitchells & Butlers was the worst blue chip performer, losing 35-1/2 pence to 585-1/2 after the All Bar One and Harvester pubs group unveiled full-year pretax profit of 207 mln stg, down from 208 mln the previous year.
   
M&B also said it is giving serious consideration to a new proposal from Robert Tchenguiz's R20 investment vehicle to release value from its property assets. In reaction to the numbers, Panmure Gordon cut its rating for M&B to 'sell' from 'hold'.

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Other pubs operators suffered in sympathy, with blue chip Punch Taverns shedding 32 pence at 839, Enterprise Inns down 13 pence at 542, and second liner JD Wetherspoon off 19-1/2 pence at 400-1/2.
   
Also on the downside with mid caps, Galiform shed 4-1/4 pence to 98-1/4 on news that Dresdner Kleinwort was understood to be placing 9 mln shares in the kitchen maker and retailer at a price of 99 pence each.
   
Among the midcap gainers, FKI was a top performer, 11-3/4 pence higher at 81-1/2, a near 17 pct jump in value after the engineering group reported a 10 pct increase in half-year pretax profits and confirmed it still intends to separate the Logistex and Hardware units from the group.
   
Arriva added 30-1/2 pence at 803 after JP Morgan upgraded the bus operator to 'overweight' from 'neutral' on valuation grounds, and upped its target for the stock to 922 pence from 855. And Biffa gained 10 pence to 319 after Montagu Private Equity and HgCapital announced that on Nov 27 they made a further written bid approach to the waste management group's board are waiting for a response.
   
The firms are requesting talks with a view to securing a recommendation for a possible cash offer for Biffa, which revealed last week that it had rejected an initial approach on Sept 4.

UK Diary of Events:

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Paris shares close up as bargain-hunting, corporate news offset mixed macro news

Share prices closed higher as investors were spurred by positive corporate news and the prospect of more bargains, which offset mixed economic news on both sides of the Atlantic.
   
The CAC-40 index finished up 36.90 points or 0.66 pct at 5,598.11.
   
Among CAC-40 stocks, 32 closed higher and 8 closed lower. On the Matif, December CAC-40 futures were trading at 5,588.
   
On the broader indices, the SBF-80 index closed up 54.86 or 0.87 pct at 6,393.01 and the SBF-120 ended 27.82 or 0.69 pct higher at 4,054.40.
   
The euro was quoted at 1.4769 usd, compared to 1.4753 usd late yesterday.
 

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German shares close higher on hopes for lower US interest rates

The DAX closed 41.53 points or 0.54 pct higher at 7,765.19 points, after trading between 7,780.48 and 7,729.44. The MDAX gained 126.84 points or 1.32 pct to 9,716.24 points, while the TecDAX won 11.44 points or 1.22 pct to 950.78 points.
   
DAX futures were up 5.00 points or 0.06 pct at 7,800.00, while bund futures were 0.37 or 0.32 pct lower at 114.79. The euro was trading at 1.4773 usd, compared with 1.4769 usd in afternoon trading.
   
Leading German blue-chips higher, Thyssenkrupp was up 0.88 eur or 2.33 pct at 38.67, after JP Morgan started coverage of the German steel giant with a 'neutral' rating and a 35 eur-per-share price target.
   
Siemens rose 1.47 eur or 1.46 pct to 101.95 after Peter Loescher, chief executive of the German electronics giant, said he would like to raise the company's earnings-per-share for the 2008 business year, adding that the company will focus on organic growth.
   
One trader said the comments sound good and will attract investors interest to the stock, but he said the company needs to give more details about the "ambitious" new targets it envisages.
   
Deutsche Boerse climbed 0.80 eur, or 0.66 pct, to 121.55 after the German stock-exchange market operator said that it has sold its Clearstream unit's headquarters in Luxembourg to IVG Immobilien for 350 mln eur, leading to a book gain of around 120 mln eur.
   
Linde added 1.12 eur, or 1.28 pct, to 88.68, as an upgrade to 'buy' from 'sell' at Citigroup yesterday continued to boost the shares. At the other end of the DAX, Adidas lost 0.74 eur, or 1.61 pct, at 45.15.
Lufthansa fell 0.20 eur, or 1.10 pct, at 18.04, as the worst performer, as it was put under pressure from rising oil prices.
   
The price also put pressure on automotives parts supplier Continental, which was down 1.00 eur or 1.12 pct at 88.00. Deutsche Telekom lost 0.12 eur, or 0.79 pct, to 15.09 after Morgan Stanley lowered its price target to 15 eur per share from 15.50 and reiterated its 'equal-weight' rating, saying the telecoms giant is likely to suffer slightly due to possible changes in its investor makeup.
   
On the MDAX, MLP gained 0.68 eur, or 7.35 pct, at 9.93 after US investment group Harris Associates said yesterday it raised its stake in the German financial services provider to 10.25 pct from 5.02 pct. At the other end of the index, Fraport dropped 1.25 eur, or 2.31 pct, at 52.75.On the TecDAX, Conergy rose 3.30 eur, or 14.73 pct, to 25.70 after Deutsche Bank raised its stance to 'hold' from 'sell' and lifted its target price to 27 eur per share from 25 largely on valuation grounds.
   
QSC was the sharpest decliner, losing 0.58 eur, or 17.63 pct, to 2.71, after analysts said a potential merger of peers United Internet and Versatel could lure away QSC customers.

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Amsterdam shares end higher, led by defensive shares

The AEX closed 1.70 points or 0.34 pct higher 501.91, after trading in a range of 497.98-504.31. Government bonds traded higher while the euro stood at 1.4770 usd versus 1.4747 usd late yesterday.
Reed Elsevier led gainers, adding 3.47 pct to 12.54 eur, while ArcelorMittal gained 2.78 pct to 49.83 eur after news that it will build a new steel pipe mill in Nigeria.
   
Unibail-Rodamco rose 2.49 pc to 155.53. Fortis rose 1.98 pct to 18.51 eur after Chinese insurer Ping An invested 1.8 bln eur into Fortis, in return for a 4.18 pct stake in the Belgo-Dutch bancassurer. Staffing companies rose. Vedior added 1.65 pc tot 12.30 eur after it bought GULP, an IT recruitment provider in Germany, while Randstad rose 1.08 pct to 32.50 eur.
   
Heineken added 1.07 pct to 44.38 eur as talk continued that a hostile bid by Heineken and Carlsberg on Scottish&Newcastle is still a distinct possibility. TNT added 0.83 pct to 26.86 eur and ING rose 0.58 pct to 25.90 eur. Royal Dutch Shell was among decliners, dropping 0.33 pct to 27.34 eur amid news that it may be one of several oil companies seen aiding the French government which wants to fund a fuel rebate for homes in France.
   
Technology-related companies lost. TomTom shed 0.78 pct to 62.15 eur, ASML dropped 1.33 pct to 23.05 and Philips shed 1.71 pct to 28.24 eur. Aegon led decliners, shedding 1.80 pct to 12.01 eur. Among midcap shares, Crucell added 5.91 pct 12.18 eur while BAM rose 2.88 pct to 16.45 eur after news that Siemens proposed the construction of a new Maglev line with a consortium of which BAM is also a part. Ordina shed 0.42 pct to 11.98 eur, Aalberts lost 0.72 pct to 13.82 and Binckbank dropped 3.34 pct to 10.42 eur.

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