UK/Euro Financial Market Daily Evening Briefing 31-01-2008

Enjoy 50% of net room revenues. From £295,000.  Click Here.

London shares rally to close higher; FTSE 100 loses 8.9 pct in January

At the close, the FTSE 100 index was up 42.5 points at 5,879.8, having been down as much as 147.9. The FTSE 250 index fell 26.7 today to close at 9,881.8. The FTSE 100 ended January 577.1 points or 8.9 pct, lower. It was one of the index's worst performances in January on record. Volume was average, with 2.9 bln shares having changed hands in 893,491 deals.

Over in the US, Wall Street opened lower after heavy losses at bond insurer MBIA fuelled credit concerns, with a disappointing outlook from Amazon.com also undermining sentiment.

Additionally, the US Labor Department said initial claims for state unemployment benefits rose 69,000 in the latest week to 375,000, well above the median estimate of economists surveyed by IFR Markets of 318,000. Continuing claims rose to 2.716 mln, above economist forecasts of 2.675 mln.

The market is not convinced that the Fed's additional rate cut yesterday will be enough to avoid recession.

But US shares rallied and as the London markets were closing, the Dow Jones Industrial Average was up 8 at 12,450, having been off as much as 192 earlier. Broader indices had also recovered. The Standard & Poor's 500 index was up 3.4 at 1,359.2, and the Nasdaq composite was up 6.12 at 2,355.12.

David Jones, chief market strategist at IG Index, said: "What is clear is that the action taken by the US Federal Reserve last night has done little to change the overall negative mood. This sentiment weighed on London for most of the day and, today's afternoon bounce back aside, this does not seem to have changed investors' outlook."

Some of the the top performers in the FTSE 100 were companies benefitting from the resurfacing of long-running takeover rumours. Carphone Warehouse topped the leaderboard, rising 24-1/2, or 8.1 pct, to close at 328-1/2. Rumours of a bid from US-based Best Buy did the rounds once again.

Miner Xstrata was also a gainer, closing up 109 pence at 3,827, as investors once again became excited by reports that a long-awaited bid from Brazil's Vale will finally materialise.

Medical devices maker Smith & Nephew took on 28 to close at 682, buoyed by a target hike from JP Morgan.

Friends Provident remained the biggest FTSE 100 faller, slipping back 16.4, or 10.6 pct, to close at 138.8, affected by disappointing new business news along with a fall in equity valuations.

The firm, which also unveiled as-expected plans to sell its stake in F&C Asset Management and its Lombard wealth management unit as part of a strategic review, said it expects underlying pretax profit for the year to Dec 31, 2007, of 300 mln stg on a European embedded value basis, down from 509 mln the previous year.

The news affected Friends' peers, with Standard Life falling 8-1/2 to 215-1/2. Old Mutual fell 7.4 to 124.3. Others, such as Prudential and Aviva that had fallen heavily earlier, recovered to close flat or even higher.

Banks also recovered from early falls.

You've probably heard about spread betting - but maybe the risks have put you off. The Finspreads Trading Academy, the most popular way into the world of spread betting, takes you through the whole subject from a keen amateur's point of view. So don't be startled by spread betting - get started. Click Here

On the corporate news front, oil major Royal Dutch Shell closed unchanged at 1,744, despite reporting the biggest-ever annual profit of any UK-listed company.

The shares were down 2 pct at one stage, with Merrill Lynch remarking that today's quarterly profit number was 3 pct below the broker's forecast and 2 pct below the consensus forecast.

Shell was also hurt today by lower oil prices, down more than 2 usd on fears that world slowdown may hurt demand.

But BP reversed earlier losses to close up 7-1/2 at 532. The company, which reports on Tuesday, said it made a "significant" gas discovery at the Nile Delta in Egypt.

And BG Group closed up 55 pence, or 5.3 pct, at 1,100, as traders noted a revival of speculative interest, although no firm details were forthcoming.

Cairn Energy rose 57 to 2,565 after a positive operational update, with Merrill Lynch reiterating its 'buy' stance on the group.

Tullow Oil rose 27 to 597. Among the other blue chip gainers, miner Rio Tinto remained in demand, rising 137 to 4,956, as investors awaited a possible bid from BHP Billiton, which was 31 higher at 1,477.

Among the midcaps, the biggest faller was Mitchells & Butlers, which ran into profit-taking after yesterday's late 18 pct leap on the back of news of bid approaches, dropping 27-1/4 pence at 445-3/4.

Panmure Gordon said existing major shareholders, notably Robert Tchenguiz and associated parties, are likely to have been behind the approach. But the broker cast doubt over Tchenguiz's ability to finance such a deal.

Shares in WH Smith fell 11-1/2 to close at 337-1/4 as investors booked profits despite the newspapers, books and stationery retailer having reported solid Christmas trading and detailing plans to return 90 mln stg to shareholders through a special dividend and share buyback.

Last year several of our products achieved 100% capital growth. Average return on investment - 42%. January 2008 many products up 9-20%. For a free brochure, and to be entered into our prize draw for a case of vintage champagne to take place on March 31st, Click Here.

Northern Rock ended the day off 2-1/4 at 107, with some negativity from brokers such as Panmure Gordon, which reiterated its 'sell', more than offsetting expectations that Virgin Group will make a takeover bid for the company on Monday.

Kesa Electricals rose 7-3/4 to close at 239, its highest in seven weeks, building on gains yesterday, when it announced the sale of BUT for 550 mln eur.

Dresdner Kleinwort today praised the company for the price it realised in the BUT sale and upped its price target to 240 pence, from 215, but downgraded its recommendation to 'hold' from 'add'. The broker said it was mindful of possible pressures on sales at Kesa's other French chain, Darty.

Finally, a positive trading update helped shares in Mouchel Group rise 3-1/4 to 437-1/4, as it said it is on track for an in-line full year performance, prompting Cazenove, WH Ireland and Seymour Pierce to all keep their 'outperform' rating on the stock.

UK Diary of Event:
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

 Move to Selftrade and enjoy fast, efficient dealing with connections to over 18 online market makers. Deal in equities, funds, gilts, corporate bonds, covered warrants and Listed CFDs. Standard flat £12.50 per trade.  Frequent trader rate £6 per trade.  No dealing fee on fund purchases. Click for more information. Click here for more information.

Paris shares close slightly lower as financials weigh on sentiment

The CAC-40 index finished down 0.08 pct or 3.78 points at 4,869.79.
Among CAC-40 stocks, 19 closed higher and 21 closed lower.

On the broader indices, the SBF-80 index closed down 32.06 or 0.58 pct at 5,509.44 and the SBF-120 ended down 5.04 or 0.14 pct at 3,522.09. The euro was quoted at 1.4832 usd compared to 1.4863 at midday.

Societe Generale was again one of the day's most closely followed stocks, closing up 1.71 pct or 1.40 eur at 83.20 in volume more than double its recent daily average.

The bank's shares got a lift after rival French bank BNP Paribas confirmed it is mulling a takeover offer for the troubled bank.

Societe Generale's gains bucked the overall downward trend among financial stocks Thursday on overnight news of a rating cut for US bond insurer FICG Corp, which sparked speculation of further downgrades for fellow companies MBIA and Ambac and raised concerns that the full impact of the US subprime crisis has yet to be fully disclosed.

Financial stocks fell sharply across Europe, with Credit Agricole leading losses in Paris, closing down 4.3 pct or 0.92 eur at 20.49. Dexia fell 3.71 pct or 0.62 to 16.08 while Natixis lost 2.83 pct or 0.33 to end at 11.33 as concerns focused on its won credit-enhancement unit CIFG, which was recently transferred to the bank's parent companies Caisse d'Epargne and Banques Populaire.

In the case of banks and insurers, fears centre on their exposure to credit instruments that have been guaranteed by bond insurers - any downgrade in the insurers' credit ratings will prompt a devaluation of the instruments and prompt further heavy provisioning.

Insurance giant Axa slumped 1.89 pct or 0.44 to 22.88 as the bond insurance concerns drew attention away from this morning's solid full-year sales figures.

"Axa's figures were in line but unfortunately the bad news on the monoline industry is eclipsing everything," according to one analyst. "On top of that, the market considers that 2007 is over and done with and is now wondering what the future holds, given the current uncertainties."

A late-afternoon spate of bargain hunting in blue-chips such as L'Oreal, Danone and France Telecom, all of which have been trading at recent lows, helped the CAC 40 pare its losses and end the day near break-even.

L'Oreal gained 2.08 pct or 1.68 eur to 82.46 and Danone rose 1.94 pct or 1.03 to 54.03, while France Telecom tacked on 1.68 pct or 0.39 to end at 23.62.

A new edition of the best selling finance book "The Naked Trader" by Robbie Burns is out. Packed with invaluable advice about trading and investing it's jargon free and easy to read. Get his top ten trading strategies at an ADVFN special price CLICK HERE

German shares close down as financials, automotive lead fall

The DAX was down 23.60 points or 0.34 pct to 6.851.75 after trading between a low of 6,691.25 and a high of 6,887.75. The MDAX rose 7.62 points or 0.09 pct to 8,718.81 while the TecDAX lost 1.20 points or 0.15 pct to 789.80.

Dax futures were up 21.50 points or 0.31 pct to 6,889.50 while bund futures added 0.66 or 0.57 pct to 116.59.

The euro traded at 1.4841 usd against 1.4869 in mid-afternoon trade. Truckmaker MAN fell 2.82 eur or 3.31 pct to 82.33, Bayerische Motoren Werke was lower 0.85 or 2.26 pct at 36.80 while automotive supplier Continental fell 1.69 or 2.37 pct at 69.50.

Henkel was the biggest loser, easing 1.21 or 3.81 pct at 30.55. Among financials, Commerzbank slipped down 0.45 or 2.17 pct to 20.26 to lead the sector lower.

Commerzbank announced early today that it is merging its Essen Hyp unit with its larger Eurohypo business in order to bundle its public finance operations into a single entity.

Deutsche Bank was down 1.57 or 2.05 pct to 75.16. Deutsche Bank said it increased its stake in Chinese investment fund company Harvest Fund Management Co Ltd to 30 pct for an undisclosed sum. In March 2005, Deutsche Bank had acquired an initial 19.5 pct holding in Harvest Fund.

Allianz fell 2.05 or 1.69 pct to 119.46, Munich Re lost 0.59 or 0.49 pct at 120.27 while Deutsche Postbank was off 0.34 or 0.61 pct at 55.57. Hypo Real Estate also declined, falling 0.11 or 0.52 pct at 20.94, but was in line with the broader weak market.

Allianz was negative impacted after S&P cut its outlook on the company's German subsidiary Dresdner Bank to negative, brokers said.

Beating the market trend, Bayer was up 1.89 or 3.57 pct at 54.83. Linde was up 1.88 or 2.20 pct at 87.47, benefiting from earnings released by French peer Air Liquide, traders said. Retailers were also weaker, with Metro falling 0.53 at 54.84, while Adidas pared 0.54 to 42.48.

The expected slowdown of the global economy will hit the German retail industry in 2009 at the earliest, German retailers association HDE spokesman Hubertus Pellengahr told Financial Times Deutschland's online edition. Pellengahr also reiterated HDE's outlook of a 2 pct growth in retail sales this year.

On the MDAX, Altana was up 0.04 to 15.06 after disclosing early this morning that its full-year EBITDA rose by about a third to 248 mln eur from 186 mln a year earlier, slightly ahead of both analysts' estimates and its own guidance, on growing demand from Asia and Europe.

Beiersdorf rose 2.22 or 4.50 pct to 51.55 while EADS fell 0.65 to 17.04 and Heidelberger Druck eased 0.66 to 18.16. On the TecDAX, Rofin Sinar outperformed with a gain of 4.58 or 18.48 pct at 29.37. Epcos lost 0.59 or 6.07 pct at 9.13.

Developing, marketing, managing and selling property throughout the Caribbean for over 30 years providing first-hand expert knowledge. Offices in Europe and the Caribbean enable us to deliver the best service and value to developers of luxury resorts and offer premium properties for resort living, retirement or investment.  Click Here.

Amsterdam shares close off lows, tracking Wall Street; Akzo Nobel leads

The AEX closed 1.71 points or 0.39 pct lower at 441.33, after opening at 440.39 and trading in the 430.14-443.12 range. Government bonds traded higher, while the euro stood at 1.4817 usd, compared with 1.4785 usd late yesterday.  

TomTom added 3.88 pct to 36.64 eur after the late afternoon surge. Unilever, due to report what analysts expect will be guidance-beating full-year results next week, rose 0.61 pct to 158.36 eur.

On the midcap, Corio rose 2.84 pct to 55.07 eur and Tele Atlas added 0.27 pct to 26.40 eur after news late yesterday that they will be promoted to Euronext Amsterdam's blue chip AEX index in March.

SBM Offshore led AEX decliners, losing 4.78 pct at 19.31 eur, following sharp gains this week as investors welcomed its preliminary full-year results. Rabo Securities cut its target on SBM this afternoon to 30 eur from 32 and maintained its 'buy' stance.

Financials were also lower amid ongoing concerns over the US sub-prime crisis, led down by ING which lost 3.13 pct at 21.68 eur.

Aegon was off 2.92 pct at 9.96 eur having agreed this morning a 30-year 1.5 bln usd capital management transaction with JPMorgan Chase Bank NA, involving an initial amount of 300 mln usd.

Fortis fell 2.36 pct to 14.88 eur as it said it will de-merge ABN Amro's asset management arm by the end of the first quarter after gaining approval from the Dutch central bank.

Tech stock ASML shed 0.45 pct at 17.75 eur as customer Taiwan Semiconductor Manufacturing said its capex spending in 2008 would be lower than in 2007.

Oil giant Shell fell 0.12 pct to 24.05 as it reported increased earnings in the fourth quarter, but below what analysts had predicted, following a worse-than-expected fall in oil and gas production and weakness in refining business.

On the midcap, Fugro led decliners, off 3.45 pct at 45.59 eur and Van der Moolen was down 2.15 pct at 2.73 eur after news it will be will be demoted to the AScX index in March.

Unit 4 Agresso added 1.82 pct at 15.67 eur as it agreed on the terms of a 205 pence per share recommended cash offer for financial software supplier CODA.

Local issue Arcadis was 0.69 pct higher at 40.94 eur, also benefiting from the news that it will be promoted to the midcap AMX index from the small cap AScX index.

Antonov, also locally issued, surged 9.30 pct higher to 0.47 eur, as it said it has begun receiving payments in Germany due under the distribution agreement of its dual-speed supercharger with GreenTech International.

Closing Forex Rates -- UK

Sterling exchange rates:

ADVFN Services