UK/Euro Financial Market Daily Evening Briefing 31-07-2007

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London shares close firmer as Dow jumps on earnings & inflation data

Leading shares closed sharply higher as Wall Street continued its rally from last week's rout amid further reassuring earnings news and as US macro data suggested tame inflation and rising consumer confidence.
   
At the close, the FTSE 100 index was 154 points higher at 6,360.1, just shy of its intra-day high. The Blue Chip index recorded its largest one day gain since March 2003. The FTSE 250 index was up 265.8 at 11,337.6. Volume was strong with 3.52 bln shares having changed hands in 747,052 deals.
    
"It's been nothing short of a bumper day for the London index but questions have to be asked as to whether this upside is being spurred by end of month position taking as opposed to any larger reversion in sentiment," said Jimmy Yates, trader at CMC Markets.
   
By London's close, the DJIA was up 121 points at 13,478.4 and the Nasdaq Composite was up 22.06 at 2605.2, buoyed by earnings news from General Motors and Sun Microsystems.   
   
In macro news, US consumer confidence rebounded in July as shoppers became relatively more satisfied with the current state of the economy, a closely watched gauge of the economy showed today.
   
The New York-based Conference Board said its Consumer Confidence Index rose to 112.6 in July, from a revised 105.3 in June. July's reading was also higher than the May reading of 108.5. The financial sector was awash with M&A rumours.
   
Standard Life rose to the top of the FTSE 100 leader board -- up 53 pence to 1,622 pence -- amid ongoing sector consolidation hopes as sector watchers played matchmaker. Among the possible scenarios, traders noted talk that the UK group could buy Nedbank from Old Mutual  -- up 6.9 pence at 163.6 pence -- or could look to merge with Friends Provident.
   
And Friends Provident was 9.3 points higher at 187 pence as sources told Thomson Financial News Old Mutual is considering making a fresh bid for the UK group -- months after the UK insurer rebuffed an initial approach from its Anglo-South African rival.
   
The source said Old Mutual approached Friends Provident in the spring about a potential 250 pence-per-share offer, but was rejected in favour of Friends' tie-up with closed life fund consolidator Resolution, unveiled last week.
   
With Friends' Resolution deal now under threat from Pearl Group, the privately-owned insurer led by entrepreneur Hugh Osmond, Old Mutual is now considering returning to the fray, the source said.
   
And Prudential stormed 33-1/2 pence higher to 683-1/2 ahead of its second quarter update -- due tomorrow.

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Elsewhere, Lloyds TSB was up 23-1/2 at 558 after the group said it is selling insurance unit Abbey Life to Deutsche Bank for 977 mln stg in cash as it reported a 15 pct increase in first half profit and raised its dividend for the first time in five years.
   
Lloyds, the UK's fifth-biggest bank, said pretax profit excluding volatility -- its preferred measure of its performance -- for the six months to June 30 came in at 2.010 bln stg, up from 1.750 bln stg in the same period last year.  Analysts had expected profit of 1.997 bln stg, according to a consensus forecast supplied by the company.
   
Its peers also gained. Alliance & Leicester was up 22 at 1,040 after Merrill Lynch upgraded the group to 'neutral' from 'sell' with a fair value of 1,092 pence. Merrill Lynch said that Alliance & Leicester shares are now trading below its fair value estimate, and it is upgrading the group.
   
The broker added that in addition to a more reasonable valuation, it thinks recent results revealed good progress on a number of fronts, including margins, costs and capital.
   
Royal Bank of Scotland, still hoping its consortium can take over ABN Amro, was up 22-1/2 pence at 592-1/2 pence, making it the top FTSE 100 riser.
   
Elsewhere, GlaxoSmithKline remained higher, up 40 at 1,255 after the FDA Advisory Panel voted 22 to 1 for diabetes pill Avandia to remain available to patients in the US. However, Merrill Lynch reiterated GlaxoSmithKline as a 'sell' with a reduced target of 1,160 pence.
   
In the airline sector positive results from Ryanair -- up 0.55, or 11.58 pct, at 5.3 eur -- helped give its UK peers a boost as Q1 net profit grew 20 pct to 139 mln above analysts forecasts.
   
Collins Stewart said flat yields was the positive surprise for Ryanair and these results should be read positively across to EasyJet and even British Airways where there had been fears of spill across.
   
British Airways was 15 pence higher at 397-3/4 and mid cap group Easyjet was the top second liner gainer up 58-1/2 or 12.91 pct at 511-1/2. Goldman Sachs had also upped its stance on Easyjet to 'buy' from 'neutral'.
   
The broker believes that the soft revenue environment is now priced in and charter competition may ease during the winter. Goldman Sachs said management is highly incentivised to achieve a 15 pct return on equity in 2008, and the broker forecasts 14 pct.
   
Miners were also higher following higher copper prices as well positive sentiment on the sector. Vedanta Resources was up 88 at 1,789, Lonmin gained 160 at 3,504 and Anglo American was up 144 at 2,904.
   
Midcap Taylor Wimpey was 30-1/4 pence higher at 330-1/4, after the housebuilder raised its annual pretax synergies target and announced a share buy-back. The new group, which resulted from the merger of housebuilders George Wimpey and Taylor Woodrow, said it now expected annual pretax synergies from the takeover of 100 mln stg, while unveiling a 750 mln stg share buyback programme.

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It posted first-half pretax-profit of 140.9 mln stg on revenue of 2,671.9 mln stg. Home completions totaled 12,228 units. This helped to push rival Persimmon to near the top of the FTSE 100 leaderboard, 41 pence higher at 1,142.
   
Oil prices are relatively flat today, with Brent for September delivery just below 76 usd a barrel, having slipped yesterday, and the heavyweight oil sector contributed significantly to the FTSE 100's resurgence. Index giant BP moved 8 pence higher to 577-1/2, while BG Group was up 32 at 808, and Royal Dutch Shell was up 25 pence at 1,960 pence.
   
Back on the second line, Tullow Oil was 12-1/2 pence higher at 483-1/2, having lost more than 12 pct since peaking earlier this month.
   
After earnings news, PZ Cussons was 4-3/4 higher at 157, after the group reported a 7 pct rise in its full-year underlying pretax profit on higher turnover due to good trading, and said overall performance since the year end has been in line with its expectations.
   
Xchanging rose 5-3/4 to 270-1/2 after strong interim figures, with the group reporting a 19 pct higher first-half adjusted operating profit, led by a strong growth in new contract wins, and added that it is well-placed to deliver organic growth and add major new business. Bridgewell Securities upgraded its stance on the group to 'buy' from 'overweight'.
   
St. James's Place soared 32-1/2 to 444-3/4 after the UK life insurer and wealth manager reported that first-half pretax profits rose to 133.6 mln stg on a European Embedded Value basis, up from 84.6 mln stg the year earlier. 
   
Analysts at Panmure Gordon said the results showed the group was "firing on all cylinders", and remarked that pretax operating profit - the broker's own signal of growth - rose 50 pct. It added that earnings upgrades were "likely" on the back of the results.
   
Elsewhere, a broker upgrade helped shares in Cattles rise 15-1/2 to 371 after Merrill Lynch upgraded the group to 'buy' from 'neutral' with a target of 400 pence.
   
Also in broker news, Rightmove was up 24 at 580-1/2 after UBS upgraded the estate agents group to 'buy' from 'neutral' with a target of 680 pence.
   
Greggs was 168 pence lower at 4,910 after it reported a higher first-half pretax profit, and said trading for the second half is likely to be closer to that of the comparable period in 2006, due to significant cost increases.

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Vienna shares close sharply higher in mkt rebound after 5 day decline

The ATX closed up 3.33 pct or 150.97 points at 4,685.24. The ATX Prime closed up 3.93 pct or 88.18 points at 2,331.68. Vienna's indices rose on the back of widespread bargain hunting following the often sharp losses posted by shares over the past five trading days.
   
Shares in Andritz led gainers on the ATX by rising 5.06 pct to 50.65 eur, thus recouping the 4.98 pct that the stock had lost over the course of trading last week.
   
Bargain hunting also fuelled the sharp gains posted by Intercell, 4.69 pct higher at 26.10 eur, and A-TEC Industries, whose shares closed up 4.77 pct to 162.50 eur amidst reports that Norddeutsche Affinerie (NA) has said that A-TEC's statements on a planned NA-Cumerio merger are "contradictory".
   
Other notable gainers on Vienna's blue-chip index include voestalpine, up 4.54 pct to 61.93 eur, and OMV, which ended the day 4.43 pct higher at 46.22 eur.
   
Shares in Erste Bank rose 3.68 pct to 55.47 eur after the bank's half-year results and reiterated full-year profits goal led WestLB to raise its rating to 'add', while other brokers decided to maintain their existing recommendations.
   
Wienerberger shares ended trading up 3.51 pct at 51.35 eur on the back of ratings upgrades to 'buy' at both Citigroup and Berenberg Bank and a reiterated 'buy' recommendation at Sal. Oppenheim, with all three brokers citing Wienerberger's strong preliminary second-quarter results as their motivation.
   
Shares that had largely withstood the downward pressures last week posted more modest gains today, including Uniqa, up 0.16 pct at 24.70 eur, Zumtobel, 0.40 pct higher at 27.85 eur, and EVN, which ended trading today up 1.12 pct to 84.72 eur.
   
Wiener Staedtische was the only ATX share not to take part in today's rebound, closing down 0.15 pct at 51.62 eur.
   
Boehler-Uddeholm once again ended the trading day unchanged at 73.00 eur, the offer price put forward by voestalpine.
   
On the ATX Prime, real estate shares rebounded from their sharp slumps on Monday, with Immoeast shares surging 10.34 pct to 9.60 eur, CA Immobilien Anlagen up 9.14 pct to 18.99 eur, Meinl European Land closing 8.25 pct higher at 17.05 eur and Immofinanz rising 7.76 pct to 9.30 eur.
   
Other sharp gainers on the ATX Prime included Pankl Racing, up 7.69 pct to 42.00 eur, Palfinger, 5.60 pct higher at 39.00 eur, and airline shares SkyEurope, up 5.49 pct to 3.46 eur, and Austrian Airlines, which closed 4.77 pct higher at 9.00 eur.
   
S&T shares rose 0.91 pct to 56.50 eur on news that the IT solutions provider's half-year revenues rose by 11 pct year-on-year thanks to stable organic growth in its three core divisions.

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German shares close higher as financial stocks rebound

The DAX was up 127.83 points or 1.71 pct at 7,584.14 points, having traded between 7,501.53 points and 7,632.83 points today. The MDAX gained 223.82 points or 2.13 pct to 10,747.42 points, while the TecDAX added 23.03 points or 2.56 pct to 921.35 points.
   
DAX futures were up 42.00 points or 0.55 pct at 7,621.00, while bund futures lost 0.14 points or 0.12 pct to 112.77.
  
Nervousness over the real estate and subprime loan market continued, but investors went bargain-hunting in the sector in hopes the worst of the subprime market's woes might have passed.
   
MAN rose 4.40 eur or 4.28 pct to 107.12, leading blue chips higher, buoyed by second-quarter figures and slightly increased full-year sales guidance, both of which the market received positively.    
   
"The figures are actually quite good," said analyst Jutta Rosenbaum from Commerzbank. "Even if one takes out the various special items and effects that come up in the figures, MAN's bottom line is better than our estimates," she said.
   
Deutsche Bank soared 3.90 eur or 4.02 pct to 100.90 eur ahead of its second-quarter figures to be released tomorrow, and after news that Lloyds TSB Group PLC is to sell Abbey Life Assurance Co Ltd to Deutsche Bank for 977 mln stg in cash.
   
Analysts said the purchase is a pure strategic investment and does not mean that Deutsche Bank is entering into the insurance sector.
   
Commerzbank added 0.91 eur or 2.96 pct to 31.68 eur and Deutsche Postbank rose 1.94 eur or 3.53 pct to 56.94 eur.
   
Postbank shot up out of negative territory in afternoon trade on rumours that Deutsche Bank may be interested in buying the company. Deutsche Post, which owns 50 pct plus one share in Postbank, declined to comment on the matter.
   
At the other end, Siemens slumped 1.55 eur or 1.63 pct to 93.57 as one of only two decliners today.
   
Linde dropped 1.38 eur or 1.56 pct to 86.86, possibly on profit taking after UBS raised its stance on the gas specialist to 'neutral' from 'reduce' and lifted its price target to 90 eur per share from 77 eur.
   
Over on the MDAX, Deutz jumped 0.89 eur or 10.37 pct to 9.47 eur after the company announced it is selling its gas-engines and diesel-engines business for decentralised power generation (Deutz Power Systems) to 3i for 360 mln eur.
   
Meanwhile, Aareal Bank slumped 0.50 eur or 1.41 pct to 34.88 eur. TecDAX-listed GPC Biotech lifted 1.71 eur or 20.07 pct to 10.23, extending recent gains, while BB Medtech fell 0.11 eur or 0.24 pct to 46.58.

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Amsterdam shares close broadly higher on recovering Wall Street

The AEX closed 8.23 points or 1.57 pct higher at 533.99 after opening at 529.44, reaching an early low of 528.50 and late afternoon high of 534.04.
   
Government bonds traded lower and the euro stood at 1.3694 usd versus 1.3677 usd late yesterday.
   
Personal navigation device maker TomTom led on the AEX, up 6.49 pct to 47.75, after takeover target and map maker Tele Atlas advanced 2.64 pct to 21.0 following the company's presentation of better-than-expected second-quarter results.
   
Unibail-Rodamco was up 5.88 pct to 175.30 and Heineken added 4.22 pct at 46.66.
   
Among financials, ING lifted 1.95 pct to 31.32 and ABN Amro went 2.82 pct higher to 35.39, both in high volume amid the sale by ABN Amro of its capital stake in InterBank and DMC Group to Credit Agricole's Sofinco. Aegon strengthened 2.69 pct at 13.37 and Fortis firmed 1.32 pct at 29.20.
   
KPN put on 2.97 pct to 11.43 after yesterday saying it intends to make a cash offer for Getronics, which was one of the few decliners of the day. The share closed off 0.64 pct to 6.21 after soaring yesterday more than 20 pct.
   
Royal Dutch Shell also recorded heavy trading volume, closing 1.31 pct higher at 28.65. Oil peer SBM Offshore was up 2.64 pct to 30.32.
   
On the midcap, Aalberts led gainers, up 6.33 pct to 20.49, with USG People rising 5.88 pct to 29.01 and Corio 5.71 pct higher to 53.30.
   
ASMI closed up 2.10 pct to 20.87 after the company repeated its confidence in its full year goals and said the softening of the Front-end market seen in the second quarter would probably soon be over.
   
The only other decliner of the day was Boskalis Westminster, down 0.45 pct to 28.86.

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