ADVFN III Morning Euro Markets Bulletin
Daily world financial news from Thomson Financial News Supplied by advfn.com
10 Jun 2008 10:00:28
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London
London shares lower early on; Asia overshadows DJIA rally; banks weigh
UK blue chips opened were lower in early trade, after falls in Asian markets overshadowed an attempt at recovery from the DJIA, with banks weighing in London after worrying news from Lehman Brothers. At 9:04 a.m., the FTSE 100 index was off 44.7 points at 5,832.9, while the FTSE 250 index lost 91.3 points to 9,650.0.
Overnight in the U.S., stocks closed mixed Monday, with Wall Street exhausted from last week's drop and still nervous about the effect of bank losses and energy costs on the economy. The DJIA rose 70.51 points to 12,280.32 after Friday's rout, which was the worst tumble on Wall Street in 15 months.
Broader stock indicators finished mixed. The Standard & Poor's 500 index rose 1.08 points to 1,361.76, while the Nasdaq composite index fell 15.10 points to 2,459.46.
"Despite the rally on the Dow, it is nowhere near to repairing the damage done last week," said Matt Buckland from CMC Markets.
Over in Asia, the mood was gloomy, with the Hang Seng index down 1,011.27 points, at 23,390.89, and the Nikkei 225 index 160.21 points lower at 14,021.17.
Hong Kong shares fell, tracking the Shanghai market which dropped by more than 5 percent, after mainland authorities unexpectedly raised the reserve requirement on deposits of banks, hurting sentiment for mainland lenders and insurers.
Back with UK equity movements, banks were out of favour, after Lehman Brothers said Monday that wrong-way trading moves and risky mortgage-backed securities plunged it into a nearly $3 billion second-quarter loss, marking the first time Lehman was unable to post a profit since going public in 1994.
The bank also revealed plans to raise $6 billion to strengthen its balance sheet.
HBOS was the worst off, shedding 11 pence to 296, while Barclays slipped 10-1/4 pence to 308-1/4, Royal Bank of Scotland dropped 6-3/4 pence to 227, and Lloyds TSB lost 8-1/2 pence to 348-1/4.
Housebuilders were also among the morning's casualties.
Persimmon was the top FTSE 100 faller, down 27 pence at 401-3/4, as Goldman Sachs downgraded its rating on the company to 'sell' from 'neutral', saying it does not expect it to remain insulated from an accelerating housing downturn and potential land writedowns, despite its positive view of the company's disciplined management team and high-quality strategic land assets.
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Midcap Redrow also suffered after a downgrade, with its shares off 16-3/4 pence at 180-3/4, as Goldman Sachs cut its stance to 'sell' from 'neutral'. The broker said that given the market's aversion to housebuilders with high gearing, it expects Redrow to underperform in the current environment.
Away from the housebuilders, but also on the back foot after a broker downgrade was ICAP, down 10 pence at 580-3/4, as Credit Suisse cut its recommendation 'underperform' from 'neutral', while lowering its price target to 535 pence from 610 pence.
The broker said it believes ICAP will not be immune from the slowdown in volumes across various product areas which has hit exchanges and investment banks since the start of ICAP's new financial year in April 2008.
In results news, Tesco shares fell 11.3 pence to 390.6, as the retailer reported Tuesday a slowdown in UK underlying sales as its first-quarter progressed as consumers cut back on spending in non-food areas.
Responding, Merrill Lynch repeated its 'neutral' recommendation.
On the M&A front, British Energy slipped 4-1/2 pence to 716-1/4, with the Independent reporting that the auction of the company has plunged into doubt as EDF refuses to increase its offer.
On the upside, good gains were seen among oil companies, as crude oil prices rose in Asian trade Tuesday, and as Citigroup said it was raising its price forecast for oil to $117 a barrel in 2008 and $123 in 2009, and its long-term forecast to $100 from $75.
The broker added Royal Dutch Shell to its existing Buys, lifted its target to 2,400 pence from 2,000, while upgrading BP to 'hold' from 'sell', and hiking its target to 600 pence from 540.
Oil majors Royal Dutch Shell and BP took on 14 pence to 2,101 and 1-1/2 pence to 596-1/4, respectively.
Tullow Oil, meanwhile, added 15-1/2 pence to 934-1/2, as Citigroup lifted its target to 1,100 from 910, and as the company said it has agreed to sell its 51.7 percent stake in the offshore Hewett Unit fields in the North Sea to Italian energy group Eni for 210 million pounds in cash.
Miners were also in demand, with Eurasian Natural Resources the top FTSE 100 riser, adding 90 pence to 1,415, as Kazakhmys, the largest copper producer in Kazakhstan, said it will acquire a further 7.66 percent stake in ENRC from the government of Kazakhstan, but added that it has no current intention of making a full offer for the company.
Kazakhmys shares took on 23 pence to 1,650.
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ENRC shares were also helped by comment from Morgan Stanley, which named the company, alongside Vedanta Resources, its top pick.
Vedanta Resources climbed 69 pence to 2,352, as Morgan Stanley initiated coverage as 'overweight' with a 3,500 pence price target.
On the second tier, a Goldman Sachs downgrade helped send shares in Northern Foods lower, off 3-1/2 pence at 71-1/4, as the broker cut its rating to 'neutral' from 'buy' as part of a European food producers note in which the broker remains 'neutral' on the sector.
In a research note published Tuesday morning, Goldman Sachs told investors that despite stocks trading on depressed valuation multiples, it does not see the current sector situation as a buying opportunity, but rather it believes a potential value trap is emerging and could remain in place until there is an alleviation in the commodity or utility cost backdrop.
On a brighter note, a number of midcaps were lifted by broker upgrades.
Soco International added 107 pence to 1,973, as Citigroup raised its recommendation to 'buy' from 'hold'.
Also gaining after a broker upgrade was Misys, which added 7-1/2 pence to 151-1/2, as UBS raised its recommendation on the stock to 'neutral' from 'sell'.
And finally, Cookson Group added 14 pence to 745, as Goldman Sachs upped its rating to 'buy' from 'neutral'.
UK Diary of Events:
For a diary of key financial and corporate events in the UK today, click here
US Summary
For a summary of US stocks at yesterday's close of trade, click here
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Paris
PARIS - Market data at 10.45 am:
Major indices:
CAC-40 down 56.54 points or 1.18 percent at 4,742.84
SBF-80 down 74.09 or 1.33 percent at 5,517.21
SBF-120 down 41.12 or 1.18 percent at 3,443.75
1 CAC-40 stocks up
39 CAC-40 stocks down
Major gainers:
France Telecom, up 0.30 euros or 1.68 percent at 18.21, extending Monday's rebound as investors see a decreasing likelihood that the group will bid for Teliasonera
Iliad, 0.03 or 0.05 percent higher at 63.48. SG Securities upgraded the stock to 'Buy' from 'Hold' and raised its price target to 72 euros from 66 after the group's bid for Telecom Italia's Alice
Major losers:
Dexia, down 0.35 or 2.56 percent at 13.32. Exane BNP Paribas downgraded the stock to 'underperform' from 'outperform'. Bank stocks are under pressure across the board after the recent run of negative newsflow, including Lehmans' announcement Monday of an unexpectedly large quarterly loss and $6 billion capital increase
Veolia Environnement, down 2.18 or 4.76 percent at 43.65. Merrill Lynch reinstated coverage of the stock with an 'underperform' recommendation
Sanofi-Aventis, down 1.18 or 2.70 percent at 42.57, amid market talk that Total is looking to sell its 12.64 percent stake in the pharmaceuticals group
Seloger.com, 1.77 or 8.05 percent lower at 20.23. Cheuvreux downgraded the group to 'underperform' from 'outperform'
Most active stocks:
France Telecom, 4.49 million shares traded
Credit Agricole, down 0.06 or 0.43 percent at 13.95. 4.40 million shares traded
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Frankfurt
FRANKFURT - Market data at 10:18 a.m.
DAX down 69.73 points, or 1.02 percent, at 6,745.90
MDAX down 114.18 points, or 1.19 percent, at 9,454.31
TecDAX down 14.19 points, or 1.69 percent, at 823.89
DAX futures down 67.00 points, or 0.98 percent, at 6,755.00
Major decliners
ThyssenKrupp, down 1.34 euros or 2.13 percent at 61.54, currently the worst performer in low-volume trade, which has shown many changes in the leaderboard this morning
Deutsche Bank, down 1.34 euros, or 2.13 percent at 61.54 following a general slump in financial stocks this morning
Deutsche Boerse, down 1.74 euros, or 2.08 percent, at 82.06, perhaps due to pressure from the company's announcement earlier announcement of a 15 percent drop in May settlement transactions in its Clearstream unit
Commerzbank, down 0.40 euros, or 2.06 percent, at 19.00, also down due to low demand for financials
Deutsche Post, down 0.39 euros, 2.02 percent, at 18.91
Major advancers
Volkswagen, up 0.46 euros, or 0.26 percent, at 176.08, continuing gains from yesterday on reports the automaker has concluded several contracts with U.S. suppliers as part of plans to increase the company's exposure in the U.S.-dollar denominated region and will cut costs on its next-generation VW Golf
by about 1,000 euros per vehicle.
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Forex
London 0855 Hong Kong 0500 GMT
U.S. dollar
yen 106.69 unchanged yen 106.69
Swiss franc 1.0339 up from Swiss franc 1.0294
Euro
U.S. dollar 1.5559 down from U.S. dollar 1.5579
yen 166.00 down from yen 166.47
Swiss franc 1.6088 up from Swiss franc 1.6067
pound 0.7935 up from pound 0.7924
Pound
U.S. dollar 1.9614 down from U.S. dollar 1.9692
yen 209.19 down from yen 210.06
Swiss franc 2.0266 down from Swiss franc 2.0274
Australian dollar
U.S. dollar 0.9483 down from U.S. dollar 0.9494
pound 0.4835 up from pound 0.4820
yen 101.10 down from yen 101.25
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