ADVFN III Morning Euro Markets Bulletin
Daily world financial news from Thomson Financial News Supplied by advfn.com
07 Aug 2008 09:58:53
London
London shares open down, hit by weak earnings news, ahead of BoE meeting
LONDON - Leading shares opened lower Thursday, shrugging off another session of gains on Wall Street, as earnings news from a number of blue-chips disappointed the market, while investors remained cautious ahead of the Bank of England interest rate decision.
At 8:54 a.m., the FTSE 100 index was down 12.8 points at 5,473.3, having closed up 31.6 points at 5,486.1 Wednesday, while the FTSE 250 index lost 57.7 points at 9,073.8.
U.S. stocks managed to reverse earlier losses to close moderately higher overnight, as a drop in oil prices and a better-than-expected profit report from technology bellwether Cisco Systems helped offset fears of bad home loans after mortgage financier Freddie Mac reported a larger-than-expected second quarter loss.
The Dow Jones Industrial Average closed 40.3 points firmer at 11,656.1, while the technology-laden Nasdaq Composite index added 28.54 at 2,378.37 and the S&P 500 index ticked up 4.31 at 1,289.19.
Hong Kong shares were also buoyant Thursday, with the Hang Seng up 129.76 points at 22,079.51 by midday, but Japanese shares closed down amid profit-taking after the previous session's rally. Tokyo's Nikkei 225 index lost 129.90 points at 13,124.99.
Oil prices were back on the up in Asian deals, rising $0.26 per barrel to $118.84 at last check, having eased off in U.S. trade after the government reported a jump in domestic inventories. Oil is now down about $30 from its record high of $147.27 reached July 11.
The MPC is widely expected to keep interest rates on hold at 5 percent as they continue to grapple with the twin evils of soaring inflation and a flagging economy.
The European Central Bank is also expected to leave its refinancing rate unchanged at 4.25 percent today.
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On the corporate front, Friends Provident was the main blue-chip casualty in early deals, down 5.5 percent, or 5 pence, at 86.7, after the insurer posted a 20 percent drop in first-half profit -- at the low end of expectations -- to 211 million pounds.
Cazenove said the shortfall reflects the slightly lower than consensus F&C Asset Management result and a deterioration in protection margins. Peer Standard Life slipped 7-1/4 pence at 236 in sympathy. Sticking with financials, banks were under pressure after Barclays reported a 33 percent drop in first half profits, in line with expectations, as it took a 2 billion pound writedown on the value of risky assets.
But profits at the bank's Barclays Capital business fell 68 percent to 524 million pounds, and Barclays Capital CEO said he sees challenging conditions lasting throughout 2008.
Barclays was 6 weaker at 363 following the results, while Lloyds TSB eased 3-1/2 at 310-3/4, Royal Bank of Scotland was off 1-1/2 at 232-3/4 and HSBC dipped 5 at 846-1/4.
International Power also fell back following the release of its interim figures, which revealed plant outages going forward.
The UK power generator posted a 19 percent rise in first half operating profit, but said second half operating profit is expected to be dented by 45 million pounds because of an extended outage at the company's Rugeley plant in the UK.
International Power shares lost 24-1/4 pence at 396-3/4. And Hammerson was out of favour after its own figures showed the retail REIT swung to a pretax loss in the first half. In reaction, Citigroup said the results contain some of the same worrying issues seen in Liberty International's numbers, released on Wednesday.
Hammerson slipped 34-1/2 lower at 954-1/2, while Liberty followed, also down 34-1/2 at 865-1/2, and British Land also felt the pinch, sliding 17 at 720.
Not all results led to share price declines, however. RSA Insurance Group added 1.4 pence at 140.6 after the commercial insurer posted a better-than-expected 9 percent increase in first-half operating profit to 440 million pounds.
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And Cobham gained 2 at 219-1/4 after also reporting numbers that came in ahead of market forecasts, with underlying first-half profit up 24 percent to 107 million pounds. The aerospace group said it expects to perform slightly ahead of its growth targets in 2008.
Away from earnings news, oil heavyweights ticked up on the back of rising crude prices, with BP 7-3/4 higher at 528-3/4, Royal Dutch Shell taking on 9 at 1,786 and BG Group up 15 at 1,085.
Moving to the second line, Debenhams and Mothercare bucked the blue-chip trend for retailer strength in early deals, dropping 2-3/4 at 54-3/4 and 2-1/4 at 397-3/4 respectively, after Altium Securities downgraded the two while also cutting its recommendation on small-cap JJB Sports.
Altium cut Debenhams to 'hold' from 'buy' and downgraded its trading recommendation to 'neutral' from 'buy', and reduced Mothercare to 'sell' from 'hold' while reducing its trading recommendation to 'sell' from 'neutral', on valuation grounds.
Among mid-cap risers, Aquarius Platinum jumped up 22-3/4 at 474-1/4 following its full-year results and with the stock also riding on the back of sector consolidation hopes after Lonmin rejected a $10 billion unsecured bid from Xstrata Wednesday.
Aquarius today said it is "on a strong footing to recover from the production set-backs of 2008 and pick up again with the march for value driven growth in the new financial year", and hiked up its total dividend by 43 percent to $0.20.
On the broker front, Dana Petroleum rose 45 at 1,322, helped by Goldman Sachs upgrading its recommendation to 'buy' from 'neutral' as it reviewed its exploration and production coverage. And Interserve was lifted 9 at 385 after UBS upgraded the stock to 'buy' from 'neutral' and reiterated its target at 500 pence, saying the shares look oversold.
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Forex
Forex - Euro firms ahead of ECB rate decision
LONDON - The euro was higher ahead of the European Central Bank's interest rate decision, supported by figures showing a bumper German trade surplus and anticipation the bank may release a fairly hawkish statement to accompany its decision.
The ECB is widely expected to leave rates at 4.25 percent, but analysts believe that president Jean-Claude Trichet will continue to issue a firm warning about the threat of rising inflation despite the recent evidence that the 15-nation single currency zone is entering an economic slowdown.
"Whilst very weak euro zone data continues to signal problems ahead for the GDP outlook the Bank's sole focus on inflation implies that it will be difficult for Trichet to alter his rhetoric too much without risking undermining his credibility," said Stuart Bennett, currency strategist at Calyon.
However there was one piece of good news this morning for the ECB after figures showed Germany's trade surplus surged to 18.1 million euros in June, supported by a strong month-on-month rise in exports.
"The euro has rebounded as traders laud the bumper German trade surplus and anticipate the possibility of a hawkish message accompanying the ECB's rate decision later in the session," said Gary Thomson, head of sales trading at CMC Markets.
At 0730 GMT the euro was trading at $1.5451 compared to $1.5429 at 0400 GMT. Against the pound the euro had climbed to 0.7933 pence compared to 0.7921 pence at 0400 GMT.
Meanwhile the pound was steady ahead of the Bank of England's interest rate announcement at midday, with economists unanimously forecasting the Monetary Policy Committee will leave interest rates on hold at 5.00 percent.
The latest data on the UK economy, including the service sector PMI surveys and the Nationwide consumer confidence figures, both came in on the downside but inflation remains at an elevated level. "Today's BoE rate announcement will be a non-event as the Bank is forced to keep rates high in order to fight inflation," said analysts at BNP Paribas.
However sterling may come under pressure ahead of the decision when the UK's largest mortgage lender HBOS releases its monthly house price index. Analysts expect the index to register a 1.4 percent month-on-month fall during July, meaning prices will be 8.6 percent lower than a year earlier.
At 0731 GMT the pound was trading at $1.9488 compared to $1.9475 at 0400 GMT.
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Frankfurt
German shares TFN market data at 10:24 a.m.
DAX up 26.43 points, or 0.40 percent, at 6,587.82
MDAX up 91.49 points, or 1.10 percent, at 8,407.91
TecDAX up 2.31 points, or 0.30 percent, at 775.96
DAX futures down 8.00 points, or 0.12 percent, at 6,620.00
MAJOR GAINERS
ThyssenKrupp, up 0.81 euros, or 2.27 percent, at 36.51 Commerzbank, up 0.48 euros, or 2.20 percent, at 22.10, after HSBC raised its price target for the bank to 33 euros per share from 32 and reiterated its
'overweight' rating
Deutsche Telekom, up 0.210 euros, or 1.85 percent, at 11.565, after the telecom giant released second-quarter numbers, which analysts and traders said were largely in line with market expectations and it reiterated its 2008 outlook
MAN, up 1.20 euros, or 1.83 percent, at 66.71
RWE, up 1.01 euros, or 1.33 percent, at 76.69
MAJOR DECLINERS
Adidas, down 0.71 euros, or 1.63 percent, at 42.92, correcting from recent gains. Munich Re, down 1.51 euros, or 1.34 percent, at 111.42, after Citigroup lowered its target to 122 euros per share from 140
Allianz, down 1.44 euros, or 1.27 percent at 111.54, after the insurer said it is abandoning its 2009 profit target because of difficult markets as it delivered slightly better-than-expected quarterly results
Lufthansa, down 0.16 euros, or 1.02 percent, at 111.54, after the airline said around 360 flights were cancelled Thursday as a result of a 36-hour strike launched by pilots at the company's regional unit CityLine.
EON, down 0.38 euros, or 0.94 percent at 40.43, under pressure from easing oil prices and Credit Suisse cut it rating on the European utilities sector to 'market weight' from 'equal weight'
OTHER STOCKS IN THE NEWS
MDAX-listed GAGFAH, up 0.49 euros, or 4.95 percent, at 10.39, after the real-estate company reported inline figures but reiterated its full-year guidance
MDAX-listed Altana, down 0.10 euros, or 0.96 percent, at 10.30, after the company reported second-quarter results that missed analyst expectations and cut its full-year guidance, citing sliding economic growth
TecDAX-listed Aixtron, up 0.41 euros, or 6.93 percent, at 6.33, after the semiconductor tools company reported solid second-quarter results, which should a consensus-beating bottom line
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Milan
Milan shares TFN market data at 10:12 a.m.; Saipem, oils higher; insurers down
Main indices:
Mibtel up 1.00 percent at 22,388 points
S&P/Mib up 1.03 percent at 29,313 points
Main S&P/Mib gainers:
Geox up 3.10 percent at 7.81 euros Saipem up 2.34 percent at 24.05 euros, after Cazenove upgraded the stock to 'outperform' from 'in-line', saying that after strong quarterly results the full-year consensus forecasts for the oilfield services company look achievable
Enel up 1.72 percent at 6.38 euros
Tenaris up 1.65 percent at 19.48 euros, after second-quarter EPS rose 99 percent to $0.84 and with oil-sector shares supported by stronger crude prices. Eni up 1.51 percent at 21.53 euros
Main S&P/Mib losers:
Fondiaria-SAI down 2.07 percent at 20.83 euros, as insurance sector stocks were sold after German group Allianz warned that it would not reach its 2008 profits target
Mondadori down 1.04 percent at 4.03 euros, in a weak media sector L'Espresso down 0.72 percent at 1.64 euros Lottomatica down 0.52 percent at 21.01 euros Alleanza down 0.53 percent at 6.55 euros
Other stocks in the news:
Saras up 3.47 percent at 3.11 euros, after first-half results beat analysts' expectations, a dealer said
