ADVFN Morning Euro Markets Bulletin - August 31st 2010

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London Market Reports
US slide hits Footsie

Market Movers
FTSE 100 5,139.36 -1.20%
techMARK 1,611.53 -0.62%
FTSE 250 9,694.45 -0.87%

London has been dragged lower by last night’s slump on Wall Street, where Dow Jones fell 140 points as traders digested disappointing personal income and spending data.

Miners are leading the retreat with ENRC and Kazakhmys the worst affected, though there are declines across the sector.

Bunzl is one of the better performers after half-year results bang in line with expectations. A recovery in North American revenues offset ongoing weakness at the distribution and outsourcing group’s business in the UK & Ireland. Profit before tax, intangible amortisation and acquisition related costs increased 8% to £125.1m.

AstraZeneca is mulling its options over fledgling respiratory treatment motavizumab after US regulators asked for more data on its efficacy. Better news for Reckitt Benckiser after the US Food and Drug Administration (FDA)approved the manufacture and market Suboxone sub-lingual film in the US.

Encore Oil has described as "superb" the latest drilling results from it Cladhan appraisal well located in UK Northern North Sea block 210/29a. "This is a superb result from Cladhan and is at the upper end of our expectations regarding the quality and quantity of reservoir sands," chief executive Alan Booth said.

BTG, the specialty pharmaceuticals outfit, expects product revenue to be higher than expected this year after doing a deal to become the sole supplier of a pair of life-saving drugs from 1 October. Nycomed US Inc’s contract as the exclusive distributor of CroFab and DigiFab in the US expires on 30 September, but it’s allowed to keep selling whatever supplies it has left for another six months.

Higher prices outweighed lower production in the first half for Africa-focused oil group Afren as it moved strongly into profit. The group posted net income of $50.7m compared with a loss of $38.5m as revenues rose to $215m from $155m.

Online gaming giant 888 Holdings' trading in August has been significantly stronger than in July but it was not all good news for shareholders, as the company cancelled its interim dividend. Total operating income in the first half of 2010 rose to $130.2m from $117/9m the year before.Underlying earnings tumbled to $12.6m from $20.6m.


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UK Event Calendar for today
INTERIMS
888 Holdings, Afren, Alpha Bank GDR (Reg S) USD, British Polythene, Concurrent Technologies, Goldenport, Grafton Group (Units), Hansteen Holdings, HydroDec Group, IFG Group, Integra Group GDR (Reg S), JSC Halyk Savings Bank of Kazakhstan GDR (Reg S), Omega Insurance Holdings, Pilat Media Global, Puricore, Raven Russia, Tamar European Industrial Fund

INTERIM DIVIDEND PAYMENT DATE
Dewhurst, Dewhurst 'A', Throgmorton Trust

QUARTERLY PAYMENT DATE
City of London Inv Trust, ING UK

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Industrial Production (JPN)
Retail Sales (JPN)
Housing Starts (JPN)
Small Business Confidence (JPN)
Construction Orders (JPN)
Unemployment Rate (GER) (08:55)
Consumer Confidence (EU) (10:00)
Unemployment Rate (EU) (10:00)
Consumer Prices Index (EU) (10:00)
Chicago PMI (US) (13:45)
Consumer Confidence (US) (15:00)
Milwaukee NAPM (15:00)
FOMC Interest Rate Minutes (US) (19:00)
ABC Consumer Confidence (US) (22:00)

Q2
Frontline

GMS
Eruma, Norman Hay, Parallel Media Group, Tomkins

FINALS
Mattioli Woods, Pan African Resources

ANNUAL REPORT
Intelek

AGMS
Angel Mining , DQ Entertainment, PXP Vietnam Fund Ltd., Tangent Communications

TRADING ANNOUNCEMENTS
Safestore

UK ECONOMIC ANNOUNCEMENTS
GFK Consumer Confidence (00:01)
Consumer Credit (09:30)
Net Secured Lending on Dwellings (09:30)
M4 Money Supply (09:30)
M4 Sterling Lending (09:30)
Mortgage Approvals (09:30)


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Forex Market Reports
Risk aversion returns after Bernanke bounce

Friday’s comments from Fed chairman Bernanke that the Fed stands ready to act to provide additional stimulus if necessary, especially if the outlook weakens significantly doesn’t really change anything from the markets perspective. The market continues to behave erratically swinging from “risk on” to “risk off” with every piece of economic data.

As if to reinforce the point, further monetary easing by the Bank of Japan (BOJ) was met with indifference yesterday as the yen continued to strengthen from its Friday lows. The BOJ raised the amount of fixed rate of loans to banks to 30trn yen from 20trn yen which was probably the least it could do in a move that was pretty much expected and as a policy response to yen strength completely insufficient given the current sentiment prevailing in the market. To be fair any steps they could take would probably go the same way, given the lack of appetite for a co-ordinated policy response from other G8 nations, who have their own problems to deal with.

This weeks US economic data in the wake of Bernanke’s comments last week is going to be a key test for risk aversion across the markets, starting today with the Case Shiller home price index, followed by US consumer confidence for August, which is expected to show a reading of 51, and could well print even lower, as well as the publication of the minutes from the last FOMC meeting which is probably not likely to throw any new light on possible US policy responses to deteriorating economic conditions.

As a result of the continued nervousness and risk aversion felt by investors the Swiss franc, yen and gold have continued to hold up with the single currency set to continue to make new all time lows against the franc.

EURUSD – another failure to close above the 50 day moving average has seen the single currency slip back towards the key 1.2605 level over the past couple of days.
A close above 1.2760 is needed to see the euro push back towards last week’s highs around 1.2920, but it shouldn’t negate the overall bearish sentiment surrounding the single currency.
We still expect to see a break and close below the 50% Fibonacci retracement level at 1.2605 which would then target the 61.8% Fibonacci retracement level at 1.2435.

GBPUSD – the pound continues to hold above the 200 day moving average at 1.5440 which has continued to prompt rallies back towards last week’s highs at 1.5620.
The lack of follow through doesn’t augur well for any further gains. We would need to see a break above 1.5620 for that to happen, and a push higher towards the 1.5730 level.
The next level of support below 1.5440 is the 50 day moving average at 1.5410 and then the 1.5320 level, which would be a 38.2% retracement of the up move from the 1.4230 lows to the recent highs around 1.6000.

EURGBP – the euro is currently stuck in a range between the recent lows around 0.8142 and the last week’s highs around 0.8245. Momentum continues to remain negative while below the longer term resistance around 0.8300/10. However we have yet to see the single currency close the week below the 0.8165/70 level as it is the 50% retracement move of the 2007/2008 uptrend. This means that a test of the previous lows at 0.8065/70 cannot be taken for granted.
Until we see this happen the possibility of further euro losses towards 0.7785, remains unlikely.

USDJPY – the dollar will remain susceptible to short squeezes of the like we saw on Friday but until such time as the market is able to take the dollar above 86.25 then further downside is the preferred scenario.
The new 15 year lows of 83.60 remain the next target to aim at as the market looks to test for further US dollar declines towards the 80.00 level.
As long as the dollar is able to close back below the 84.70/80 level then we should see a slow fall back towards last weeks lows and then on towards the 80.00 level.


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US Market Reports
GDP update sparks rally

Wall Street recovered from a mid-morning slump and closed well ahead on positive GDP figures and Fed chief Ben Bernanke’s assertion that he was ready to help the recovery.

Dow Jones was 164 points higher at 10,150, while the Nasdaq gained 34 points to 2,153. The S&P 500 added 17 points at 1,064.

The preliminary report on US growth revealed the world’s largest economy expanded at an annualised rate of 1.6% in the second-quarter, better than the 1.4% predicted, but down on initial estimates of 2.4%.

Federal Reserve chairman Ben Bernanke said that the US central bank will do all it can to ensure that the economic recovery will continue in his speech at the meeting of central bankers at Jackson Hole, Wyoming. He said that growth has been too slow and unemployment too high.

"The committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly," he said.

Away from the economics, there’s no sign of a winner in the fight between PC makers Dell and Hewlett Packard (HP) for data storage provider 3Par.

Dell has matched an offer of $27 a share made by HP last night, sending 3Par’s shares higher in pre-market trade.

It had already put together a new package for 3Par at $24.30 a share, or $1.6bn (£1bn). The group thought a deal had been done at $18 a share, or $1.15bn, last week, but HP smashed that with Monday’s $24 a share ($1.5bn) takeover.

Intel shares fell after it said that third quarter revenues will be below expectations and this knocked some technology companies. SanDisk shares have also fallen.

Jeweller Tiffany reported lower than expected second quarter sales of $669m.


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Tuesday newspaper round-up:
Osborne, Tesco, Airlines...

George Osborne is planning to cut staff numbers at the Treasury by about one-quarter and scale back his department’s role as he attempts to lead by example in the search for sweeping spending cuts across Whitehall.

The chancellor will reconvene the public spending “star chamber” this week and hopes to settle a number of departmental budgets – including justice, transport, environment and culture – by mid-September, the FT reports.

Tesco secretly bought a town centre through a front company and let it become essentially derelict as it tried to secure a landmark regeneration deal, The Times has learnt. Britain’s biggest supermarket group won applause from councillors and local people three years ago when it bought the centre of Linwood, in Renfrewshire, and promised to redevelop its crumbling 1960s shopping precinct.

Staff will be forced to pay more to maintain their company pensions because of new rules that will see employers contributing less, actuaries have warned. Under laws introduced by Labour, employers will have to enrol all their staff into a company pension scheme from 2012, unless workers specifically opt out. A study by the Association of Consulting Actuaries says many of Britain’s largest employers believed the change would force them to scale back the generosity of these schemes, the Telegraph reports.

A £10.5bn plan to buy air-refuelling tankers for the Royal Air Force is being reconsidered by the Government after concerns were raised over the value of the deal. Ministers could scrap the project or sell one third of the aircraft to France after it emerged that the consortium supplying the aircraft spent £100m on a hanger and infrastructure, the Times reports.

Property prices fell again in August as the number of first-time buyers continued to dwindle, new housing research out today shows. Asking prices dropped by 0.3% during the month, following a 0.1% decline in July, according to research by the Hometrack property intelligence company, the Times reports.

Stock and currency markets swung wildly throughout the day in Tokyo as the Japanese Government and central bank threw together a set of emergency plans to revive the economy, defeat deflation and stop the yen’s rise in its track. Early optimism sent the Nikkei 225 benchmark index soaring by more than 3%, breaking back above the 9,000-point level it tumbled miserably through last week. But, when it did emerge, the Bank of Japan’s plan to expand its low-interest bank funding programme was less dramatic than investors had hoped, and about half of the morning’s gains were unravelled, the Times reports.

Americans' disposable income fell last month for the first time since January, according to a report on Monday from the Department of Commerce. After taking taxes and inflation into account, average incomes across the country dropped 0.1%. Separate figures showed that heavy discounting by car dealers helped consumer spending climb a stronger-than-expected 0.4%, the Telegraph reports.

Genzyme, the US biotech company, has rebuffed an $18.5bn (£12bn) cash offer from French pharmaceutical giant Sanofi-Aventis. Henri Termeer, Genzyme chief executive, wrote to Christophe Viehbacher, Sanofi chief executive, saying the board unanimously rejected what he called an "opportunistic takeover proposal", the Telegraph reports.

Investors’ anger over the performance of stock market listings this year is rising after the fall of shares in a number of high-profile offerings below their sale price. More than half the big initial public offerings in Europe this year are trading below their issue price, according to data from Dealogic, prompting claims from institutional investors that companies are being sold at unrealistic valuations, the FT reports.

Airline share prices have risen more than 70% from their lowest point at the beginning of last year, outperforming the broader equity market, as investors bet on a strong recovery in the highly cyclical aviation business. As larger carriers reported stronger results amid growing passenger traffic, airline stocks climbed 73% from the bottom of the cycle in the first quarter of 2009, the International Air Transport Association said in its latest financial monitor report, the FT reports.

Competition on two of the busiest transatlantic routes is set to intensify with Delta Airlines applying to run services from London's Heathrow airport to Boston and Miami. The US carrier's move follows the regulators' decision to allow British Airways (BA) and American Airlines to operate a joint business across the Atlantic. Delta in turn is now seeking permission from both the European Commission and US Department of Transportation to run twice-daily flights on the Boston and Miami routes, the Telegraph reports.

Unemployment is set to breach the psychologically important 10% level over the next five years – but only in the north of the country, a leading economics think-tank warns today. A combination of public-sector spending cuts, sluggish private-sector growth and slowing demand for British exports if the global recovery also falters will further ingrain the existing geographical disparities in wealth, according to the Centre for Economic and Business Research (CEBR), the Independent reports.

The taxpayer stands to make up to £27bn from the emergency bailout of Britain's banks when the Government's stakes in Lloyds Banking Group and Royal Bank of Scotland (RBS) are sold, estimates suggest. The public purse can expect to benefit from £19bn of share price gains, another £2bn in fees for guaranteeing bank bonds, plus £5bn in fees for the Asset Protection Scheme (APS) and £1bn in loan fees, according to calculations by the trade magazine The Banker, the Independent reports.