ADVFN Morning Euro Markets Bulletin - Oct. 11th 2010

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London Market Reports
Bright start fizzles out

Market Movers
FTSE 100 5,657.12 -0.01%
techMARK 1,758.13 -0.05%
FTSE 250 10,753.00 +0.26

Early gains for Footsie have quickly fizzled out and the index is almost back where it started.

Builders merchant and Wickes’ owner Travis Perkins is on track as sales improved again in the third quarter. Turnover for the nine months to end of September rose 6%, driven by the merchants businesses and a modest improvement at Wickes, which grew sales for period to 2 October by 2.1%, though like-for-like turnover eased 0.1%.

Wood Group is still trading in line with forecasts and the provider of support services to the oil and gas industry expects to match full-year estimates. The Aberdeen-based firm, which today won a $152m contract to convert California’s Tracy Peaker power plant to a combined cycle facility, said higher bidding volumes and recent contract awards at its engineering business should help improve numbers in the second half and into 2011.

Drugs companies AstraZeneca and Pozen said their jointly developed pain reliever Vimovo has received positive agreement for approval across 23 EU countries. Vimovo treats osteoarthritis, rheumatoid arthritis, and ankylosing spondylitis.

Ladbrokes, the bookmaking firm, said group net revenue was up 12% year on year in the third quarter. Operating profits (excluding high rollers) were 128% higher, albeit against weak comparative figures.

No-frills airline easyJet has agreed a settlement to its acrimonious dispute with founder Sir Stelios Haji-Ioannou over its continued use of the 'easy' name. The price is not cheap. For the next 50 years, easyJet will have to pay a royalty of 0.25% of revenues, fixed at £3.9m and £4.95m in the first and second years respectively.

Bluetooth chip specialist CSR “will defend itself” against Broadcom which filed an enforcement action on Friday against redesigned products made by the UK firm's SiRF unit. In the latest episode of a long-running patent infringement case, the American firm alleges violation of the US International Trade Commission's (ITC) orders despite a previous ruling by US customs that the "redesigned chips fall outside the scope of the exclusion order issued by the ITC”.


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UK Event Calendar
A week after online betting exchange Betfair announced plans to float on the London stock exchange old school bookie Ladbrokes updates the market with its interim management statement.

The last time we heard from the company, back in August, the news was not great, as the company warned of a challenging consumer environment.

On Wednesday online sports betting specialist Sportingbet issued an upbeat trading statement so things may have improved for the bookmaking fraternity since Ladbroke’s gloomy August statement.

Along with its perennial rival William Hill, Ladbrokes has expressed an interest in taking over the Tote when the government gets round to selling it off, though any bid to do so may fall foul of competition rules.

Ralph Topping, chief executive of William Hill, has already railed against the “archaic” competition rules that effectively limit the opportunities for the bookies who have a strong high street presence to expand their physical estate.

“We believe that the Office of Fair Trading needs to revisit the archaic competition tests which have looked at the market in terms of betting shops – the true market is a global one that includes online and betting exchanges,” Topping said.

After the bookies we move on to the pub and a preview of the final results from Punch Taverns, the first set of figures released under the helmsmanship of new boss Ian Dyson.

The heavily indebted pubs group raised full year profits guidance back in August after trading improved in the final quarter of the company’s fiscal year. Like for like sales in the 12 weeks to mid-August were up 2.6% year on year.

Market consensus is for profit before tax of £131m on sales of £1,274m.

The company recently hosted a “meet the new chief executive officer” day for investment analysts and clearly left a favourable impression on KBC Peel Hunt.

“There is a positive spirit in this company that is tangible, and this was also in evidence at the analysts’ trip around the managed estate three weeks ago, which focused on the value of the reinvestment process,” the broker said.

“What has been achieved is remarkable. Punch's securitised tenancies could be allowed to default, and there is still value in the managed pubs less relevant debt, plus cash that has accumulated at the parent company. We will be looking at our valuations as this approach suggests value could be significantly higher than the existing 85p share price,” it added.

“Whether Dyson actually presses the button on this is the biggest question in his in-tray. The other major question he faces whether he asks the bondholders for compensation for protecting the securitised tenancies from default. We expect these issues to feature strongly in the 12 October finals, which should prompt renewed momentum in the share price,” Peel Hunt opined.

Internet and catalogue home shopping company N. Brown should continue on its growth path with its interim results, though the pace of growth is likely to have slowed.

Panmure Gordon thinks underlying earnings before interest and tax will be 1.1% higher than last year at £46.0m, while profit before tax should advance by 2.4% to £42.8m. On those figures Panmure Gordon calculates earnings per share of 11.6p, up 5.1%. “We expect an interim dividend of 5.6p (+27.6%),” the broker predicted.

Sales are forecast to hit £349.5m, up 3.2% on a year earlier. “Clothing macro data have been strong in the period to date. N. Brown customers’ income streams are likely to be less affected, relatively, than other retailers’ by rising interest rates (less exposed to mortgages) and unemployment,” is Panmure Gordon’s view.

The gross margin may be subject to some erosion, however, with the broker suggesting it could deteriorate by one-fifth of a percentage point to 52.9%, as trailed in the firm’s July statement.

“The outlook for bad debts will be key: in July, management were able to report continuing stabilisation in metrics such as bad debt as a percentage of turnover and percentage of accounts in arrears. Moving from stabilisation to improvement would immediately benefit the P&L [profit & loss]. However, our assumption for H2 2011E [estimate of second half earnings for fiscal 2011] is similar to H1 2011E, and this is where we think N. Brown could provide a positive surprise for the market,” Panmure Gordon said.

Monday October 11

INTERIM DIVIDEND PAYMENT DATE
Arbuthnot Banking Group, Jupiter European Opportunities Trust, Tex Holdings

QUARTERLY PAYMENT DATE
Africa Opportunity Fund Ltd., Alpha Pyrenees Trust Ltd.

GMS
Asia Digital Holdings, Stellar Diamonds

FINALS
Nautical Petroleum, YouGov

IMSS
Ladbrokes, Travis Perkins

SPECIAL EX-DIVIDEND PAYMENT DATE
Dignity

AGMS
The Indian Film Company, Trinity Capital

TRADING ANNOUNCEMENTS
E2V Technologies, X5 Retail Group GDR (Reg S)

FINAL EX-DIVIDEND DATE
Medusa Mining

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Industrial Production (FRA) (07:45)
Manufacturing Output (FRA) (07:45)


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FX round-up
Dollar slides on jobless data

The US dollar found itself under pressure after disappointing US jobless data on Friday. Us non-farm payrolls fell 95,000 in September versus predictions of no change or just a small fall.

On the bright side, the unemployment rate held steady at 9.6% against expectations of a rise to 9.7%, but traders were in no mood to pay heed to this and set about selling the greenback.

Only the day before the European Central Bank had been making dismissive noises about relaxing its monetary policy and so it was no surprise that with the US jobless figures making some sort of new stimulus measures by the US Federal Reserve more likely that the euro gave the dollar a battering.

The euro surged to $1.3984 at one point on Friday before the dollar gained some composure and whittled the single currency’s value back to $1.3923, up from $1.3914 the day before.

The greenback’s recovery was helped by some optimistic souls pointing to the 65,000 new jobs created in the private sector in September, though even this was below expectations of a 75,000 increase.

Besides which, even without the woeful US jobs figures, many dealers had already been expecting the US authorities to resume quantitative easing (QE) in an effort to head off the prospect of a double-dip recession.

The dollar index, which measures the US currency’s value against a basket of other currencies, eased to 77.295, versus 77.462 on Thursday, but that represented a recovery from the level of 77.204 it fell to immediately after the jobs data.

The dollar index fell 1% over the course of the week, despite the Bank of Japan announcing at the start of the week it would be cutting its key lending rate. The US currency dropped below 82 Japanese yen Friday for the first time since 1995.

Turning to the UK, where talk of a resumption of QE seem to be growing louder by the day, sterling also rose against the US dollar. It hit $1.5957 in New York trading.

UK producer prices data quietened some of the chatter about QE. The Office for National Statistics (ONS) said input prices rose by 0.7% from August, ahead of expectations, as high costs for commodities such as wheat fed through.

Prices for goods leaving factories rose by 0.3% during the month, also ahead of expectations.


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US Market Reports
Dow Closes Above 11,000 For First Time Since May

Stocks showed a notable move to the upside over the course of the trading day on Friday, as a continued decrease in employment added to optimism about additional quantitative easing measures from the Federal Reserve. The strength in the markets lifted the Dow above 11,000 for the first time since May.

The strength in the markets came following the release of a report from the Labor Department showing that U.S. employment saw a notable decrease in the month of September, with another significant decrease in government employment offsetting continued job growth in the private sector.

The data raised some concerns about the economic outlook but was seen as increasing the likelihood that the Federal Reserve would enact additional quantitative easing measures.

With commodities prices moving mostly higher on the day, resource-related stocks turned in some of the market's best performances. Steel stocks posted particularly strong gains, resulting in a 2.1 percent advance by the NYSE Arca Steel Index, which set a five-month closing high.

Most of the other major sectors also moved to the upside over the course of the trading day, with electronic storage, biotech, healthcare, and transportation stocks posting notable gains.

The major averages pulled back off their best levels going into the close but remained firmly positive. The Dow rose 57.90 points or 0.5 percent to 11,006.48, the Nasdaq jumped 18.24 points or 0.8 percent to 2,401.91, and the S&P 500 climbed 7.09 points or 0.6 percent to 1,165.15.

With the gains on the day, the major averages all closed higher for the week after breaking a four-week winning streak last week. The Dow and the S&P 500 both rose by 1.6 percent for the week, while the Nasdaq posted a 1.3 percent weekly gain.


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Monday newspaper round-up
Nearly 500,000 people on long-term sickness benefit will have to take up jobs or have their welfare payments cut by a third, the Times reports.

The move, expected to save up to £4bn, is part of the Government’s plan to find economies of at least £16 bin from the £195bn welfare budget by 2014-15. Incapacity benefit, which has cost the taxpayer £135bn in the past ten years and goes to 2.1m people, is one of the largest items of welfare spending, the Times reports.

"Too tough" banking regulation will put a "drag on economic recovery" and cost upwards of 10m jobs globally, the world's leading bankers have warned. The Institute of International Finance(IIF) yesterday launched a determined backlash against national governments who want to "gold-plate" the new Basel III regulations with "arbitrary constraints, the Independent reports.

The world is shifting into a “dangerous” phase of unilateralism in currency and trade relations, the world’s leading banks have warned after a fractious summit of ministers in Washington, the Times reports. Josef Ackermann, chairman of the Institute of International Finance and chief executive of Deutsche Bank, said that some leaders were pursuing narrow national or regional interests that could damage a “fragile” world recovery.

Peppa Pig could be set to complete her transformation from a favourite of Britain’s TV-watching pre-schoolers to that of a global, billion-dollar brand. Entertainment One, Peppa Pig’s owner, is about to strike a key television deal in the United States, The Times has learnt. The deal, understood to be with Nickelodeon, America’s most-watched children’s channel, will mean that Peppa airs in the United States this Christmas.

Google has built a car that can drive itself and tested it on more than 100,000 miles of public roads. The experiment, which was carried out in San Francisco, was almost incident-free. The sole mishap was when the driverless car was bumped from behind by another vehicle at a traffic light, the Telegraph reports.

China is sitting on a profit of nearly $1.5bn from a bold trading strategy in copper based on expectations of an emerging markets-led boom. Beijing’s bet that a ‘super-cycle’ in metals markets would keep copper prices high, despite the financial crisis, has paid off, according to dealers’ calculations, the FT reports.

British companies are seeking to serve and expand their shareholder base in the United States by listing their shares on a new platform for the over-the-counter market in New York, rather than seeking a listing on the main New York Stock Exchange and Nasdaq platforms. Last month Kingfisher, the home improvement chain, became the latest British business to join OTCQX, bringing the total number of UK-registered companies there to 14, the Times reports.

The City watchdog is now taking three times as long to approve new financial businesses as it did before the crisis, raising new concerns over damage to London’s standing as an international financial centre. Entrepreneurs seeking to set up new financial services businesses such as banks, brokerages or hedge funds must now wait almost three months on average for a decision from the Financial Services Authority, according to data released under the Freedom of Information Act, the FT reports.

An oil-splattered BP engineer's boiler suit has become one of the most successful Halloween costumes in the United States. More than 10,000 of the outfits have been sold in the approach to this year's October 31 holiday, which Americans are renowned for celebrating elaborately, the Telegraph reports.

Jupiter's successful listing is thought to have alerted both Standard Life and Prudential of the possible gains to be made from either floating or partially selling their fund management arms, Standard Life Investments (SLI) and M&G, says the Independent.