ADVFN Evening Euro Markets Bulletin - October 27th 2010

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London Market Reports
Poor start for Footsie

Market Movers
FTSE 100 5,658.76 -0.85%
techMARK 1,766.92 -0.65%
FTSE 250 10,868.08 -0.66%

London has followed on from last night’s lacklustre performance on Wall Street and a weak display in Asia this morning with a poor start.

Reports suggesting that any new stimulus in the US will be smaller than expected have knocked the miners with Kazakhmys, Xstrata and Rio Tinto the worst performers this morning.

In company news, British American Tobacco’s cigarette volumes rose in the Asia-Pacific region during the first nine months of 2010, but fell everywhere else as smokers cut back during the recession. The maker of Dunhill, Kent, Lucky Strike and Pall Mall grew market share, but volumes fell 1% to 526bn. They were up 5% in Asia-Pacific, but down 8% in Western Europe, 3% in Africa and the Middle East, and 2% in Eastern Europe.

Organic volumes dropped 3% as more people stopped smoking, the illegal trade grew in some markets, and through the loss of sales in Pakistan after the floods. Industry volumes were “markedly lower” in Romania, Turkey, Pakistan, Germany and South Africa.

Ad agency WPP enjoyed its fastest growth in a decade in the last three months chief executive Sir Martin Sorrell said yesterday, as recovery in corporate earnings fed through into marketing spending.

Oil explorer Soco has had no more luck with its second well in the DR Congo than it had with its first. The firm will now plug and abandon the second well, Kinganga Nyanya 1, in the Nganzi Block. The well was drilled to 1,164 metres. There were oil shows in the Lower Bucomazi and the Chela formations and log analysis indicated oil pay in the secondary target Chela formation sands, Soco said.

Floor coverings retailer Carpetright said group sales declined 5.2% in the 12 weeks ended 23 October 2010 and warned it expects tough market conditions to continue into 2011. The closure of its operations in Poland accounted for 0.5% of the total revenue decline. UK and Republic of Ireland sales declined 4.6%, with like-for-like sales down 7.3%.

Chairman and chief executive Lord Harris said, "The tough trading environment in the UK and Republic of Ireland continued into the second quarter of our financial year. The further reduction in mortgage approvals along with fragile consumer confidence has produced a difficult market. We expect these market conditions to continue into 2011."

Another heavy faller is CSR, the Bluetooth chip specialist, despite a “robust” third quarter, but revenue in the fourth quarter is expected to lower than last year. The company made sales of $222.1m during the three months, towards the bottom end of the $220-235m range predicted at the interim stage, though still up 6% on last year.

DS Smith is in confident mood in the run up to December’s interim results, which the paper and plastic packaging firm thinks will be way ahead of last year as the “encouraging” overall trading in the first quarter continued into the second.

Helphire, which supplies replacement vehicles to drivers involved in accidents, is already predicting results for the year to June 2011 will be below current market expectations. The company, which only published its 2010 results at the start of this month, blames high petrol prices and fewer road miles being driven have led to lower accident rates.


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UK Diary of Event
INTERIMS
First Derivatives

INTERIM DIVIDEND PAYMENT DATE
Capital & Counties Properties , Quarto Group Inc.

INTERIM EX-DIVIDEND DATE
Aberforth Geared Income Trust, Albany Inv Trust, Blackstar Group, Booker Group, Corin Group, Hansteen Holdings, Harvey Nash Group, Hunting, John Menzies, Marshalls, ProVen Health VCT, Rolls-Royce Group, Senior, Tandem Group, Tullett Prebon, Whitbread, William Hill

QUARTERLY EX-DIVIDEND DATE
Bankers Inv Trust, Equity Partnership Inv Co Income Shares, GlaxoSmithKline, M&G High Income Inv Trust Income & Growth Units, M&G High Income Inv Trust Income Shares

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Consumer Price Index (EU) (10:00)
Consumer Price Index (GER) (07:00)
Crude Oil Inventories (US) (15:30)
Durable Goods Orders (US) (13:30)
Factory Orders (US) (15:00)
Harmonised Index of Consumer Prices (EU) (10:00)
M3 Money Supply (EU) (09:00)
MBA Mortgage Applications (US) (12:00)
New Homes Sales (US) (15:00)

Q3
Coca-Cola Hellenic Bottling Company SA, CSR, Electrolux AB, Norsk Hydro ASA, Telekomunikacja Polska GDR (Reg S), Virgin Media Inc.

IMSS
British American Tobacco

EGMS
Hardy Oil & Gas

AGMS
Aberdeen Development Capital, Aberdeen Development Capital 2010 ZDP Shares, Aberdeen Development Capital 2012 ZDP Shares, Eclectic Investment Company

TRADING ANNOUNCEMENTS
Carpetright

FINAL DIVIDEND PAYMENT DATE
Haynes Publishing Group

FINAL EX-DIVIDEND DATE
BlackRock Greater Europe Inv Trust, City of London Investment Group, Edge Performance VCT 'C' Shares, Edge Performance VCT 'D' Shares, Edge Performance VCT 'E' Shares, IndigoVision Group, Mcbride, Plexus Holdings, Ricardo, Savile Group, Stagecoach Theatre Arts, Thorntons


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Currencies Market Reports
Sterling continues to rise after GDP surprise

Yesterday’s surprise rise in UK Q3 GDP to 0.8% gave the pound a significant boost as it posted its biggest one day gain against a basket of currencies in 3 months. Sentiment was also helped by a ratings upgrade from Standard and Poors to a “stable” outlook bringing them into line with their agency peers, Fitch and Moody’s.

It should also delay the prospect of any return to quantitative easing by the Bank of England for the remainder of this year at least, though it probably won’t stop Adam Posen from voting for it again at the next monetary policy meeting in November.

The US dollar also regained some ground on the back of slightly better than expected consumer confidence and Richmond Fed numbers for October yesterday.
With US GDP numbers looming on Friday, US dollar sellers now appear to be in the process of locking in some profit, and with the FOMC decision only a week away an element of caution is now starting to permeate into the markets psyche as thoughts turn to what steps the Fed might take next week with respect to the form that any measures would take in a stimulus package. How much easing is priced in relative to the declines of the last few weeks? What happens if US GDP also surprises to the upside like UK GDP did yesterday?

The release of Australian inflation data overnight, which came in lower than expected, has also prompted a recovery in the US dollar pushing it further away from parity. It also diminishes the prospects of a further rate hike by the RBA in the short-term.

US economic data out today includes durable goods for September with expectations of a rise of 2%, after last months 1.5% decline. New home sales for September are also out slightly later on, and a rise of 4.2% expected.

EURUSD – the single currency appears to have been unable to sustain the gains above 1.4000 and now looks as if it could now be heading for a correction lower.
Yesterday’s break below 1.3890 now targets a move towards last week’s lows around 1.3700, however 1.3770 could be a tough nut to crack initially. Key resistance remains just above 1.4000, while there is also minor resistance around 1.3930.

GBPUSD – the key support on the pound remains around the 50 day moving average support and last weeks lows at 1.5640/60. These lows remain the key barrier to further declines towards 1.5390, the 38.2% retracement of the up move from the May lows at 1.4230 to the highs at 1.6105.
Yesterday’s rally pushed slightly beyond the 1.5880 level, which was a 50% rebound of the 1.6105/1.5650 down move, however it would need a break above 1.5935 which is the 61.8% retracement to re-target the 1.6000 area.

EURGBP – the failure earlier this week to close above the 0.8910 trend line resistance was a timely warning that upside momentum was indeed waning. As a result the rebound in sterling sent the euro scuttling lower yesterday below the trend line support from the September lows of 0.8210/15 at 0.8820. The next target support can be found around the 12th and 18th October lows around 0.8700/05 and this becomes a key support with respect to further euro losses. A break of this support would open up a move back towards 0.8500. The 0.8820/30 breakout level should now act as resistance.

USDJPY – yesterday’s US dollar recovery after posting new all time lows earlier in the week at 80.42 could be the catalyst for a deeper rebound. Yesterday’s daily candle has all the hallmarks of a bullish engulfing candle and could signal a test of the 82.20/30 level over the coming days. It was also the biggest rally in the dollar against the yen since the middle of September and there is the thought we could well have seen the lows in the short-term, even though 79.80 remains the target in the short-term.
To date rallies have been limited to just below 82.00, however if we were to break above 82.20/30, then we could see 84.20 quite quickly.


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US Market Reports
Dow crawls higher

Wall Street just kept itself in the blue as bumper numbers from Ford and better than expected consumer confidence figures outweighed some disappointing earnings elsewhere.

The Dow Jones closed up 5 at 11,166. Nasdaq was 6 ahead at 2,497 while the broader S&P 500 stayed static at 1,185.

The Conference Board’s measure of consumer confidence rose to 50.2 in October from 48.5 the month before, better than the increase to 49.5 predicted by analysts.

The S&P/Case-Shiller Home Price index was 1.7% higher in August, which was lower than the 2.2% increase predicted.

Third quarter earnings from car giant Ford topped forecasts. It made a record $1.7bn, or 43 cents a share, during the period, up 71% on the year before. The firm also plans to keep cutting its debt.

Meanwhile, DuPont shrugged off a drop in pharmaceutical income following patent expiries to post a smaller than expected drop in quarterly earnings to $367m, or 40 cents a share.

US Steel unexpectedly lost money in the latest quarter and is cautious about prospects for the fourth quarter. AK Steel reported a bigger loss than expected.

Texas Instruments says that its fourth quarter earnings will be hit by poorer than expected demand. Shares of Sony (SNE) rose 1% Tuesday, on media speculation that the electronics maker might be a takeover target for Apple (AAPL, Fortune 500).

Shares of Lexmark fell by more than a fifth after CEO Paul Curlander announced that he will retire in the spring of 2011.

S&P 500 - Risers
Coach Inc. (COH) $49.74 +11.83%
National Oilwell Varco Inc. (NOV) $52.03 +8.46%
Carnival Corp. (CCL) $43.08 +6.37%
Abercrombie & Fitch Co. (ANF) $44.84 +4.82%
Northern Trust Corp. (NTRS) $50.12 +4.38%

S&P 500 - Fallers
Lexmark International Inc. (LXK) $37.71 -20.98%
Tellabs Inc. (TLAB) $6.98 -13.45%
Regions Financial Corp. (RF) $6.48 -7.82%
Cabot Oil & Gas Corp. (COG) $28.66 -7.31%
Cummins Inc. (CMI) $89.00 -5.81%

Dow Jones I.A - Risers
Microsoft Corp. (MSFT) $25.95 +3.02%
American Express Co. (AXP) $40.10 +2.04%
Walt Disney Co. (DIS) $35.96 +1.41%
Bank of America Corp. (BAC) $11.30 +1.25%
Wal-Mart Stores Inc. (WMT) $54.56 +1.13%

Dow Jones I.A - Fallers
Procter & Gamble Co. (PG) $62.86 -1.07%
Travelers Company Inc. (TRV) $55.03 -1.01%
E.I. du Pont de Nemours and Co. (DD) $47.22 -1.01%
Merck & Co. Inc. (MRK) $37.07 -0.94%
Cisco Systems Inc. (CSCO) $23.40 -0.91%


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Wednesday newspaper round-up
The chairman of British Airways has launched an attack on “completely redundant” airport checks and said the UK should stop “kowtowing” to US demands for increased security.

The comments by Martin Broughton reflect broader industry and passenger frustration over the steady accumulation of rules on everything from onboard liquids to hand baggage that have blossomed since the September 11 terrorist attacks, the FT reports.

Interest rates will start to rise sooner than expected after official figures showed the economy growing at its fastest rate for a decade, economists have said. Growth over the past six months reached 2 per cent, the fastest pace of expansion over two consecutive quarters since 2000, according to the Office for National Statistics. The economy received a further significant boost when Standard & Poor's, the ratings agency, revised its outlook on Britain from negative to stable and confirmed the country's AAA credit rating, the Telegraph reports.

Europe's debt woes have returned to the fore after Greek premier George Papandreou threw open the door to fresh elections and vowed to liberate the nation from "slavery and surveillance". Spreads on 10-year Greek bonds jumped 31 basis points to 9.57pc and the euro tumbled 2 cents to $1.385 against the dollar as investors awoke to the risk of political upheaval in Greece, not helped by warnings from bond giant PIMCO that Athens will default within three years, the Telegraph reports.

One of the City of London's top bankers was assailed in a Manhattan courtroom yesterday for playing both sides of the 2007 takeover of EMI and misleading a client to juice his multi-million-pound bonus. Citigroup's David Wormsley picked his way cautiously through a barrage of questions and insisted he had no memory of the conversations in which he is alleged to have lied to Guy Hands, the private equity baron who had been one of his closest friends and business associates, the Independent reports.

WPP, the world’s biggest advertising group, is experiencing its fastest growth in a decade, reflecting a healthy recovery in corporate confidence. Sir Martin Sorrell, the company’s chief executive, said that its third-quarter results would show its strongest revenue growth in nearly ten years. “Everything we see in the rear-view mirror is good,” he said, the Times reports.

The Government today unveiled details of its new ‘Junior Isa’ savings accounts. They will take the place of Child Trust Funds, which are being slowly phased out. The key difference is that the Government made contributions to the CTF, but will make none to the Junior Isas. Instead they will be funded entirely by parental and family contributions. However, all returns will be tax free, the Times reports.

A British insurance executive was sent to jail for 21 months today for paying $2 million in bribes to win lucrative foreign contracts. Julian Messent, 50, was sentenced at Southwark Crown Court after pleading guilty last week to two counts of making corrupt payments to Costa Rican officials between February 1999 and June 2002. Messent, the former chief executive of PWS International, a London-based reinsurance broker founded by Lord Pearson, the former UKIP leader, was prosecuted by the SFO after the case was referred by the Foreign Office in October 2005, the Times reports.

Growth in air cargo dipped last month, reflecting weak consumer and business confidence across the world, the International Air Transport Association (Iata) warned yesterday. International passenger traffic rose by 10.5% in September compared with the same month last year, outstripping the 6.5% year-on-year growth recorded in August, according to the latest assessment by the global airline industry body, the Independent reports.