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 |  Subject: ADVFN Morning Euro Markets Bulletin April 19th 2010  Mon Apr 19, 2010 9:19 am | |
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Air travel woe dominates
Travel problems continue to dominate the market with the UK flight ban extended to tomorrow at the earliest.
More than 100,000 customers of TUI Travel due to return home yesterday were left stranded by the ongoing flight ban imposed after the eruption of the volcano in Iceland last week. Currently, TUI estimates the cumulative cost to the group, up to and including yesterday is circa £20m. Estimated daily costs thereafter will run at approximately £5m - £6m, it added. Thomas Cook is also lower as are British Airways, Easyjet and Ryanair.
Banks are also weak after the Goldman Sachs alleged fraud shock last week. Barclays and HSBC are down but Royal Bank of Scotland is bucking the trend.
Sage Group has confirmed that its chief executive, Paul Walker, is to stand down “in due course” after 16 years at the helm of the accountancy software company.
Cairn Energy subsidiary MedOil has plugged and abandoned a well offshore Tunisia in the Louza block after finding only minor evidence of light oil.
Set-top box maker Pace expects another good year with margins higher and sales growth in single mid-digits though the the World Cup will bring forward some revenues into the first half.
Construction and property consultancy firm Cyril Sweett said 2010 revenue is expected to be £67m as it cuts its cost base. "Revenue for the period is expected to be £67.0m, delivering pre-exceptional PBT of approximately £3m," the group said in a company statement.
The performance of Alliance Trust last year was in the lowest quartile of its peer group after the investment trust made a slow start to 2009. Net asset value in the year to 31 January 2010 improved by 16.8% to 377.7p, while the total return advanced 22.2%. |
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| | UK Event Calendar for today |
Asda’s soon to depart chief executive Andy Bond admitted on Thursday that the Wal-Mart owned supermarket chain has not been happy with its recent sales performance. That suggests that the market leader in the sector, Tesco, has recovered its poise after a slight wobble in the early days of the recession when some pundits doubted Tesco’s ability to combat the deep discounters.
We will find out just how well Tesco has been doing on Tuesday when it declares its full year results, though we already know that the company’s UK operations had their best Christmas in three years.
n the six weeks to January 9, the firm posted a 5.1% year-on-year rise in like-for-like sales excluding petrol and VAT at its UK business, ahead of expectations.
Customers also took advantage of offers and double Clubcard points. Clubcard vouchers contributed 0.7% to UK like-for-like sales growth.
Market consensus is for pre-tax profit of £3.21bn on sales of £58.5bn, up from profit of £2.95bn on sales of £54.33bn the year before.
“UK is forecast to report a 13.2% increase in trading profit to £2,695m, with operating margin progressing by 40bps [basis points] to 6.6%,” according to Charles Stanley. “Like-for-like sales are forecast to be up by 3.0%, with growth slowing through the year as food price inflation has declined,” the broker added.
The results will include Tesco Bank as a wholly owned entity for the first time after the company bought out Royal Bank of Scotland’s 50% stake. Charles Stanley is forecasting the bank will contribute £245m to profits.
Pubs group Punch Taverns has been working hard to lose the adjectival preface “cash strapped”, with a series of asset disposals, while at the same time attempting to stabilise its business performance.
It declares interim results on Thursday and Panmure Gordon is tipping the group will announce profit before tax of £64.5m, slightly below market consensus of £65m.
At the end of last month the company’s chief executive, Giles Thorley, announced his intention to step down after nine years at the company.
On the economic front, the release of the minutes of the April meeting of the Bank of England’s Monetary Policy Committee is likely to be a non-event. Even if the committee had been minded to change policy it would have been unlikely to do so with a general election in the offing.
Of far more import is Friday’s first estimate of the first quarter gross domestic product figures. As Bill Clinton had to keep reminding himself as he sought election as President for the first time, “it’s the economy, stupid” that is likely to have the major impact on voter sentiment.
Economists have been notably off the mark with their recent attempts to forecast economic growth, though their reputations have been saved somewhat by subsequent revisions to fourth quarter GDP. With that in mind, economists have been getting their excuses in early, observing that the extreme weather conditions in the early part of the year mean it is difficult to forecast the level of growth.
Market consensus is for growth of 0.4% in the first quarter to a level 0.1% lower than the first quarter of 2009. If the market proves correct first quarter growth would match that of the fourth quarter of 2009, though the fourth quarter figure was only arrived at after two revisions; the initial figure was for growth of 0.1% and this time round it would not be a surprise either to see the initial estimate come in lower than the market is expecting.
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Leading Indicators (US) (15:00)
PMI Construction (EU) (09:00)
Consumer Confidence (JPN)
UK ECONOMIC ANNOUNCEMENTS
Rightmove House Prices (00:01)
GMS
IRF European Finance Investments
FINALS
Alliance Trust, Brinkley Mining, DDD Group, Gaming VC Holdings, Individual Restaurant Company, NetDimensions
ANNUAL REPORT
Cairn Energy, Chaucer Holdings, G4S, Mount Engineering, Vindon Healthcare
IMSS
Pace
EGMS
Datang Intl H, INA-Industrija Nafte GDR (Reg S)
AGMS
Pace
FINAL EX-DIVIDEND DATE
Sagicor Financial Corporation
Q1
TEO LT GDR (Reg S)
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| | European, Currencies Market |
Banks and travel stock fall
Banks and travel stocks are leading Europe’s main markets lower in early dealings on Monday. Travel problems continue to dominate the market as Europe grounded most airline flights for a fourth day.
More than 100,000 customers of TUI Travel due to return home yesterday were left stranded by the ongoing flight ban imposed after the eruption of the volcano in Iceland last week. Currently, TUI estimates the cumulative cost to the group, up to and including yesterday is circa £20m. Estimated daily costs thereafter will run at approximately £5m - £6m, it added.
Thomas Cook is also lower as are British Airways, Lufthansa, Air France-KLM, Easyjet and Ryanair.
Banks, including Societe Generale, Deutsche Bank, Commerzbank and UBS, are lower on news Goldman Sachs is being investigated for alleged fraud. Following on from Friday’s shock decision by the US Securities and Exchange Commission (SEC) to sue Goldman Sachs for fraud the SEC’s UK and German counterparts are also investigating the US banking giant’s activities.
Part-nationalised bank Royal Bank of Scotland (RBS) is said to be one of the big losers from the activities which the SEC is investigating, with press reports suggesting that RBS lost £550m as a result of being sold collateralised debt obligations (CDOs) by the Wall Street banking firm.
The SEC’s case against Goldman Sachs and a vice president at the firm, Fabrice Tourre, is that the bank sold investors a product linked to the performance of a parcel of mortgages but neglected to tell them that Paulson, a hedge fund that was shorting the product, had participated in the design of the CDO.
Across the markets, the Dax in Frankfurt is down 3 points at 6,178 and the Cac in Paris is 11 points lower at 3,976. The Swiss market has dropped 79 points to 6,815.
Dutch technology bellwether Philips Electronics reported a better than expected first-quarter operating profit but said markets were still uncertain.
Earnings before interest, taxes and amortisation (EBITA) rose to €504m compared with a €74m loss last time.
CAC 40 - Risers
ST Microelectronics (STM) € 7.64 +1.58%
Cap Gemini (CAP) € 39.22 +0.89%
Alcatel-Lucent (ALU) € 2.47 +0.61%
Pernod Ricard (RI) € 66.00 +0.56%
France Telecom (FTE) € 17.24 +0.41%
Essilor International (EI) € 46.46 +0.39%
Technip (TEC) € 61.35 +0.31%
Peugeot (UG) € 21.77 +0.30%
Lafarge (LG) € 55.43 +0.18%
Unibail-Rodamco (UL) € 148.40 +0.17%
CAC 40 - Fallers
Societe Generale (GLE) € 44.52 -1.52%
AXA (CS) € 16.78 -1.44%
Dexia (DEXB) € 4.49 -0.99%
LVMH (MC) € 86.68 -0.97%
Danone (BN) € 45.13 -0.92%
BNP Paribas (BNP) € 54.84 -0.92%
Credit Agricole (ACA) € 13.08 -0.91%
Saint Gobain (SGO) € 36.80 -0.77%
Veolia Environnement (VIE) € 25.28 -0.69%
EADS (EAD) € 14.52 -0.58% |
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| | US Market |
Financials drag markets down
US stocks finished with big losses after financials fell on news that US regulators charged Goldman Sachs with defrauding investors.
The SEC accused Goldman Sachs of fraud relating to the way that debt products tied to subprime residential mortgages were structured and sold. Goldman slid nearly 13%.
American Express, Bank of America and JPMorgan Chase were some of the biggest fallers today. This despite Bank of America returning to profit in the first quarter of 2010 with forecast beating earnings per share of 28 cents. The market had been expecting earnings per share of 8 cents.
Across the markets, the Dow finished down 125 points to 11,018 with the Nasdaq slipping 34 points to 2,481. The S&P 500 is down 19 points to 1,192
General Electric saw first-quarter earnings beat Wall Street forecasts but sales fell short of expectations due to its GE Capital lending unit.
Net income fell 18% to $2.3bn, or 21 cents per share, in the quarter to March 2010 but analysts thought it would fall to 16 cents. Revenue fell 5% to $36.6bn.
Toy maker Mattel swung to a surprise first-quarter profit thanks to strong demand in its core brands and newly licensed toy lines such as Toy Story and World Wrestling Entertainment.
Boston Scientific has been given permission to resume selling defibrillators that were taken off the market in March.
Shares in Palm were boosted by RBC Capital Markets’ argument that Palm’s WebOS software could push any bid price up to between $10 and $14 a share.
Yesterday, internet goliath Google saw first quarter net profits surge 37% and exceed Wall Street expectations as signs of a recovery in the advertising market emerged.
On the economic front, the Commerce Department said construction rose 1.6% to 626,000 last month, more than the 610,000 units expected. Applications for building permits rose to an annual rate of 685,000 against expectations of 630,000.
US consumer sentiment took a surprise negative turn in early April, slipping to 69.5 against expectations of 75. It was also below the 73.6 reading seen at the end of March. |
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| | Monday paper round-up |
British Airways, Goldman Sachs, Election
British Airways challenged the blanket ban on flights as its chief executive took to the skies to test the effects of volcanic ash on its aircraft.
Willie Walsh, the airline’s chief executive, joined four crew in a three-hour test flight from London, over the Atlantic, to Cardiff. Today the airline will study the effects of the flight on engines before concluding whether it is safe to fly or not. The chaos caused by the eruption of an Icelandic volcano, now entering its fifth day, has left more than one million British travellers stranded abroad, the Telegraph reports.
Goldman Sachs faces the prospect of investigations in the UK and Germany after Gordon Brown said he was "shocked" at the "moral insolvency" alleged against the bank. The Prime Minister called for a "special investigation" into Goldman's activities. It came as the bank prepares to pay out £3.5bn in bonuses and announce first-quarter profits of almost $4bn (£2.6bn) this week, in the face of a US investigation by the Securities and Exchange Commission (SEC) over securities fraud, the Telegraph reports.
Lawyers in the United States were predicting a wave of legal action last night in the wake of the $1bn fraud charge brought against Goldman Sachs by the US Securities and Exchange Commission. Richard Blumenthal, the Connecticut attorney-general, said that he had begun a review of the case. “A key question is whether this is an isolated incident or part of a pattern of investment banks colluding with hedge funds to purposely tank securities they created and sold to unwitting investors,” the Times reports.
A clear election victory by either Labour or the Conservatives is needed to sustain the appetite for gilts among the world's biggest investors, according to a Financial Times survey that highlights market concerns about the increasingly tight opinion polls. Ten leading investment funds, with in total more than $7,000bn (£4,570bn) of assets under management, all told the FT that a hung Parliament, potentially delaying action to tackle the UK's £167bn deficit, was the biggest threat to the market.
The head of the UK's largest private hospital group has launched a savage attack on the three main political parties, accusing them of ignoring key health issues in the general election for fear of losing votes. Adrian Fawcett, chief executive of General Healthcare Group (GHG), has accused Labour, the Conservatives and the Liberal Democrats of constructing a "wall of silence" over the future of health care provision, the Telegraph reports.
Corporations must "step up to the plate" and play a central role in getting Britain's economy back in shape, a leading economic forecasting group will say this morning. With wary, debt-ridden consumers unlikely to provide the necessary boost, cash-rich businesses could provide the fillip the economy needs, according to the quarterly prediction by the Ernst & Young ITEM Club. But economic growth will remain "dismal" for the rest of the year, with neither corporate investment nor export-led growth expected to have a significant impact until 2011, it added, the Independent reports.
EU Finance ministers meeting in Madrid yesterday failed to agree a deal on a new bank tax, as a row over what the proceeds of any levy should be used for intensified. There is consensus across the 27-member community that banks should face a new charge after a series of state-backed bailouts across the continent cost taxpayers billions of pounds, the Independent reports.
Tesco is set to reveal yet another year of record turnover and profits, capping a decade that has seen it nearly treble in size. But rather than look back on ten years of almost unprecedented success, it will look forward — and overseas — pointing to its prospects for international growth. The supermarket group is expected to reveal turnover up 7% at £58bn, with profits up 9% at £3.1bn, when it announces its annual results tomorrow, the Times reports.
The CBI wants the next government to reform plans for compulsory workplace pensions or risk deterring millions of potential savers with high and complex annual charges. It wants the Treasury to reconsider its proposal to levy an annual “set-up” charge on employees who join Nest, the nationwide company pension that is scheduled to come into effect in stages from 2012. The annual fee, provisionally set at 2% of contributions, will come on top of a 0.3 % annual management fee to the pension provider, the Time reports.
The head of Prudential's Asian operations has dismissed fears that a takeover of AIG's regional business by the UK insurer, a long-time rival, will trigger mass defections among its 320,000 sales agents. The Pru is battling to acquire American International Assurance (AIA), owned by AIG, and key defections of its tied sales agents would undermine the ambitious growth projections that underpin the $35.5bn (£23bn) deal, the FT reports. |
| | The key question for European markets is: |
How long can they keep going up for at the current rate?
At the current rate the DAX will be back to all time highs by the middle of 2011, the French Cac 40 and the Italian MIB indices will take until early 2012 and the FTSE 100 will get there as early as this year.
There is a simple reason for this: Forex. The Euro is far too strong to help economic recovery, while the pound is so very weak; it’s great news for international profits denominated in pounds.
While a shareholder in a European Euro-denominated company might not benefit from business profits they do get a nice return in currency improvement. Nonetheless this isn’t exactly good news for European investors investing Euros in companies with a disadvantage of an overly strong currency.
Meanwhile across the Atlantic, the Dow and the S&P 500 are in-line with the Dax to regain highs in mid-2011.
The quiet story amongst the indices is technology. In London the Techmark has already blown old highs away and the Nasdaq could be at pre-crunch levels before the summer is out.
Of course all this needs a continuation of a market rally. Yet with Europe having a lot of ground to recover, the prospects are bullish that in a recovering world economic environment the trend will remain up. |
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