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 |  Subject: ADVFN Evening Euro Markets Bulletin - July 7th 2010  Wed Jul 07, 2010 4:56 pm | |
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Back above 5,000
Market Movers
techMARK 1,589.83 +0.74%
FTSE 100 5,014.82 +1.00%
FTSE 250 9,539.99 +0.41%
Britain’s banks staged an impressive turnaround Wednesday that helped carry London out of the red and onto a second day of very respectable gains.
High street lenders were unsettled early on as investors waited for details on the nature of European stress tests for about 100 banks. Last-minute haggling over exactly how much of the methodology should be revealed makes it more likely an announcement will be made tomorrow instead.
But traders appear more optimistic about the potential outcome, which should be known on 23 July. A prediction from US bank State Street that second quarter results will beat forecasts also improved the mood.
Hopes that UK peers will be able to replicate that had Barclays, Royal Bank of Scotland and Lloyds reversing initial losses, while HSBC erased most of a 3% slump.
A strong start on Wall Street also gave the City a lift, getting the leading index up above 5,000 for the first time in a week.
Supermarket chain J Sainsbury hit a two-month high on growing speculation that former suitor, the Qatar Investment Authority, is stake building. Talk is the Qataris are ready to up their interest in Britain’s third-largest food retailer to 29.9% ahead of a cash offer pitched at 500p a share.
Shares in BP also continued to rise on talk of Middle East investment and possible capping of the leaking Gulf of Mexico well. Chief executive Tony Hayward is said to be in Abu Dhabi meeting with representatives of one of the world’s largest sovereign wealth funds.
There was also plenty of results news, though the response to first quarter numbers from M&S wasn’t what the high street bellwether had hoped for.
The retailer reported a 3.6% rise in UK like-for-like sales, but is cautious about the outlook for consumer confidence and spending. Like for like sales in general merchandise, which includes clothing, were up 6% in the 13 weeks ended 3 July, with like for like sales growth in food of 1.5%.
KBC Peel Hunt is nervous. While it accepts Marks has had a good start to the year, there are enough concerns for it to repeat its “sell” rating and 325p target. “Our concerns for Marks & Spencer stem from relative balance sheet constraints and lower cash generation compared to its peers such as Next as capital expenditure starts to ramp up to normal levels and to meet new investment plans,” said KBC analyst John Stevenson.
Other retail plays have also fallen back, with Burberry struggling.
Anglo-Swiss mining titan Xstrata has given the green light to a large investment in a brownfield expansion to the Tintaya copper mine in southern Peru. The Xstrata board has approved a $1.47bn investment to develop the Antapaccay copper project, located around 10 kilometres from the Tintaya open pit mine which is expected to be exhausted in 2012.
Tullow Oil can proceed with the $1.5bn acquisition of a 50% stake in two big oil fields in Uganda from Heritage Oil after the government there gave approval after months of wrangling. Tullow exercised its first refusal rights over blocks 1 and 3A in the Albert Basin in Uganda after Heritage agreed to sell the stakes to Eni of Italy.
Aquarius Mining is lower after five people died yesterday at its Marikana platinum mine when a shaft collapsed.
Storage firm Big Yellow Group enjoyed a “robust” quarter with a particularly “strong” June. Annualised store revenue, for the 51 wholly owned stores, rose 9% to £59.8m at 30 June 2010. Total store revenue was £14.4m for the quarter, up 10% from the same quarter last year.
Private equity leviathan 3i said its investments are stabilising or improving while the pipeline of investment opportunities looks promising. Investment in the second quarter of 2010 totalled £105m, compared to £79m in the second quarter of 2009.
Enterprise software giant Autonomy has licensed its Intelligent Data Operating Layer (IDOL) software to Kraft Foods, the US processed foods giant which last year bought up UK confectionery firm Cadbury. Financial details of the deal were not disclosed.
South African bank Investec has received a number of approaches from parties interested in acquiring its Rensburg Fund Management (RFM) subsidiary. The business was acquired as part of the takeover of Rensburg Sheppards in June.
Carillion said the coalition government’s cuts on the Building Schools for the Future programme will not have a "material impact" on the group’s orders.
Engineer Smiths has agreed a ten-year plan with its trustees to reduce the £655m deficit in its two main pension funds.
Sales are on the rise at Booker, the cash and carry wholesale group, with demand for fresh produce particularly strong.
Paper and plastic packaging firm DS Smith is to buy Otor, a corrugated packaging company based in France.
Greeting cards retailer Clinton Cards said total sales since its last statement in May have been weaker than expected.
Support services firm Cape anticipates performance for the year ending 31 December 2010 will be ahead of its previous expectations thanks to favourable exchange movements. |
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FTSE 100 - Risers
Barclays (BARC) 291.60p +6.19%
Sainsbury (J) (SBRY) 344.00p +4.81%
BP (BP.) 362.05p +4.79%
Royal Bank of Scotland Group (RBS) 42.83p +4.69%
BT Group (BT.A) 134.90p +3.61%
3i Group (III) 272.60p +3.61%
Fresnillo (FRES) 1,030.00p +3.36%
International Power (IPR) 310.00p +3.09%
SEGRO (SGRO) 269.00p +2.83%
ARM Holdings (ARM) 280.60p +2.78%
FTSE 100 - Fallers
Marks & Spencer Group (MKS) 343.40p -2.64%
Smith & Nephew (SN.) 578.00p -1.53%
Burberry Group (BRBY) 758.50p -1.37%
Whitbread (WTB) 1,370.00p -1.30%
Eurasian Natural Resources (ENRC) 852.00p -1.22%
Invensys (ISYS) 252.40p -1.21%
Essar Energy (ESSR) 455.00p -1.09%
Schroders (SDR) 1,192.00p -1.00%
Serco Group (SRP) 559.00p -0.80%
AstraZeneca (AZN) 3,119.00p -0.76%
FTSE 250 - Risers
JKX Oil & Gas (JKX) 262.20p +7.02%
Wellstream Holdings (WSM) 482.90p +5.41%
Imagination Technologies (IMG) 291.90p +5.38%
SDL International (SDL) 491.30p +4.71%
IG Group Holdings (IGG) 462.40p +4.47%
Premier Farnell (PFL) 223.00p +4.21%
Fidessa (FDSA) 1,380.00p +4.07%
Computacenter (CCC) 270.00p +3.85%
Paragon Group Of Companies (PAG) 126.50p +3.77%
St James's Place (STJ) 229.00p +3.62%
FTSE 250 - Fallers
Aquarius Platinum Ltd. (AQP) 294.20p -6.54%
Telecity Group (TCY) 376.40p -4.47%
SIG (SHI) 100.00p -3.19%
Dana Petroleum (DNX) 1,409.00p -3.03%
Rank Group (RNK) 98.75p -2.90%
De La Rue (DLAR) 920.00p -2.49%
Ashtead Group (AHT) 94.30p -2.28%
Inchcape (INCH) 255.90p -2.25%
Hargreaves Lansdown (HL.) 325.00p -2.23%
International Personal Finance (IPF) 200.50p -2.20% |
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| | European Markets Report |
Stocks turn blue
American bank State Street’s bullish forecast on second quarter profits gave European peers an excuse to switch direction and lead bourses to large gains.
Hopes the European stress test on about 100 banks will not be as big a deal as feared also revived interest in the sector. SocGen, Credit Agricole, BNP Paribas, Banco Santander and BBVA were up between 5% and 7%.
Paris turned a 32-point loss into a 60-point gain, closing at 3,483, Frankfurt added 51 points to 5,992, having been down 51 at lunchtime, while Zurich ended 36 better at 6,099.
A report today showed that May German factory orders unexpectedly dropped for the first time in five months. Factory orders fell 0.5% in May from April. Analysts were looking for a 0.3% rise.
On the corporate front, Air Berlin said the number of passengers it transported in June rose 3.4% to 3.02m from the same period last month.
French catering and services group Sodexo saw third-quarter revenue total €4bn, rising from €3.8bn in the year-ago period. It expects to achieve organic revenue growth for 2010 of around 2%
Unit sales hit record figures at Peugeot Citroen, jumping 16.9% in the first half of 2010 to 1.86m units.
Hexagon rose on news that the Swedish technology group will buy US engineering and security software firm Intergraph for $2.13bn in cash.
Satnav device maker TomTom advanced after Merrill Lynch upgraded the company's rating to neutral from underperform.
Elsewhere, the European Commission said Greece is "broadly on track" with budget cuts and economic reforms.
CAC 40 - Risers
Dexia (DEXB) € 3.06 +7.86%
Societe Generale (GLE) € 37.58 +7.05%
Credit Agricole (ACA) € 9.20 +6.94%
BNP Paribas (BNP) € 47.69 +5.30%
Renault (RNO) € 32.10 +3.12%
GDF Suez (GSZ) € 24.59 +3.06%
AXA (CS) € 12.92 +2.66%
Peugeot (UG) € 22.13 +2.64%
Accor (AC) € 23.34 +2.48%
EADS (EAD) € 16.75 +2.38%
CAC 40 - Fallers
Lafarge (LG) € 40.63 -2.21%
Bouygues (EN) € 31.20 -1.14%
Sanofi-Aventis (SAN) € 46.60 -0.92%
LVMH (MC) € 87.00 -0.82%
Essilor International (EI) € 48.08 -0.48% |
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| | US Markets Report |
Major Averages Remain Firmly Positive In Late Morning Trading
Stocks have shown a strong upward move over the course of morning trading on Wednesday, moving further off their recent lows as traders go bargain hunting. The major averages have all moved sharply higher, although it remains to be seen if they will be able to hold onto the gains.
Oil service stocks are turning in some of the market's best performances in late morning trading, resulting in a 2.7 percent advance by the Philadelphia Oil Service Index. The sector is benefiting from a notable increase by the price of crude oil, which is up more than $1 a barrel.
Considerable strength has also emerged among commercial real estate stocks, which are regaining some ground after falling sharply in recent sessions. The Morgan Stanley REIT Index is up 2.6 percent after ending the previous session at a four-month closing low.
Most of the other major sectors have also moved to the upside on the day, with banking, computer hardware, semiconductor, and transportation stocks posting notable gains. On the other hand, some biotech stocks are bucking the uptrend.
The major averages have moved off their best levels of the day in recent trading, although they remain firmly positive. The Dow is up 129.04 points or 1.3 percent at 9,872.66, the Nasdaq is up 27.50 points or 1.3 percent at 2,121.38 and the S&P 500 is up 14.58 points or 1.4 percent at 1,042.64. |
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| | Broker tips: M&S, Next, easyJet, Autonomy |
There’s been a mixed response to the latest figures from high street bellwether Marks and Spencer despite a 3.6% increase in UK like for like (LFL) sales for the first quarter.
Panmure Gordon says the statement “looks strong”, especially as the retailer beat the broker’s target of a 3% LFL sales improvement. Both general merchandise and food also topped forecasts.
“Although the UK consumer is likely to be under pressure over the coming 12-18 months, we think that the M&S customer is likely to hold up rather better than, for example, the Debenhams (Hold, 58p price target) customer,” Panmure said.
The guys at Ambrian are also happy. They think M&S has “significant” sales and margin recovery potential and a large opportunity to trade its brand more aggressively online.
“This is very much a holding statement, given that the new chief executive is conducting a review of the business, the fruits of which are not expected until the autumn,” it explains.
“We don’t think that M&S is dead. It has problems, but these are solvable. While the shares have recovered strongly since 2008, we believe that the current valuation is still too low and this is reflected in our target of 576p.”
But KBC Peel Hunt is nervous. While it accepts Marks has had a good start to the year, there are enough concerns for it to repeat its “sell” rating and 325p target.
“Our concerns for Marks & Spencer stem from relative balance sheet constraints and lower cash generation compared to its peers such as Next as capital expenditure starts to ramp up to normal levels and to meet new investment plans,” said KBC analyst John Stevenson.
He prefers Next (Hold, target 2,300p) and Debenhams (Buy, target 80p) on valuation grounds.
New planes used by easyJet must make more money than anything the budget airline has achieved before if it is to create shareholder value, reckons Charles Stanley.
Analyst Douglas McNeill believes pre-tax profit (PBT) per seat, normally about £3, has to hit £5.80 in order to justify the current share price. Its best ever is £5.34, in 2002.
“We do not take this kind of improvement for granted. Instead, we allow for asset utilisation to get some of the way back to pre-recession levels, and for the new planes to deliver PBT of £4.50 per seat,” McNeill said in a note to clients.
“This would, we estimate, make the equity worth 334p, which we adopt as our target. At the long-run average of £3, it would be difficult to justify a valuation above 300p.”
A sceptical KBC Peel Hunt recently started coverage of Autonomy with a “sell” rating and nothing that’s happened since has changed its view.
“If Autonomy beats numbers for a quarter, they normally announce the fact within five trading days of the quarter end (ie today),” says Morland.
“Realistically, this probably means that if we hear nothing tomorrow or the next day, then Q2 consensus has not been beaten.”
The broker sees this as a negative for the shares, because Q2 should be benefiting from a one-off sale of $10m of stock that would not have been in consensus.
“Given this boost to sales, being in line is not good enough in our view.” |
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