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 |  Subject: ADVFN Evening Euro Markets Bulletin - July 20th 2010  Tue Jul 20, 2010 4:38 pm | |
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There was plenty of movement in both directions Tuesday, but Footsie closed just a few points lower.
Government spending cuts and their effect on the profits on the big players in the public sector is the day’s big story afterCable & Wireless Worldwide warned that the coalition government’s emergency budget will cause earnings growth to slow this year and come in at the lower end of the range of expectations.
The largely UK focused part of the old Cable & Wireless, split off in March, said non-contracted spending in the UK public sector has slowed “very significantly”. “Given the nature of our public sector business, this reduction will adversely impact trading in the current year.”
Its shares slumped and were joined lower by other companies with public sector exposure including outsourcers Capita and Serco and the IT group Logica.
De La Rue also suffered heavy falls, though not because governments are cutting back on money printing. The banknote printer has suffered quality control issues at one of its paper production facilities. The company has suspended production at the facility while it sorts the problems out, and expects this will result in paper production and sales in 2010/11 being materially lower than originally planned.
With metals prices firming mining stocks remain in demand. BHP Billiton, which has been upgraded to “overweight” from “equal weight” by Barclays Capital, was on the up, as wereRio Tinto, Vedanta and Xstrata.
Bid speculation is kept the share price of International Power bubbling. French energy giant GDF Suez revived talks yesterday about a partnership to create a new London-listed electricity group. The deal would see a combination of their businesses outside Europe and certain assets in the UK and Turkey.
Tenanted pub group Enterprise Inns was in demand after saying it has continued to see an “improving trend” since the interim results on 11 May and predicts full-year results will match forecasts. The figures seem to have done as much, if not more, for the Punch Taverns share price.
Aquarius Platinum rallied sharply after a 'constructive' meeting with the South African Department of Mineral Resources over proposed enforced changes to the way mines are constructed.
Power systems developer Rolls-Royce has been selected by Lockheed Martin as the in-service support provider for the engines on the CC-130J military transport aircraft flown by the Canadian Air Force.
Bookie William Hill reported a rise in second quarter revenues, though gains from the World Cup were partly offset by a loss-making Royal Ascot festival. For the year to date, net revenue was up about 3% and pre-exceptional earnings before interest, tax and amortisation for the first half are expected to be around £135m from £134.6m last time.
Data search software company Autonomy said a major US bank has placed an order for the company’s compliance product. The agreement has an expected value of in excess of $15mi over the next few years. Nevertheless, the shares are lower with Panmure Gordon downgrading to “hold” from “buy” ahead of second quarter figures and after the pummelling IBM shares took yesterday following its disappointing second quarter figures.
Severn Trent‘s customers kept consumption steady over the past three months from April, while prices declined by 0.7%. As a result, the water utility has kept its expectations and guidance unchanged for this year.
Profits at Ryanair slipped by a fifth as the €50m cost of the volcanic ash cloud hit its first quarter, while the no-frills airline remains cautious for the remainder of the year.
Soco International is getting rid of its operations in Thailand and using the proceeds of up to $106m to fund development of core assets in Vietnam and West Africa. Salamander Energy is paying $105m plus a contingent cash consideration of $1m for Soco Thailand and its 40% interest in the B8/38 licence, which holds the Bualuang field.
Profits jumped by a quarter last year at spread bet firm IG Group as its bad debt charge tumbled and equity markets settled down after the volatility of 2009. The shares have been marked down however, with both Singer Capital Markets and Panmure Gordon suggesting the shares look a bit toppy after their recent good run.
Exhibitions group ITE is trading in line with expectations and said it has noted indications of an improving trading environment in some of its principal markets.
Annual losses at home shopping group Findel widened by a third as it scrapped its final dividend and warned current trading remains challenging.
Shares in oil group Xcite Energy jumped after it said had entered into a contract for a rig to drill a well in the Bentley field in the North Sea.
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| FTSE 100 - Risers
Rio Tinto (RIO) 3,178.00p +4.25%
Vedanta Resources (VED) 2,315.00p +3.90%
Xstrata (XTA) 953.50p +3.84%
BHP Billiton (BLT) 1,876.00p +3.28%
Eurasian Natural Resources (ENRC) 863.50p +2.98%
African Barrick Gold (ABG) 596.50p +2.93%
Antofagasta (ANTO) 936.00p +2.52%
Lonmin (LMI) 1,447.00p +1.90%
Kazakhmys (KAZ) 1,035.00p +1.77%
TUI Travel (TT.) 222.40p +1.69%
FTSE 100 - Fallers
Cable & Wireless Worldwide (CW.) 69.00p -17.41%
Serco Group (SRP) 537.00p -5.79%
ICAP (IAP) 392.60p -3.49%
BT Group (BT.A) 134.30p -3.38%
Capita Group (CPI) 717.50p -3.11%
Autonomy Corporation (AU.) 1,815.00p -2.73%
Wolseley (WOS) 1,330.00p -2.42%
Essar Energy (ESSR) 448.00p -2.38%
G4S (GFS) 260.00p -2.18%
Smith & Nephew (SN.) 587.50p -2.16%
FTSE 250 - Risers
Aquarius Platinum Ltd. (AQP) 255.00p +12.29%
Punch Taverns (PUB) 71.00p +5.97%
Melrose Resources (MRS) 314.00p +4.98%
Enterprise Inns (ETI) 98.30p +4.57%
Gem Diamonds (GEMD) 222.00p +4.32%
BTG (BGC) 203.70p +3.82%
Pace (PIC) 172.80p +3.41%
JPMorgan Asian Inv Trust (JAI) 196.90p +2.45%
Tullett Prebon (TLPR) 339.00p +2.32%
TR Property Inv Trust Sigma Shares (TRYS) 63.40p +2.09%
FTSE 250 - Fallers
De La Rue (DLAR) 776.50p -15.92%
Logica (LOG) 101.70p -6.44%
SThree (STHR) 255.00p -6.32%
IG Group Holdings (IGG) 443.60p -4.93%
Resolution (RSL) 64.65p -4.93%
Unite Group (UTG) 174.10p -4.81%
Babcock International Group (BAB) 588.00p -4.55%
Mitie Group (MTO) 200.00p -4.08%
Grainger (GRI) 108.80p -3.89%
Rentokil Initial (RTO) 104.00p -3.88% |
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| | European Markets report |
European stock markets staged a late rally but it was not enough to return the major indices to positive territory.
The DAX in Frankfurt closed down 41 points at 5,967, the CAC in Paris shed 18 points at 3,468 while the Swiss market index dived 33 points to 6,123.
In Germany vehicle makers were the big losers, with luxury car maker Daimler and truck maker Man sporting the biggest losses.
Daimler was hit by a broker note from Morgan Stanley, which advised that its clients be underweight in the stock. Fellow German car markers BMW and Volkswagen fell in sympathy, as did French automobile manufacturers Peugeot andRenault.
Chip maker Infineon was out of favour after disappointing figures from US sector peer Texas Instruments. Ripples from across the pond were also felt by chemical maker Henkel after US healthcare giant Johnson & Johnson lowered full year earnings guidance.
Mobile phone handset maker Nokia gained after the Wall Street Journal reported that the Finnish firm plans to replace its chief executive Olli-Pekka Kallasvuo. The Journal is citing unnamed people familiar with the situation as saying that Nokia's board is "supposed to make a decision by the end of the month."
Swedish telephone company TeliaSonera fell back after it announced a 1.7% decline in second quarter sales.
Profits at Ryanair slipped by a fifth as the €50m cost of the volcanic ash cloud hit its first quarter, while the Irish no-frills airline remains cautious for the remainder of the year.
Pre-tax profits fell to €104.6m from €134.6m on sales up 16% to €896.8m. Underlying profit to June before the volcano costs rose 1% to €138.5m.
2.04 -1.74%
CAC 40 - Risers
ArcelorMittal SA (MT) € 23.31 +2.13%
Accor (AC) € 23.18 +0.80%
LVMH (MC) € 88.86 +0.63%
PPR (PP) € 98.34 +0.55%
EDF (EDF) € 30.63 +0.53%
Bouygues (EN) € 30.74 +0.41%
Technip (TEC) € 47.68 +0.28%
Dexia (DEXB) € 3.12 +0.23%
Lagardere SCA (MMB) € 25.71 +0.14%
CAC 40 - Fallers
Cap Gemini (CAP) € 34.63 -3.23%
EADS (EAD) € 16.08 -2.87%
Peugeot (UG) € 22.78 -2.48%
Alcatel-Lucent (ALU) € 2.03 -2.27%
ST Microelectronics (STM) € 6.47 -2.10%
Schneider Electric (SU) € 83.16 -1.76%
Sanofi-Aventis (SAN) € 47.14 -1.68%
Renault (RNO) € 32.69 -1.65%
Michelin (ML) € 57.37 -1.39%
Alstom (ALO) € 36.40 -1.22% |
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| | US Markets Report |
A bunch of disappointing earnings reports have led to a sharp fall in Wall Street in early dealings on Tuesday.
Earnings from Goldman Sachs missed expectations and dragged down other financial stocks. Profit slumped 82% at the Wall Street giant in the second quarter as the bank took a hit from Britain’s bank bonus tax and a fraud settlement with the Securities and Exchange Commission.
Net earnings fell to $613m, or 78 cents a share, in the three months to 30 June from $3.44bn, or $4.93 a share, the year before. That disappointed the markets who were looking for earnings of $1.28bn, or $2.08 a share.
Computer services firm IBM missed estimates when it published quarterly figures after the bell last night due to low demand for services. The computer hardware producer reported a 9% rise in net income to $3.4bn, though revenues rose only 2% versus a year ago to $23.7bn. Analysts were looking for stronger revenues.
Meanwhile, chipmaker Texas Instruments’ sales and profits failed to meet expectations after the bell on Monday.
Johnson & Johnson's revenue fell also short of Wall Street estimates. Global sales of consumer products dropped 5.4% in the second quarter to $3.6bn, while the group cut its full-year profit forecast.
Across the markets, the Dow slumped 141 points to 10,014, with the Nasdaq 38 points lower at 2,161. The S&P 500 is currently 13 points down at 1,058.
On the positive side, Harley-Davidson jumped after second-quarter adjusted earnings of 59 cents comfortably beat expectations of 42 cents.
iPhone firm Apple and internet giant Yahoo are due to publish their figures after the close.
On the economic front, housing starts fell 5% in June to a seasonally adjusted annual rate of 549,000 in June, according to figures from the Commerce Department. |
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| | Broker tips: William Hill, Autonomy, IG |
The online division of bookmaker William Hill is starting to deliver on its potential in the view of KBC Peel Hunt which thinks that the shares look cheap from an historical perspective.
“Given the results produced by some of the pure online players, WHO’s [William Hill Online] 24% growth in revenues and 43% improvement in operating profits is an impressive result. The move offshore has clearly helped the bottom line, but the top-line growth reflects a business that is beginning to fire on all cylinders. Sportsbook turnover rose 59%, with gross win up to 7.7% (6.8%),” KBC analyst Nick Batram observes.
While the online side is coming up trumps, the betting shop side of the business is having a tough time of it, with the World Cup windfall offset by the company’s worst ever Ascot race meeting performance.
KBC Peel Hunt thinks there remains an air of suspicion towards the traditional bookmakers that is reflected in the share price, which trades at about a 20% discount to its historical price earnings ratio (based on next year’s projected earnings).
“William Hill has done relatively little wrong since the acquisition of the assets from Playtech and addressing the balance sheet,” Batram asserts, and thinks that with the online business starting to gain traction “then patient investors should be well rewarded.”
The broker has a “buy” recommendation on the shares and a price target of 227p.
Ahead of Autonomy’s second quarter results on Thursday Panmure Gordon has adopted a more cautious view on the shares, particularly after the pummelling IBM shares took in the USA after a mixed set of figures on Monday.
Panmure Gordon moves its rating from “buy” to “hold” and shaves a couple of pence off its price target, which moves to 2149p.
The broker is expecting the data search software titan to report figures that are merely in line with market expectations, “and while it will talk through its (many) drivers for earnings upgrades shares, following the usual pattern, shares are likely to be hit on the day,” suggests George O’Connor. If that proves to be the case then it will provide an opportunity to stock up on the shares at a reasonable price, O’Connor adds.
Following a good run for the share price Singer Capital Markets is contemplating revising its buy recommendation for IG Group despite the spread betting firm delivering full year results in line with expectations.
The broker has bumped up its price target from 440p to 485p, and said it still likes the company’s prospects over the longer term but it thinks the company is now trading close to its fair value.
“Whilst comparables are increasingly tough, strong momentum in client opening has continued which bodes well for further revenue growth across most geographies. In addition, the regulatory approvals at the US business, Nadex, allow IG now to develop a white label business in that region. This is likely to take some months before we see revenues coming through but over the longer term, this could offer significant potential,” suggests Singer.
Panmure Gordon also thinks the shares are starting to look a bit toppy. At 14.5 times current year earnings, the shares continue to trade well within their historic valuation range, the broker notes. However, although Panmure sticks with its “buy” recommendation it sees “no clear scope for upgrades in today’s statement,” and consquently “we expect some profit taking on the back of a strong recent share price run.” |
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