ADVFN Morning Euro Markets Bulletin - August 24th 2010

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London Market Reports
Blue chips hit by general malaise

London has opened lower after a late fall on Wall Street and tough day in Japan, with the Nikkei dropping below 9,000 for the first time in 15 months.

Decent company news has made little impact. A much faster than expected turnaround in the US helped advertising giant WPP lift first half profits by more than a third, with shareholders getting a 15% dividend hike.

Increased production volumes and higher prices contributed to a sharp increase in underlying net earnings at copper miner Antofagasta in the first half of 2010. The full year copper production target was trimmed to 530,000 tonnes, however. Other miners are weak, though, led by BHP Billiton, Kazakmys and Vedanta.

Cairn Energy’s revenue before exceptional items increased by 311% from $81m to $333m at the half year stage. In an update on its Greenland drilling programme the company said the first hydrocarbons have been discovered in the Baffin Bay basin by T8-1 well which has encountered gas, in thin sands.

Persimmon has restarted dividend payments as first half profits and sales rose simmonsharply, though it says the housing market has slowed in recent weeks. Shareholders will get 3p per share after interim profits jumped to £101.4m from £9.8m. Underlying profits, before one-offs and landbank provisions, came in at £39.4m against a loss of £16.7m.

Pubs group Punch Taverns expects full year earnings to be marginally ahead of its previous expectations, as pub refurbishments and favourable summer weather brought in more customers. The group, which has more than 7,100 pubs in total, said like for like sales for the last 12 weeks were up 2.6% after improved trading particularly in the final quarter.

Steam trap and pump maker Spirax Sarco pulled out all the stops in the first half of 2010, achieving record results. Revenue rose 10%, or 8% on a constant currency basis, in the first half of 2010 to £277m from £251.6m the year before.

Wood Group, which provides support services to the oil and gas industry, posted a decline in half yearly profit but said it looks to the second half and 2011 with increasing confidence.


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UK Event Calendar for today
INTERIMS
Aer Lingus Group, Cairn Energy, Corin Group, CRH, Development Securities, Gem Diamonds, H & T Group, John Wood Group, Jupiter Fund Management , OJSC Magnit GDR (Reg S), Oxford Biomedica, Persimmon, Plaza Centers, Promethean World, Source BioScience, Spectris, Spirax-Sarco Engineering, Vitec Group, WPP Group

INTERIM DIVIDEND PAYMENT DATE
Maven Income and Growth VCT 3

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Gross Domestic Product (GER) (7.00)
Private Consumption (GER) (07:00)
Government Spending (GER) (07:00)
Imports (GER) (07:00)
Exports (GER) (07:00)
Industrial New Orders (EU) (10:00)
Existing Home Sales (US) (15:00)
Richmond Fed Manufacturing Index (US) (15.00)
ABC Consumer Confidence (US) (22:00)

GMS
Imaginatik

ANNUAL REPORT
Aortech International

EGMS
OJSC Polyus Gold ADR

AGMS
Acorn Income Fund Ltd., ProVen Growth and Income VCT, ProVen VCT, ProVen VCT 'C' Shares, ProVen VCT 'D' Shares

TRADING ANNOUNCEMENTS
Persimmon

UK ECONOMIC ANNOUNCEMENTS
BBA Mortgage Lending Figures (09:30)


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Forex Market Reports
US dollar and yen continue to gain on safe haven flows

A brief revival in risk appetite early yesterday morning, on a fairly slow day for currencies, didn’t last particularly long as the single currency continued to remain under pressure after euro zone manufacturing purchasing manager’s data for August came in slightly below expectations. This poor data revived concern about the strength of the euros recent recovery against a backdrop of widening credit default spreads with the region’s peripheral members.

Today’s revision of the recent record German Q2 GDP number is unlikely to alter that concern.

The yen continues to gain after yesterday’s meeting between the Bank of Japan and the Japanese Prime Minister Nato Kan failed to formulate a plan to curb the yen’s recent strength as the currency pushed close to 15 year highs against the US dollar and hit its lowest levels since 2001 against the euro.

The Australian dollar also remains choppy against a backdrop of political uncertainty and weakening commodity prices.

The pound had remained fairly well supported against a basket of currencies, making new 11 month highs, however alleged comments from Bank of England monetary policy committee member Martin Weale, about the likelihood of a second recession in the UK sent the pound lower across the board, and it remains particularly heavy against the US dollar, unable to regain the 1.5600 level.

Even though the markets will have an eye on the Fed’s annual get together at Jackson Hole, Wyoming this week, anything major with regard to policy is unlikely to come out ahead of this Friday’s US Q2 GDP revision where a revision to the downside is expected.

Today’s US data could do a lot to revive risk appetite with existing homes sales data for June due to be released, but that appears unlikely with a declines of around 15% expected, while the Richmond Fed manufacturing index for August is expected to also slip to 12, from 16 in July. The concern remains that a continued weakening, or double-dip, in the US housing market which appears likely given the recent data, could well drag the US economy down with it.

EURUSD – the single currency has continued to remain weak as it looks to test its support around 1.2605, the 50% retracement of the 1.1880/1.3335 up move.
A break of 1.2605 would target the 61.8% level at 1.2435.
The euro has also stayed below its 50 day moving average which is in itself a bearish signal, however the fact that the US dollar index has not yet closed above its same moving average could make the euro susceptible to a sharp rebound.
The Euro has resistance around yesterday’s highs around 1.2735/40 and the 50 day MA, as well as around 1.2780 and the larger resistance and last week’s highs around 1.2920.

GBPUSD – cable has so far been unable to close below its 200 day moving average, now at 1.5475, continuing to see sharp rallies, yesterday seeing 1.5620; however today’s push below it in Asia today could well be different as price weakness starts to take hold.
However to diminish the downside pressure building up from the lower highs of the last few days we would need to see a break and close above the 1.5700 area and break through the 1.5730 resistance which is currently weighing on the pound.
With downside pressure continuing to build up, today’s break and a confirmed close below the 200 day moving average could result in further losses towards 1.5320, which would be a 38.2% retracement of the up move from the 1.4230 lows to the recent highs around 1.6000. Expect to find resistance on any rallies towards yesterday’s highs around 1.5620 as well as around 1.5730 and 1.5820.

EURGBP – the euro continues to make new lows, yesterday at 0.8142, but really needs to close the week below 0.8165/70 to not only target the previous lows at 0.8065/70, but also to open the possibility of further euro losses towards 0.7785 which would a 61.8% retracement of the up move from the 2007 lows at 0.6535 to the 2008 highs at 0.9800.
There is a risk of a retest towards the highs of the last two days around 0.8245/50, however, while below the larger resistance around the 0.8300/10 level, the downside momentum remains intact.

USDJPY – fears of possible intervention by the Bank of Japan appear to be receding after it transpired that currency intervention wasn’t discussed at yesterday’s conference call between the Bank of Japan and the Japanese Prime Minister Nato Kan. As such the dollar yen continues to edge towards the recent lows around the 84.70/80 level.
The recent highs and recent range highs around 86.25 remain the key obstacle to a dollar rally but unless a concerted intervention effort is made it looks like a move below the recent 15 year lows is only a matter of time.
A move towards 80.00 may well be long and drawn out but in the absence of any intervention or physical stimulus it looks like it’s only a matter of time.


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US Market Reports
Dow slides to weak close

Wall Street’s strong start to the week did not last long as poor economic confidence and worries about economic growth hit sentiment.

Across the markets, the Dow finished down 39 points to 10,174. Nasdaq fell 20 points to 2,159. The S&P 500 shed four points to 1,067.

The decline in tech shares on Nasdaq came despite a bid battle for 3Par. Hewlett-Packard has made a $1.6bn bid for the California-based data storage provider, topping an $18 per share offer from Dell.

HP’s $24 per share bid is one-third higher than Dell’s agreed bid for the company last week. Shares in 3Par jumped more than 40%.

Potash Corporation of Saskatchewan has formally rejected the hostile $40bn (£26bn) offer made by Anglo-Australian miner BHP Billiton last week. The world’s largest fertiliser producer called the bid, which followed an unsuccessful friendly approach, “opportunistic” and “wholly inadequate”.

"The PotashCorp board of directors is unanimous in its belief that the BHP Billiton offer substantially underv-alues PotashCorp and fails to reflect both the value of our premier position in a strategically vital industry and our unparalleled future growth prospects," said the Canadian firm’s chief executive Bill Doyle.

Elsewhere on the M&A front, there is talk in the market that South African brewer SABMiller is interested in buying Foster's, Australian brewer of the eponymous fizzy yellow alcoholic beverage.

3M says that it may spend $2bn on acquisitions in 2010, while Campbell Soup is considering a $2.3bn bid for United Biscuits.

Washington Post was the biggest riser on the S&P because of the potential undervaluation of its education business.

S&P 500 - Risers
Washington Post Co. (WPO) $368.78 +6.07%
Micron Technology Inc. (MU) $7.36 +3.37%
Avon Products Inc. (AVP) $29.79 +2.72%
Supervalu Inc. (SVU) $10.31 +2.28%

S&P 500 - Fallers
Titanium Metals Corp. (TIE) $18.46 -4.50%
FLIR Systems Inc. (FLIR) $25.24 -4.25%
Intuit Inc. (INTU) $42.83 -3.97%
Cummins Inc. (CMI) $76.50 -3.79%

Dow Jones I.A - Risers
Wal-Mart Stores Inc. (WMT) $51.14 +1.83%
Merck & Co. Inc. (MRK) $34.97 +1.54%
Pfizer Inc. (PFE) $16.10 +1.13%
Exxon Mobil Corp. (XOM) $59.50 +1.04%

Dow Jones I.A - Fallers
Caterpillar Inc. (CAT) $66.84 -2.93%
Cisco Systems Inc. (CSCO) $21.70 -2.38%
Alcoa Inc. (AA) $10.37 -2.08%
Boeing Co. (BA) $63.26 -2.07%


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Tuesday newspaper round-up:
Potash/BHP, Cairn Energy, HSBC...

Britain faces a “significant” risk of a renewed slide into recession, a leading policymaker at the Bank of England warned yesterday.

It would be “foolish” to rule out the possibility of a double-dip downturn, even if it was not the Bank’s central prediction, said Dr Martin Weale, the newest member of the Monetary Policy Committee (MPC). He also feared that the Bank’s central outlook — which is for growth of about 2.8% in 2011 and 3.2% in 2012 — could be too optimistic, the Times reports.

Meanwhile, Bank of America has accused the Democrats and Republicans in Congress of endangering the US economy in a game "fiscal chicken", risking a grave policy error by tightening too early. Ethan Harris, the bank's chief North American economist, said early data for August suggest that "an already weak recovery is getting weaker" with a rising risk of a relapse into recession, the Telegraph reports.

The world’s biggest fertiliser company launched its formal defence against a $39bn (£25bn) hostile takeover by BHP Billiton claiming that several rival bidders were waiting in the wings. Potash Corporation of Saskatchewan is trying to generate an auction to stop the mining group “cheating” shareholders with a low-ball bid. BHP submitted its $130-a-share offer to investors last week, which the board of PotashCorp rejected yesterday, the Times reports.

Three of India’s state-controlled oil firms are considering a bid for a majority stake in Cairn India, in a move that would pose a direct challenge to a proposed £6.1 billion takeover by Vedanta Resources. Oil and Natural Gas Corporation (ONGC), GAIL and Oil India are considering a joint bid for the share in the Rajasthan-focused oil producer, which is held by Cairn Energy, the British-listed oil firm, the Times reports.

Chi-X Europe, the pan-European share trading platform, said on Monday it had received an approach that could lead to an offer being made for the company.It said the “enquiry” from an unnamed third party “may not lead to an offer for the whole or partial sale of the company”, the FT reports.

The world’s largest manufacturer of helicopters has suggested that work could return to the UK from Romania as the two countries were on a par for costs in the aftermath of the financial crisis. Eurocopter is understood to have told the Ministry of Defence that it could move a £300m contract to the UK with little impact on the price, reports the Times.

Hewlett-Packard has trumped rival Dell's bid for data storage company 3PAR, despite dispensing with the services of its chief executive Mark Hurd a fortnight ago amid sexual harassment allegations. A week after Dell announced a recommended $1.15bn (£741m) bid for 3PAR, HP has made a $1.6bn counter offer, the Telegraph reports.

Falling profits at Lord Ashcroft's Caribbean banking business have sent shares in his British holding company towards all time lows. BCB Holdings, which is controlled by the Conservative party deputy chairman and whose shares trade on London's Alternative Investment Market, announced a 39% fall in profits yesterday and additional provisions for bad loans at its main banking division, the Independent reports.

Britain’s industrial safety watchdog has launched a programme of more “intrusive investigations” of oil spills in the wake of new figures that reveal a sharp increase in the number of major leaks. The figures, released on Tuesday by the Health and Safety Executive, show a marked rise in the combined number of “major and significant” hydrocarbon releases over 2009-10 by UK offshore oil and gas operators, mainly in the North Sea, the FT reports.

The row between property group Minerva and its biggest shareholder, KiFin escalated yesterday when the company hit back at its rebel investor, accusing it of lying to other backers ahead of next month's emergency general meeting. KiFin, backed by the billionaire South African Nathan Kirsh, owns 29.5% of Minerva and is calling for the removal of its chief executive, Salmaan Hasan, and chairman, Oliver Whitehead, the Independent reports.

HSBC on Monday entered into exclusive talks to buy 70% of Nedbank’s shares, including a 52% stake held by Old Mutual, the insurer. The UK bank now has about two months to come up with a firm offer. HSBC is understood to have signalled that it would be willing to pay more for the shares than its rival bidder, Standard Chartered, although a price will not be agreed until a formal offer is made, the FT reports.