Evening Euro Market Bulletin - 5 Aug 09 by ADVFN.com

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US Market
Stocks Posting Notable Losses In Mid-Morning Trading
Following a retreat at the opening bell, stocks are posting notable losses in mid-morning trading on Wednesday, as disappointing data on activity in the service sector deflated the mood on Wall Street. The major averages are all in negative territory, offsetting some of their recent gains.
The day’s pessimism has been generated by the Institute for Supply Management’s report on activity in the service sector in the month of July, which showed that the pace of contraction in the sector unexpectedly accelerated from the previous month.
The ISM said its index of activity in the sector edged down to 46.4 in July from 47.0 in June, with a reading below 50 indicating a contraction in the sector. The decrease came as a surprise to economists, who had expected the index to rise to 48.0.
In a separate report, the U.S. Commerce Department revealed that factory orders rose 0.4 percent in June, surprising economists, who had expected the measure to drop 0.8 percent. May's factory orders figure was revised slightly lower, to an increase of 1.1 percent compared to the 1.2 percent increase that was originally reported.
Earlier this morning, a report released by payroll processor Automatic Data Processing (ADP) showed that private sector employment saw another notable decline in the month of July, although the pace of job losses slowed to its slowest rate since October of 2008.
ADP said non-farm private employment fell by 371,000 jobs in July following a revised decrease of 463,000 jobs in June. Economists had been expecting a decrease of about 350,000 jobs compared to the loss of 473,000 jobs originally reported for the previous month.
In earnings news, Procter & Gamble Co. (PG) reported fourth quarter net income of $0.80 per share, compared to $0.92 per share in the same quarter of last year. Wall Street analysts expected the company to report earnings of $0.79 per share for the quarter. Meanwhile, net sales came in at $18.66 billion for the quarter, falling short of the $19.32 billion forecast by analysts.
Kraft Foods Inc. (KFT) said its second quarter net income was $0.56 per share, compared to $0.49 per share in the year ago quarter, which edged out analyst estimates of $0.54 per share.
Revenues declined 5.9 percent to $10.2 billion, failing to meet estimates of $10.37 billion.
Traders are also digesting results from Ralph Lauren (RL) and Electronic Arts (ERTS), which reported quarterly results that beat forecasts, while Dean Foods (DF) came in line with estimates and lifted its full year outlook.
The major averages have moved off of their worst levels of the day in recent trading, but they remain stuck in negative territory. The Dow is currently down by 94.16 at 9,226.03, the Nasdaq is down 21.62 at 1,989.69 and the S&P 500 is down 9.90 at 995.75.
Sector News
The major sectors are moving mostly lower, contributing to the downward move being shown by the broader markets.
Some of the day’s weakest performances are being turned in by oil service and gold stocks, with the Philadelphia Oil Service Index and the NYSE Arca Gold Bugs Index sliding by 2.6 percent and 2 percent, respectively. The downward moves come amid a retreat in commodity prices following the recent run-up.
Trucking stocks are also retreating by notable margins, as reflected by the 1.8 percent loss being shown by the Dow Jones Trucking Index. The index is backing further off of the ten-month closing high set on Monday.
While steel, telecommunications, tobacco, and semiconductor stocks are also posting notable losses, some banking stocks are bucking the day’s downtrend. The Dow Jones Banking Index is currently up by 1.4 percent after setting a seven-month intra-day high earlier in the session.



European Market
Stocks lose earlier gains
European stocks lost earlier gains as the US started in lacklustre fashion. Across the markets, the German DAX fell 64 points to 5,353 with the French CAC rising 17 points to 3,458.
Societe Generale climbed after the French bank reported second-quarter profit of €309m, which exceeded estimates of €68m.
Insurer AXA also rose after it saw first-half profit drop 39%, which was below expectations, due to lower fees from asset management.
But Swiss Reinsurance slid after the reinsurer reported an unexpected quarterly loss because of writedowns and cost of hedging corporate bonds. It posted a net loss of 381m Swiss francs compared with a profit of 564m francs for the same period a year earlier.
Deutsche Boerse AG declined after the stock exchange operator said second-quarter profit fell because revenue from stock and derivative trading dropped.
Danish brewer Carlsberg saw second-quarter profit rise 37% to 1.94bn kroner from 1.42bn kroner, which beat expectations of 1.6bn kroner. The group benefitted from price increases and savings from the takeover of Scottish Newcastle last year, which offset weaker sales in Russia.
Downturn in consumer spending has hit sportswear giant Adidas, which reported a fall in profits for the April to June period of 93% to €8m compared with €117m a year earlier. Sales fell 2.5% to €2.46bn.
On the economic front, Eurostat said retail sales fell 0.2% in the eurozone from May and down 2.4% from last year, which was worse than expected.
The index of purchasing managers' activity in the manufacturing and services sectors rose to 47.0 points from 44.6 in June, higher than earlier estimates.



Broker tips:
Carpetright, BSkyB, Premier Foods

A return to like-for-like sales growth at Carpetright’s UK operations has prompted broker KBC Peel Hunt to place its price target on the carpet retailer under review.
Shares in Carpetright jumped after it said total sales in the UK and Ireland climbed by 7.5%, while like-for-like sales were up an ‘encouraging’ 1.4%.
Analysts had been expecting a fall in like-for-like sales, after the 15.3% decline seen during the first quarter.
KBC Peel had a price target of 650p on the firm, but that is starting to look a little ungenerous given that Carpetright’s shares are above 740p after this morning’s jump.
KBC Peel notes that Carpetright has the potential to profit from the woes of its rival Allied Carpets, which appears to be on course to close 150 stores by the end of August.
‘The extent of the sales and profit upside from such a major competitor failure is likely to be material with respect to current year expectations,’ it says.
With its low exposure to advertising markets and ‘utility’ characteristics, BSkyB is one of the most defensive companies in the media sector, Charles Stanley said as it upgraded its rating on the pay TV group to ‘accumulate’ from ‘hold’.
‘The tough economic environment means consumers are increasingly seeking inexpensive entertainment in their own homes,’ said the broker.
BSkyB’s 15x price/earnings ratio puts it at a premium to the media sector, but this is ‘justified by the group’s defensive profile and strong forecast earnings growth over the next three years,’ it says, while acknowledging that risks relating to future regulation and technological developments exist.
Hovis to Branston pickle maker Premier Foods first half results provided investors with some reassurance, headline numbers emerging in line with expectations and guidance indicating that full-year profit expectations will be met, Charles Stanley says.
Unlike many food producers, however, who are enjoying the benefit associated with a fall in food price inflation from 11.2% in January to 5.5% in June, Premier continues to experience cost tail winds, in part currency-related and in part down to a highly diversified cost base associated with the fragmented nature of its product portfolio.
Estimates are unlikely to be altered in the wake of the interim results and Stanley’s recommendation, based on a prospective P/E multiple of 6.5 times, remains 'Hold'.