ADVFN Morning Euro Markets Bulletin - Nov. 22th 2010

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London Market Reports
Ireland gives market a lift

Market Movers
FTSE 100 5,770.58 +0.66%
techMARK 1,761.39 +0.57%
FTSE 250 10,890.27 +0.58%

Markets opened strongly on hopes that Ireland’s decision to accept a bail-out will mean some stability for the battered eurozone.

Miners are leading the market higher with banks also in demand. Xstrata, Kazakhmys and Vedanta are the best of the metals-focused firms, while Lloyds and Barclays have picked up among the banks. Hotels giant Intercontinental is the best performer.

It’s a slow start to the week on the company’s front. But Rolls-Royce has picked up a morale boosting $1.8bn (£1.1bn) engine order from China just weeks after the problems that grounded Airbus A380 super-jumbos around the world.

Defence group Qinetiq has nabbed a $2bn five-year deal to provide engineering services to the Kennedy Space Centre in Florida. The contract, with US space agency NASA, is a cost-plus-award-fee contract to begin next March and will run for five years.

Mining heavyweight Anglo American has puts its Callide thermal coal mine up for sale. The mine in Central Queensland, a low cost coal producer, will go as part of Anglo’s focus on growing its metallurgical coal and high margin export thermal coal businesses.

Mitie has grown interim profit by 12% and the outsourcing and asset management group is confident of meeting expectations for the full-year and picking up new government work next year. Profit before tax and one-off items was up to £47.5m in the six months to 30 September from £42.3m a year ago on revenue 15% higher at £918.7m.

Estate agent chain Winkworth expects to beat full-year profit forecasts after growing revenue by 20% in the first nine months, but 2011 is expected to be another low volume year, like 2010. Franchise offices enjoyed a strong third quarter, it said Monday, despite low transaction volumes, especially outside London, and a drop in prices compared with the first half.

Education solutions provider RM reported record full year profit as growth continues in each of its three divisions. Pre-tax profit rose to £24m for the year to 30 September 2010 from £16.3m the year before. Revenue increased to £380.1m from £346.9m the year before.


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UK Event Calendar for Today
Pubs group Mitchells & Butlers' recent nine week trading update highlighted a 3.6% like-for-like sales improvement on last year.

Food sales were, as usual, the driver of growth but even the “wet” side of the business saw a pick-up. Brokers now expect the All Bar One and Harvester owner to post profits of £166m this year, but this figure could be conservative.

Utilities move to centre stage in the middle of the week with interim results from Severn Trent and United Utilities. Broker Charles Stanley expects Severn Trent to report pre-tax profits of £169m and EPS of 51.2p with a dividend 10% lower at 24.0p.

Like Severn Trent, United Utilities’ interims will be the first set of results under the new price control regime that runs until 2015. Charles Stanley expects profits of £163m and EPS of 17.5p. The dividend is expected to be 12% lower at 9.8p.

Also on Wednesday, contract caterer Compass should report good organic revenue growth in its second half of the year, which could even exceed 5% and lift the full year total to over 3%. Pre-tax profits should be about the £900m mark.

Platinum giant Johnson Matthey should be getting a boost from the strong revival in the sales of cars and heavy lorries. Platinum prices have also been strong generally over the past six months.

Ad agency WPP recently reported like-for-like revenues rose by 4.1% in the first nine months of its current year as companies restarted advertising spending after the recession with traditional ad spending outstripping online.

Total revenue rose by 6.3% to £6.69bn with third quarter sales up 12.2% to £2.3bn. Chief executive Sir Martin Sorrell was also upbeat over the rest of this year and 2011 and should be similarly optimistic this week.

US news dominates the economic agenda with all eyes on the GDP data for the third quarter on Tuesday. Consensus forecast are for the US economy to have grown by 2.4% over the past three months, up from 2% in the previous quarter.

A higher figure could trigger a bullish reaction in the dollar as the economic outlook looks to improve, a more sluggish growth rate could prompt a quick sell-off in the greenback.

Minutes to the Federal Open Market Committee will also be released Tuesday and are expected to reveal the committee’s growth projections in light of its much–criticised $600bn bond-purchasing programme.

INTERIMS
Big Yellow Group, KSK Power Ventur, Mitie Group

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Consumer Confidence Indicator (EU) (10:00)

Q2
Big Yellow Group

Q3
JSC Halyk Savings Bank of Kazakhstan GDR (Reg S), Synchronica

GMS
Netplay TV, Tristel

FINALS
Diploma, RM, Sarantel Group 'B' Shares

ANNUAL REPORT
BowLeven, Tristel

EGMs
EMED Mining Public Ltd., JSC Bank of Georgia GDR (Reg S)

AGMs
Origin Enterprises, Pure Wafer

FINAL DIVIDEND PAYMENT DATE
Henderson EuroTrust


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Currencies Market Reports
Irish bailout request boosts the euro

Friday’s larger than expected increase in Chinese bank reserve requirements by 50 basis points saw the US dollar pull back some ground initially, despite Fed chairman Ben Bernanke’s robust defence of the Fed’s new stimulus plan, however currency markets look set to start the week as they ended the previous week, with Ireland at centre stage, especially after Friday’s revelations from Allied Irish Bank that customer deposits were down by €13bn, and that it would probably need to raise the extent of its capital raising to €6.6bn, while bad debt levels remain elevated and mortgage arrears increased over the third quarter.

With this in mind it was not too much of a surprise that Irish Finance minister Lenihan felt forced to announce that the country would be requesting a rescue package of up to €100bn, with the exact details to be worked out over the next few days.

This despite the fact that the government has no reason to return to the bond markets until June next year and had said that it didn’t need the money.

While this news may cause the euro to pop a little, the fact remains that asking for a loan and agreeing the terms of one are two different things, and as such expect the single currency to remain under pressure in the longer term.

There is rising strength of opposition building in Ireland to the prospect of a bail-out, and the possible loss of tax sovereignty a bail-out might involve. There are also many obstacles to be overcome, and then there is the prospect of the other elephants in the room in the form of Portugal and Spain.

There is also the risk to future Irish growth with a number of US companies resident in Ireland warning the Irish authorities of the risks involved should their corporation tax be moved upwards as part of any rescue package.

The fact is we’ve now had two domino’s fall in the space of six months in Greece and Ireland, and attention will inevitably shift towards Portugal, and soon after to Spain whose housing market is in dire straits, suggesting that this bail-out package will not be the last, and confirming the complete inadequacy of the so called European bank stress tests in the summer.

EURUSD – the single currency continues to find support at progressively higher levels, and is currently set to test the 1.3765/70 level, which is 38.2% retracement of the down move from the highs at 1.4280 to the lows at 1.3445. The weekend bailout announcement could well see a pop to 1.3865 which is the 50% retracement level but it would be surprising if the euro were to go much higher.
The 1.3360 level remains the long term objective and is also a 38.2% retracement level of the up move from the June lows at 1.1880 to the highs at 1.4280. A break of 1.3360 would then target 1.3080 which is the 50% retracement level of the same earlier up move.

GBPUSD – the pound continues to hold above the 1.5870/80 rising trend line support from the 17th June lows at 1.4645. At the same time it is also holding below trend line resistance from the recent highs at 1.6300, which comes in at 1.6085/90.
A break above 1.6100 retargets trend line resistance at 1.6290 from the highs at 1.7045 in 2009.
A break below the longer term trend line support at 1.5870/80 could well target a strong move towards 1.5510 which is 38.2% retracement of the entire up move from the May lows at 1.4230 to the 1.6300 highs earlier this month.

EURGBP – the single currency continues to hold above rising trend line support from the August lows around 0.8140, now at 0.8470. It has so far been unable to post a daily close above the 200 day moving average at 0.8563, and while it is unable to close below this key level the risk remains for a move lower on a break of this trend line to head towards the next major support around the 0.8400 level which is 61.8% retracement of the 0.8070/0.8940 up move.
A close back above the 200 day MA would then signal a turn around in fortunes back towards 0.8650.

USDJPY – the dollar continues to hold up against the yen and continues to reinforce the view that we could see a move towards the 84.20 area.
The continued resilience of US yields will continue to support the dollar here as they look to head towards the 3% level. While the US dollar continues to remain above the 50 day moving average at 82.65, the risk remains for a larger move past 84.20 towards the 86.00 level. If 10 year US bond yields did slip back, we could see a move back below 82.70, which could re-target the 81.80 area.


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US Market Reports
Dow rises late again

US markets ended quietly for the second week in a row as investors waited for news of the bail-out for Ireland. Economic tightening in China also made the market jittery.

Dow Jones did manage to claw its way back into the blue by the close, adding 22 points at 11,204. Nasdaq added 3 at 2,518 while the S&P 500 gained 3 at 1,200.

China raised its reserve requirements on banks by 50 basis points, more than the 25 basis point increase anticipated by many analysts. Oil prices are also falling following this news.

Federal Reserve chairman Ben Bernanke has defended his $600bn stimulus plan in a speech in Germany earlier today. Bernanke said the latest aid package will work, helping cut unemployment in the US.

He also attacked China for undervaluing its currency, which he claims is holding up the global economic recovery.

On the company front, GM fell back but is still higher than its $33 offer price.

Last night’s quarterly numbers from PC maker Dell showed third quarter net income more than doubled to $822m, or 42c a share, much better than forecast, while sales climbed 19% to $15.4bn, though that was just shy of expectations.

Marvell Technologies was the best performer on Nasdaq after it beat expectations. Fashion retailer Gap fell back after it said that net income fell to 48c a share.

Del Monte Foods surged 11% on reports that private equity firm Kohlberg Kravis Roberts is in talks to purchase the company. Nike improved after it said it would raise its cash dividend 15% to 31c per share.

S&P 500 - Risers
Salesforce.Com Inc. (CRM) $136.74 +18.11%
Western Digital Corp. (WDC) $33.98 +5.17%
Cabot Oil & Gas Corp. (COG) $35.83 +4.10%
WellPoint Inc. (WLP) $58.61 +4.07%
Nike Inc. (NKE) $85.81 +4.05%

S&P 500 - Fallers
Intuit Inc. (INTU) $44.92 -6.80%
Wynn Resorts Ltd. (WYNN) $102.68 -5.75%
Intuitive Surgical Inc. (ISRG) $247.11 -5.01%
Autodesk Inc. (ADSK) $34.55 -4.73%
PulteGroup Inc. (PHM) $6.50 -3.13%

Dow Jones I.A - Risers
Hewlett-Packard Co. (HPQ) $42.48 +1.89%
E.I. du Pont de Nemours and Co. (DD) $47.10 +1.23%
American Express Co. (AXP) $42.75 +1.18%
Home Depot Inc. (HD) $31.22 +1.13%
General Electric Co. (GE) $16.22 +1.12%

Dow Jones I.A - Fallers
Boeing Co. (BA) $63.59 -1.58%
Walt Disney Co. (DIS) $37.01 -1.52%
Kraft Foods Inc. (KFT) $30.44 -0.91%
Microsoft Corp. (MSFT) $25.67 -0.65%
3M Co. (MMM) $85.01 -0.63%
JP Morgan Chase & Co. (JPM) $39.42 -0.61%




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Newspaper Round-up
Ireland to get €85-90bn bail-out

The debt crisis gripping the eurozone claimed its second victim in six months on Sunday night when European finance ministers agreed to a request from Ireland for a multibillion-euro emergency rescue, the FT reports.

The bail-out is expected to total €80bn-€90bn and will include contributions from the UK and Sweden, according to people briefed on the discussions. But the deal may not be concluded until the end of November because the parties are still negotiating the conditions attached to the aid.

After an emergency Cabinet meeting in Dublin, Brian Cowen, the Taoiseach, said his country had formally asked for a rescue package from the European Union and the International Monetary Fund. EU ministers endorsed the request, saying that it was “warranted to safeguard financial stability in the EU and the euro area”. It represented a U-turn by Ireland, which insisted last week that it needed no bailout, the Times adds.

George Osborne is set to water down plans to force disclosure of bank bonus payments above £1m, in a move that will delight the City but sets up a political clash with business secretary Vince Cable and the Liberal Democrats. The chancellor has been lobbied by senior bankers who claim that if Britain introduces more pay transparency unilaterally it could put the City at a disadvantage and lead to some banks shifting activity to New York or other financial centres, the FT reports.

Detailed disclosure of what bankers earn is becoming less likely in Britain after the policy’s author, Sir David Walker, called for the plan to be put on hold. His comments come as the Government faces rising pressure from British banks not to go ahead with pay band disclosure for those with the highest earnings on the grounds that no other country is planning similar changes, potentially putting London at a big disadvantage to rival financial centres, the Times also reports.

Britain’s two biggest cigarette makers have launched a vitriolic attack on the Government’s plan to force them to use plain brown packets, saying the move would be “like Christmas” for counterfeiters. British American Tobacco, whose brands include Dunhill, Lucky Stripe and Kent, said the policy — intended to remove the glamour from smoking to stop young people taking up the habit — may have the opposite effect, the Times reports.

Orange and T-Mobile will move to subsidise the cost of buying an iPad before Christmas as the two networks, which have 30m consumers between them, look to tap into the growing appetite for tablet computers. Everything Everywhere, which owns Orange and T-Mobile, will be the first operator in the world to devise a scheme under which consumers can buy the iPad — which costs up to £700 for the top model — on a long-term contract in the same way they buy mobile phones. It will sell iPads direct from its website and its retail stores, the Times reports.

The US Air Force has admitted to mistakenly sending the wrong documents to arch-rivals EADS and Boeing at a key moment in the tender contest for new aerial refuelling tankers, giving away sensitive information about each other's bidding plans. The Pentagon said the mishap was a "clerical error" that did not favour one side or the other, the Telegraph reports.

Hopes that the VAT increase in January will prompt consumers to bring forward major purchases into this year have been hit after Markit said attitudes to buying costly items worsened in November at the fastest rate since it began its survey of household finances in February 2009, the Telegraph reports.

Britain's manufacturers are confident they will be able to fill the "growth gap" as the public sector contracts. The Engineering Employers Federation (EEF) says its members – 6,000 industrial companies of all sizes – are "well placed" to respond to the Prime Minister's call to "create and innovate; invest and grow", the Independent reports.

John Lewis has said its online sales will smash through the £500m barrier this year, as it delivered another stellar weekly performance in its department stores. The retailer posted internet revenues of £389.5m in the year to 30 January and its online sales are up by more than 40% so far in 2010, the Independent reports.

Senior executives at Rok, the failed building group, were warned the company’s public statements risked misleading investors by failing to identify the extent or source of its problems. The board of directors was contacted by Ashley Martin, at the time the suspended finance director, after Rok released a trading statement on August 11 that said it was “confident about the outlook” for its core maintenance and improvements business, the FT reports.