ADVFN Morning Euro Markets Bulletin - Jan 6th 2011

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London Market Reports
Flat start for FTSE 100

Market Movers
techMARK 1,879.10 +0.56%
FTSE 100 6,056.33 +0.21%
FTSE 250 11,757.96 +0.14%

The top share index is little changed in early dealings but a raft of trading updates from retail and other sectors has given traders plenty to ponder.

Mother and baby retailer Mothercare today warned that it now expects full year underlying pre-tax profit to be below current market expectations after disappointing Christmas sales. UK like for like sales in the third quarter fell 5.8% as freezing temperatures kept would be shoppers at home. Toy sales were particularly affected, as were online sales as the retailer cut off Christmas orders early, amid adverse weather conditions, to make sure customers received their goods in time.

Greetings card specialist Clinton Cards has also pointed to the negative impact of wintery weather in the run-up to Christmas, warning that pre-tax profits for the year to July 31 are likely to fall short of current market expectations. Like-for-like sales fell by 2% from the same period a year ago at its UK stores in the five weeks to 2 January. At its Irish operations (with 14 out of the group’s 824 stores) like-for-like sales were down by 12.2%.

However, it’s not all doom and gloom in the retail sector. Wine merchant Majestic Wine raised a glass to Britons’ refusal to let the winter snowfall prevent them celebrating Christmas after reporting strong sales over the festive period. Total UK store sales, excluding VAT, were up 6.4% for the nine weeks of Christmas trading from 2 November 2010 to 3 January 2011. Over the same period, like for like UK store sales growth, excluding VAT, was 3.7%.

Uncertainty in the retail sector has prompted McBride, which makes toothpaste and other household items for supermarkets to sell under their own labels, to warn that its full-year performance could be at the lower end of its expectations. The shares have taken a sharp dive. Growth in Central and Eastern Europe has been driving revenues higher but the UK has been very competitive, McBride said. This, “combined with our previously announced time-lag in cost recovery, leads the board to expect that trading profit for the first half will be around £20m,” the company said.

There was further evidence of a newly confident airline industry Thursday as British Airways completed contracts with power systems developer Rolls-Royce, one of the FTSE 100’s top risers today, for Trent 900 and Trent 1000 engines to power up to 61 new wide-body aircraft. The order was originally announced in September 2007 and is worth in excess of $5bn at list prices if all options are exercised.

Recruitment giant Hays, another strong performer today, grew net fees by more than a fifth during its second quarter as rapid growth at the international business made up for a drab performance in the UK. Net fees on a like for like basis - organic growth at constant currency – was up 21% in the three months to 31 December, in line with expectations. The actual increase was 24%. Continental Europe & Rest of World led the way with a 37% surge, or 53% on an actual basis, followed by Asia Pacific, up 36%, or 33% actual. The UK & Ireland rose just 1%.

Construction and engineering group Costain has returned to the table with what it terms “a significantly enhanced proposal” to take over contractor Mouchel. The new offer is on the basis of 0.5947 Costain shares for each Mouchel share, valuing each Mouchel share at about 135p.

FTSE 100 - Risers
ARM Holdings (ARM) 531.50p +12.75%
Randgold Resources Ltd. (RRS) 5,235.00p +2.85%
Rolls-Royce Group (RR.) 666.50p +1.91%
Vedanta Resources (VED) 2,525.00p +1.77%
Rexam (REX) 344.70p +1.65%
Pearson (PSON) 1,025.00p +1.59%
Marks & Spencer Group (MKS) 380.40p +1.44%
Xstrata (XTA) 1,519.50p +1.33%
Amec (AMEC) 1,200.00p +1.27%
Eurasian Natural Resources Corp. (ENRC) 1,092.00p +1.20%

FTSE 100 - Fallers
Intertek Group (ITRK) 1,781.00p -1.11%
Reckitt Benckiser Group (RB.) 3,537.00p -1.09%
BT Group (BT.A) 184.30p -0.97%
Royal Bank of Scotland Group (RBS) 40.58p -0.90%
Scottish & Southern Energy (SSE) 1,234.00p -0.64%
Shire Plc (SHP) 1,551.00p -0.64%
Centrica (CNA) 333.60p -0.63%
Associated British Foods (ABF) 1,143.00p -0.61%
Petrofac Ltd. (PFC) 1,639.00p -0.61%
Standard Life (SL.) 218.20p -0.59%

FTSE 250 - Risers
Regus (RGU) 95.55p +3.92%
Taylor Wimpey (TW.) 33.75p +2.90%
Salamander Energy (SMDR) 281.90p +2.36%
Petropavlovsk (POG) 1,121.00p +2.19%
ITE Group (ITE) 247.00p +2.02%
Dunelm Group (DNLM) 540.00p +1.89%
Barratt Developments (BDEV) 97.55p +1.83%
Home Retail Group (HOME) 201.50p +1.82%
Premier Oil (PMO) 2,059.00p +1.68%
Ocado Group (OCDO) 203.00p +1.50%

FTSE 250 - Fallers
Mcbride (MCB) 168.60p -8.27%
Mothercare (MTC) 562.50p -5.94%
Halfords Group (HFD) 426.00p -3.18%
St. Modwen Properties (SMP) 170.20p -2.13%
Halma (HLMA) 352.50p -1.95%
Stobart Group Ltd. (STOB) 141.60p -1.80%
Hikma Pharmaceuticals (HIK) 851.50p -1.73%
CSR (CSR) 371.60p -1.62%
Caledonia Investments (CLDN) 1,900.00p -1.45%
Devro (DVO) 251.50p -1.37%


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UK Event Calendar
TRADING ANNOUNCEMENTS

Clinton Cards, Hays

UK ECONOMIC ANNOUNCEMENTS

PMI Composite (09:30)
PMI Services (09:30)


INTERNATIONAL ECONOMIC ANNOUNCEMENTS

Factory Orders (GER) (11:00)
Continuing Claims (US) (13:30)
Initial Jobless Claims (US) (13:30)


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European Market Reports
Spain out of step as stocks rise

Heartened by Wall Street’s performance overnight most European bourses have opened the day on a firm footing.

Numbers from payroll processor ADP showed a record 297,000 increase in private-sector employment between November and December in the US, boosting sentiment concerning the prospects for the US economy.

The CAC 40 is up 16 points in Paris at 3,920 while in Frankfurt the DAX is sporting a 26 point gain at 6,966. Spain’s IBEX index is down 20 points at 9,780, however.

There is a shortage of corporate news on the European mainland to create investor interest, so much of the focus is on broker commentary.

Brewers Heineken and SABMiller have both been rated as worth buying by Citigroup, as it initiated coverage of the European beverage sector.

Media group Lagardere has been upgraded from “neutral” to “buy” by Goldman Sachs; the company is going to hit the acquisition trail after raising more than €2bn from proposed asset sales, including the flotation of its minority stake in pay TV operator Canal+.

Peugeot edges higher after the company’s chief executive officer, Philippe Varin, told reporters in Paris that the company sold about 3.6m light vehicles in 2010, a record number for the group.

Elsewhere in the automobile sector Volkswagen (VW) is looking to gain share in the lucrative sports utility vehicle (SUV) market in the US.

VW’s US head, Jonathan Browning, said in a phone interview that the company was looking to grow, “particularly in the compact SUV segment”.


CAC 40 - Risers
Lagardere SCA (MMB) € 34.42 +4.32%
Technip (TEC) € 75.74 +2.35%
ST Microelectronics (STM) € 8.45 +2.03%
AXA (CS) € 13.40 +1.25%
Renault (RNO) € 45.98 +1.17%
L'Oreal (OR) € 85.63 +1.15%
EADS (EAD) € 18.59 +1.11%
Peugeot (UG) € 30.68 +1.09%
Pernod Ricard (RI) € 69.63 +1.06%
Carrefour (CA) € 32.47 +0.98%

CAC 40 - Fallers
Cap Gemini (CAP) € 35.24 -1.92%
Dexia (DEXB) € 2.74 -1.19%
Lafarge (LG) € 47.33 -0.63%
Michelin (ML) € 54.53 -0.40%
Societe Generale (GLE) € 42.62 -0.28%
EDF (EDF) € 31.70 -0.19%
Danone (BN) € 46.67 -0.18%
Credit Agricole (ACA) € 10.10 -0.00%


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US Market Reports
Dow continues its climb

Wall Street snapped out of a sluggish start after some well-received service sector data, pushing the Dow towards another two-year high.

The Dow closed up 31 at 11,722. Nasdaq added 20 at 2,702 while the S&P 500 gained 6 at 1,276.

The Institute for Supply Management’s non-manufacturing index for December came in at 57.1 from 55 the previous month. Numbers from payroll processor ADP, meanwhile, showed a record 297,000 increase in private-sector employment between November and December.

That was almost three times as much as the 100,000 gain predicted by economists. ADP said strength was evident within “all major industries and every size business”. November’s 93,000 rise was revised down slightly to 92,000.

Employment in the service-providing sector leapt 270,000, the eleventh consecutive monthly gain and the largest monthly increase in the history of the report.

Meanwhile, outplacement consulting firm Challenger, Gray & Christmas said the number of job cuts announced by US companies in 2010 was down 59% on the year before at 530,000.

That was the lowest number for any year since 1997, while the 32,000 cuts flagged in December was the lowest monthly figure for a decade.

Elsewhere, discount retailer Family Dollar Stores fell sharply as first quarter earnings of 58c a share missed estimates, as did pharmacy group Walgreen despite sales rising almost 3% in December.

Sears Holdings and Urban Outfitters are weighing rival bids for clothing retailer J Crew in a potential challenge to TPG Capital and Leonard Green & Partners’s $3bn buyout, Bloomberg reported.

Mobile phone chip maker Qualcomm, seeking to improve its Wi-Fi capabilities, has agreed to buy Atheros Communications for about $3.2bn.

Fertiliser giant Mosaic climbed after beating second quarter earnings estimates.

S&P 500 - Risers
American International Group Inc. (AIG) $60.95 +7.34%
Nvidia Corp. (NVDA) $16.90 +7.15%
Autodesk Inc. (ADSK) $41.23 +7.02%
Priceline.Com Inc. (PCLN) $433.24 +5.83%

S&P 500 - Fallers
Family Dollar Stores Inc. (FDO) $44.99 -8.76%
Scripps Network Interactive Inc. (SNI) $50.21 -2.96%
GameStop Corp. (GME) $21.89 -2.71%
Vulcan Materials Co. (VMC) $41.22 -2.18%

Dow Jones I.A - Risers
Walt Disney Co. (DIS) $39.96 +2.49%
American Express Co. (AXP) $45.04 +2.48%
Bank of America Corp. (BAC) $14.50 +1.83%
Cisco Systems Inc. (CSCO) $20.83 +1.51%

Dow Jones I.A - Fallers
Intel Corp. (INTC) $20.89 -1.23%
Wal-Mart Stores Inc. (WMT) $54.41 -0.66%
Coca-Cola Co. (KO) $63.49 -0.59%
Travelers Company Inc. (TRV) $55.24 -0.59%


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Newspaper Round-up
CRH, Tullett Prebon, Domino's Pizza

CRH, the building materials producer that is Ireland’s biggest company, spent €367m (£312m) on 17 different purchases in the second half, bringing the year’s total to €536m, well ahead of the €450mspent in 2009 and back to pre-crash levels.

The group has one of the strongest balance sheets in the sector and analysts now believe that the rate of investment will move sharply higher this year, with the potential for €1.5b over the next 18 months. CRH shares sell on about 20 times this year’s earnings, which suggests much of the future upside is already in the price, according to the Times.

Markets all over the world started the year on an upbeat note – but this year is likely to be volatile. This volatility should be good for broker Tullett Prebon. Tullett shares were first recommended at 310.3p on May 15 last year – they are now up 28%compared with a FTSE 100 up 15%. The Telegraph says buy.

Among the more startling figures in yesterday’s quarterly trading update for the fast-food company Domino’s Pizza is a 10.3% rise in like-for-like sales in 553 older stores last year, after an 8.6% rise in 501 of these in 2009. The shares have straight-lined from about three quid at the start of 2010 to 561½p last night and now sell on approaching 30 times’ 2011’s earnings. One would not bet against that upward trend resuming in due course, the Times says.

Games Workshop, which sells toy soldiers, is an erratic business. Yesterday it became apparent that not all of its staff were suited to the format and a number had quit in the summer, causing disruption at a time when the hobby should have been at its peak. The share price is equally erratic, having started last year at about £2.50 and peaked two quid higher in September. Peel Hunt, the broker, expects profits of £12 million in the current financial year to the end of May, which puts the shares on about 13 times earnings. Not worth chasing at this level, says the Times.

Just before Christmas, oil group Gulfsands Petroleum announced the disposal of some of its US assets. This was good news, as investors had been waiting for this sale for some time. Trading on a December 2011 earnings multiple of just nine times, falling to 5.9 in 2012, the shares remain a buy according to The Telegraph.