ADVFN Morning Euro Markets Bulletin - February 3rd 2011

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London Market Reports
Mixed reception for company updates

Stocks are moving in both directions after updating the market and the top share index is currently in the red by about a dozen points.

Royal Dutch Shell is a faller even though the oil titan more than quadrupled fourth quarter profits thanks to higher energy prices, an increase in production and cost-cutting. Earnings for the last three months of 2010 on a current cost of supplies (CCS) basis surged to $5.7bn from $1.2bn a year ago. They grew 90% to $18.6bn for the full-year. Excluding certain items, earnings grew to $4.1bn from $2.8bn last time. "We are making good progress against our targets, and there is more to come from Shell," said chief executive Peter Voser. The dividend stays at 42 cents a share.

The turmoil in Egypt and Tunisia threatens to reverse an improving trend at holiday group TUI Travel. The operator of brands such as Thomson and First Choice, whose shares are lower, posted higher revenues in the three months to 31 December and said it has had a good start to 2011. However, the problems in North Africa could impact results for the current quarter by £25m to £30m. Holidays to Egypt from mainland European destinations such as Germany and France have been cancelled. TUI is still sending holidaymakers from the UK to Red Sea resorts.

Strong growth in broadband subscribers and a pick-up by its global services operation helped telecoms titan BT, one of today’s best performers, lift profits by almost a third over the past three months. Pre-tax profits in the quarter to December jumped by 30% to £531m from £408m, even though sales fell slightly to £5.04bn from £5.2bn. BT added 188,000 new broadband subscribers in the three months to take its market share to 53%. Profits from its global services division rose by 15% to £141m on an underlying business, though sales here fell by 7% to £1.98bn.

Investors also have an appetite for Compass after the contract caterer said revenue growth seen in the second half of 2010 continued into the first quarter of the new financial year, with organic revenue growth of around 5.5%.

Sticking with food, Unilever has taken a €110m provision to cover possible competition law breaches in the European consumer detergents market. The Anglo-Dutch food and households goods giant, which owns the Domestos bleach brand, said it had concluded it is now 'appropriate' to take a provision following an European Commission investigation that began in 2008.

Mobile phone titan Vodafone thinks full-year profit will be at the top end of the range following a third quarter that went pretty much as expected, driven by strong growth in India and parts of Europe. The company, which yesterday announced the departure of chairman Sir John Bond, reckons adjusted operating profit will be towards the upper end of the £11.8bn to £12.2bn range given in November.

South Africa-focused bank Investec said it saw a marginal improvement in profit in the nine months to 31 December as strength in its asset and wealth management businesses helped offset a weaker performance from banking and advisory businesses. Investec, which also has a large presence in the UK and Australia, said that the pace of the economic recovery is varied across the markets in which it operates and that the regulatory environment remains challenging.

Military researcher QinetiQ expects to 'exceed its previous expectations' for the current year, as it delivers a backlog of its products. However the high-tech weapons group warned that its view of future periods is unchanged as its principal markets 'remain subject to considerable uncertainty'.


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UK Event Calendar
INTERIMS
Alumasc Group

INTERIM DIVIDEND PAYMENT DATE
Mitie Group, Robert Wiseman Dairies

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
PMI Services (FRA) (08:15)
PMI Composite (GER) (08:55)
PMI Services (GER) (08:55)
PMI Composite (EU) (09:00)
PMI Services (EU) (09:00)
Retail Sales (EU) (10:00)
ECB Interest Rate (EU) (12:45)
Productivity (US) (13:30)
Unit Labour Costs (US) (13:30)
Weekly Jobless Claims (US) (13:30)
Non-farm Productivity (US) (13:30)
ISM Services (US) (15:00)
Factory Orders (US) (15:00)

Q3
BT Group

Q4
Royal Dutch Shell 'A', Royal Dutch Shell 'B', Unilever

GMS
F&C Asset Management

FINALS
GlaxoSmithKline, Royal Dutch Shell 'A', Royal Dutch Shell 'B', Unilever

IMSS
Creston, Metric Property Investments , Vodafone Group

AGMS
Compass Group, Edinburgh Worldwide Inv Trust, TUI Travel

UK ECONOMIC ANNOUNCEMENTS
PMI Services (09:30)

FINAL DIVIDEND PAYMENT DATE
WH Smith

Q1
TUI Travel


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European Market Reports
Bourses fall back

Bourses are lower ahead of the European Central Bank interest rate decision this afternoon.

The CAC 40 in Paris is down 40 at 4,025, the DAX 30 is down 28 at 7,155 and the Swiss market is 25 lower at 6,527.

Anglo-Dutch oil group Royal Dutch Shell falls even after it more than quadrupled fourth quarter profits thanks to higher energy prices, an increase in production and cost-cutting.

Spanish bank Banco Santander, which owns the Abbey brand in the UK, slipped after saying its 2010 profit was lower than in the previous year.

Swedish telecoms group TeliaSonera moved ahead after reporting a rise in fourth quarter net income.


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US Market Reports
Flat as Dow consolidates

Wall Street marked time after yesterday's surge despite some strong jobs figures as the Egypt situation continues to unnerve traders. Dow Jones closed up 1 at 12,041. Nasdaq shed one at 2,749 while the S&P 500 lost three at 1,304.

Information on the state of America’s jobs market has come in positive. Employers announced 38,519 job cuts in January, down 46% on the year before, according to outplacement firm Challenger, Gray & Christmas.

Meanwhile, payroll services firm ADP said US firms added 187,000 jobs to payrolls last month, far more than expected. That’s raised hopes that Friday’s non-farm payrolls for January will reveal an increase of around 150,000.

In corporate news, a better advertising market helped Time Warner beat fourth quarter earnings estimates, while last night’s third quarter numbers from video game giant Electronic Arts impressed.

Borders fell again as rumours the bookseller will soon file for insolvency gather pace. Washing machine maker Whirlpool fell after fourth quarter profits missed expectations.

Shares of video game company Electronic Arts rose strongly after its big rise in quarterly earnings and share buy-back. After hours, Visa reported first-quarter earnings $1.23, slightly above forecasts. Net income for the three months to December climbed to $884m from $763m. Sales rose 14% to $2.24bn in line with market estimates.

S&P 500 - Risers
MEMC Electronic Materials (WFR) $13.42 +15.39%
Electronic Arts Inc. (ERTS) $17.87 +14.38%
Time Warner Inc. (TWX) $35.10 +8.64%
Gannett Co. Inc. (GCI) $16.24 +6.84%

S&P 500 - Fallers
Genworth Financial Inc. (GNW) $12.79 -8.25%
Hospira Inc. (HSP) $51.05 -7.27%
Broadcom Corp. (BRCM) $43.79 -5.60%
CH Robinson Worldwide Inc (CHRW) $74.43 -4.82%

Dow Jones I.A - Risers
Walt Disney Co. (DIS) $40.49 +1.53%
Caterpillar Inc. (CAT) $99.09 +1.10%
Boeing Co. (BA) $71.00 +1.01%
Hewlett-Packard Co. (HPQ) $46.89 +0.80%

Dow Jones I.A - Fallers
Pfizer Inc. (PFE) $18.97 -1.30%
Home Depot Inc. (HD) $36.56 -1.16%
JP Morgan Chase & Co. (JPM) $45.45 -1.05%
Wal-Mart Stores Inc. (WMT) $55.86 -0.83%


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Newspaper Round-up
Lloyds Banking, BP, Irish banks

Lloyds Banking Group plans to create a vehicle to manage thousands of homes that it could then sell or float. The bank, which is heavily exposed to the British residential sector, is thought to be at a fairly advanced stage of setting up a special-purpose vehicle, or “residential asset management platform,” the Times reports.

Russia's state oil firm Rosneft is not prepared to let four oligarchs gatecrash its £10bn deal with BP, after a court granted an injunction halting all talks. The oligarchs, known as Alfa Access Renova, are the existing partners of BP in Russia through a joint venture called TNK-BP. They won a court order on Tuesday temporarily halting BP's deal to swap £5bn of shares with Rosneft, claiming that the alliance breaches an earlier agreement they had with the British company. "They have neither the technology, nor the experience, nor the personnel," said Peter O'Brien, Rosneft's chief financial officer, the Telegraph reports.

Irish central bank data showed losses of €40bn (£34bn) in deposits from the key banks in December, compared with €27bn a month earlier. Over the past year Irish lenders have haemorrhaged €110bn, equal to 60pc of gross national product, the Telegraph reports.

The prospects of a marriage combining steely German success with French panache has long been the subject of saloon car chatter. But while the big day may still be some way off, the relationship is getting stronger: BMW and PSA Peugeot Citroën announced yesterday that they are to join forces to produce hybrid electric cars, reports the Times.

Rupert Murdoch yesterday launched The Daily, the first newspaper designed for the iPad and other tablet computers, in a $30m gamble to establish a new business model for journalism. For 99 cents (61p) a week, or $39.99 a year (£24.74), iPad users in the US will receive a product showing 360-degree photographs, high-definition video, an audio soundtrack that can be played like a radio, as well as animated graphics and text, says the Times.

Government plans to abolish the Financial Services Authority (FSA) and give the Bank of England the key role in regulating the City will not take place until 2013, raising concerns about the impact this will have on retaining staff and policing markets. Despite hoping to have the three new bodies that will regulate the financial sector operating in 2012, it is becoming clear that it will take longer to get legislation through parliament, the Guardian reports.

The Bank of England may be forced to raise interest rates if commodity prices continue to rise, the deputy governor, Charles Bean, has warned. In the face of global pressures, including rising food prices, metals and other commodities at record highs, and oil breaking through the $100 mark in response to concerns over stability in the Middle East, the MPC may be forced to raise rates regardless of the danger to the nascent recovery, the Independent reports.

The consumer protection watchdog has launched an investigation into the fast-growing electronic book market, over claims that pricing deals between publishers and retailers may have breached competition rules. The move follows a similar inquiry launched in the US last year. The Office of Fair Trading (OFT) revealed it had opened an investigation "into arrangements between certain publishers and retailers for the sale of e-books" following a "significant number" of complaints, says the Independent.

The Scottish Parliament has overturned plans to implement a controversial new tax on large stores that would have cost the retail industry an estimated £30m. The so-called "Scottish Large Retailer Levy" would have been applied to all stores with a rateable value over £750,000 and would have increased business rates bills by 30pc for some individual stores, reports the Telegraph.

US bankers awarded themselves an inflation-busting pay rise last year - in a move set to widen the rift between Wall Street and Main Street. Staff at America's top 25 financial firms shared a record salary and bonus pool of more than £83bn - up from £79bn in 2009, a survey has found. The 6% hike in take-home pay compares with the paltry 1% increase in revenues across the industry, suggesting that US financiers are pocketing an ever-larger slice of the spoils, the Daily Mail reports.