ADVFN Morning Euro Markets Bulletin - August 9th 2011

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London Market Reports


Flat start as Antofagasta and Vedanta rally

Stocks are flat this morning, despite the predictions of a resumption of the slide, though recent volatility suggests it would be foolish to rule that out.

Miners are rallying from hefty losses, yesterday, with South American copper group Antofagasta and India’s Vedanta posting large gains. Precious metal miners such as African Barrick Gold and Russian gold group Petropavlovsk are adding more gains as investors continue to seek a haven from the turmoil.

Weir's way is up this morning. The engineer to the oil business Weir is staging a strong recovery, after falling yesterday when Morgan Stanley cut its rating on the stock to "equalweight" from "overweight" citing margin concerns.

Banks are under the cosh though, with RBS a notable faller.

In company news, even Greggs, the bakery chain famous for cheap takeaway snacks, is suffering from the tough consumer environment. Like-for-like sales in the 26 weeks to 2 July were up by just 0.4% from the same period a year ago. The shares are sharply lower.

Global hotels group InterContinental Hotels Group saw revenue per available room (RevPAR) grow by 6.7% from a year earlier in the first half of 2011, driven by strong demand in Greater China and the US. Second quarter profit before tax tumbled 11.9% to $111m from $126m the year before.

Bank HSBC has confirmed that it is in discussions regarding a possible sale of the card and retail services business in the USA.


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UK Event Calendar
INTERIMS
Greggs, InterContinental Hotels Group, International Power

INTERIM DIVIDEND PAYMENT DATE
THB Group

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Balance of Trade (GER) (07:00)
Current Account (GER) (07:00)
FOMC Interest Rate Minutes (US) (19:00)
Productivity (US) (09:30)

Q2
InterContinental Hotels Group

GMS
Aberforth Geared Income Trust, Redstone

FINALS
Dawson International, NWF Group

UK ECONOMIC ANNOUNCEMENTS
Balance of Trade (09:30)
BRC Sales Monitor (00:01)
Industrial Production (09:30)
Manufacturing Production (09:30)
RICS Housing Market Survey (09:30)

FINAL DIVIDEND PAYMENT DATE
Babcock International Group


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European Market Report
Tin hats still needed

Markets remain extremely volatile but the safe bet seems to be to reduce exposure to equities. Friday's ratings downgrade for US sovereign debt has severely dented confidence in global equity markets while on a more local level there is still the worry that the whole eurozone project could collapse under the weight of the region's debt burden.

In Paris, the CAC is down 40 at 3,085 while in Frankfurt the DAX is off 100 points at 5,822. Switzerland is proving no sort of safe refuge, with the Market Index down 79 at 4,889.

Despite markets being in decline for the eighth day in succession, there are bright spots to be found. In Paris, lenders such as Credit Agricole, BNP Paribas and Societe Generale are sharply higher, while in Frankfurt car makers BMW and Volkswagen - both of which headed a long way down the hill yesterday - are climbing slowly this morning.

Car drivers may also be deriving some grim satisfaction from the current crisis, as drastically reduced economic growth expectations has choked off demand for oil, sending the price of Brent crude below $100 a barrel for the first time since 8 February.

Meanwhile, the price of gold continues to charge to new highs. The most actively traded gold futures contract is closing in on $1,750 an ounce, up $35 or so on the day, as investors seek somewhere ostensibly safe for their investment funds.

The news has not been helpful on the economic front either, with German exports sliding 1.2% in June from May's level. Economists had forecast a decline of 1.0%.

Meanwhile, Chinese inflation is racing away, rising at its quickest pace in three years in July. The annual consumer prices inflation rate jumped to 6.5%, slightly above the 6.4% expected by economists, as food costs soared.

CAC 40 - Risers
Natixis SA (KN) € 2.99 +3.46%
Credit Agricole (ACA) € 6.98 +3.39%
Alcatel-Lucent (ALU) € 2.30 +3.28%
AXA (CS) € 11.30 +2.82%
BNP Paribas (BNP) € 40.37 +2.70%
Societe Generale (GLE) € 25.76 +2.55%
Vinci (DG) € 34.03 +2.50%
Schneider Electric (SU) € 87.38 +2.46%
Unibail-Rodamco (UL) € 132.65 +2.04%
Saint Gobain (SGO) € 33.22 +1.84%

CAC 40 - Fallers
Essilor International (EI) € 49.21 -0.90%
Pernod Ricard (RI) € 59.97 -0.43%
ST Microelectronics (STM) € 4.57 -0.41%
Publicis Groupe Sa (PUB) € 31.15 -0.14%
EDF (EDF) € 22.03 -0.07%


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US Market Reports

Dow Jones NASDAQ NYSE AMEX

Please click on the images to view our interactive charts

Dow down, deeper and down

The first day of trading since the ratings agency Standard & Poor's (S&P) cut the USA's debt rating from AAA was every bit as rough as some pundits feared.

The Dow Jones industrial average shed 634 points to 10,809 while the S&P 500 tumbled 80 points to 1,119. The NASDAQ Composite index dived 174 to 2,357.

Investors feared that the ratings cut may presage a slow down in the recovery of not just the US economy, but the global economy.

Brave talk that the prospect of a ratings cut had already been priced in to a market which fell 7% last week proved to be well wide of the mark as investors baled out of equities into safer assets such as gold, where the most widely traded futures contract shot up $61.40 to close at $1,713, a new high. In contrast, the most actively traded copper futures contract slumped $19.35 to $392.35 per pound, on expectations that demand for the industrial metal would diminish as industrial activity contracts.

The oil price also took a battering, falling to an eight-month low, resulting in integrated oil companies such as Chevron and Exxon being high on many investors' sell lists.

JPMorgan was one investment house that did not seem too surprised at the move by ratings agency Standard & Poor's to downgrade the USA's sovereign debt last Friday.

"Compared with the remaining AAA issuers, the metrics for the US stand out," JPMorgan said.

"Debt currently makes up 92% of GDP, and the IMF forecasts that this will rise to 112% by 2016. This compares with an average for AAA issuers of 60% now, falling to 59% by 2016. Looking at the fiscal balance tells a similar story: the fiscal deficit is currently -10.6%, and is forecast to come down to a still-large 6% by 2016. In contrast, the average deficit for AAA issuers is currently -3.2%, and by 2016 the forecast is for a small surplus," the US investment bank noted.

Meanwhile, another investment bank, Goldman Sachs, lowered its forecast for the end-2011 value of the S&P 500 to 1,400 from its previous guess of 1,450, citing lower gross domestic product estimates for the US, Europe and Asia.

For much of the day just one stock among Dow Jones constituents was in the blue, and that was Procter & Gamble, but even that fell into the red by the close despite solid results. The household goods firm saw net income in the second quarter of 2011 rise to $2.51bn from $2.19bn in the equivalent period of 2010.

Earnings per share advanced to 84 cents from 71 cents the year before, marginally ahead of expectations of 82 cents.

Bank of America was the largest faller, losing a fifth of its value, after insurer AIG said it was suing the bank to recover more than $10 billion of losses from a "massive fraud" on mortgage debt.

Other banks were also looking sickly, with Citi, JPMorgan Chase and Morgan Stanley suffering double-digit percentage losses.

After the bell, games software developer Take-Two Interactive Software disappointed with its first quarter figures. Adjusted earnings per share of 2 cents were well below the 10 cents the market had been expecting.

S&P 500 - Risers
O'Reilly Automotive Inc. (ORLY) $58.48 +0.22%

S&P 500 - Fallers
Bank of America Corp. (BAC) $6.51 -20.32%
Eastman Kodak Co. (EK) $1.86 -18.42%
Compuware Corp. (CPWR) $7.22 -17.11%
Genworth Financial Inc. (GNW) $5.63 -16.96%
Citigroup Inc. (C) $27.95 -16.42%
Sprint Nxtel Corp. (S) $3.13 -15.86%
Harman International Industries Inc. (HAR) $29.02 -15.49%

Dow Jones I.A - Risers
None

Dow Jones I.A - Fallers
Bank of America Corp. (BAC) $6.51 -20.32%
Alcoa Inc. (AA) $11.33 -11.42%
JP Morgan Chase & Co. (JPM) $34.06 -9.41%

Nasdaq 100 - Risers
O'Reilly Automotive Inc. (ORLY) $58.48 +0.22%

Nasdaq 100 - Fallers
Sears Holdings Corp. (SHLD) $58.58 -12.57%
Foster Wheeler AG (FWLT) $21.56 -10.89%
Teva Pharmaceutical Industries Ltd. ADS (TEVA) $36.35 -10.73%
Joy Global Inc. (JOYG) $71.50 -10.13%


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Newspaper Roundup
ENRC, London riots, Chicken Tonight, China accuses the US, Barclays

One of the FTSE’s largest companies has initiated three external investigations into alleged corruption and wrongdoing within the past four years, The Times has discovered. Eurasian Natural Resources Corporation (ENRC), a £10bn copper miner, is understood to have hired investigators for the most recent inquiry in March amid claims of financial irregularities at its Kazakhstan operations.

The weekend's riots and looting may have serious repercussions on long-term efforts to regenerate some of London's struggling high streets, business leaders have warned. As businesses begin to tally the cost of stolen goods and damaged stores the British Retail Consortium (BRC) has warned that many of the shops affected may never reopen, while other firms may rethink their investment plans for areas such as Tottenham and Wood Green, the Guardian reports.

There will be no more Chicken Tonight at Unilever after the consumer goods group sold its unloved sauce brands to Symington’s, the Leeds-based owner of Golden Wonder and Campbell’s. The Anglo-Dutch group, which has hundreds of global brands from TRESemmé shampoo to Slim-Fast foods, decided to review the slowing British market for its Chicken Tonight and Ragu sauces last October, according to the Times.

China has blamed America's cripplingly expensive military campaigns for the current debt crisis and called for the world's leading superpower to rethink its global "domineering". "Since the collapse of the Soviet Union, the United States, as the world's sole superpower, has relied on its powerful military to meddle everywhere in international affairs, advancing hegemony, and paying no heed to whether the economy can support this," said an editorial on the official Xinhua news wire, China's second fierce attack on the US in three days, the Telegraph reports.

The chief executive of Barclays has renewed speculation over the bank’s future in the UK if the British government pushes ahead with sweeping reforms of the industry. Speaking to investors last week about proposals to force British banks to build a wall around their core high-street operations, Bob Diamond said: “It’s no longer a question of whether Barclays wants to stay in the UK but whether the UK wants Barclays,” the Financial Times reports.

The prospects for a fresh wave of tech initial public offerings in the second half of this year have receded with the stock market sell-off of recent days, technology investors and analysts warned. However, a handful of leading companies that dominate their particular niches and are benefiting from fundamental shifts in consumer behaviour, such as social games company Zynga and daily deals site Groupon, should still find their way to Wall Street unblocked, they said, according to the Financial Times.

Retailers have warned of a "spending paralysis" on the high street if confidence is not revived in the wake of the global slowdown and sovereign debt crisis, after the sector delivered anaemic sales growth in July. While underlying sales rose by 0.6 per cent last month, after a fall by the same amount in June, the increase was largely driven by hefty discounting in the fashion and grocery sectors, according to a survey by the British Retail Consortium and KPMG, the Independent reports.

Songbird Estates, the property group behind Canary Wharf, said on Monday it had signed a deal that will finally realise the full vision outlined in the 1988 masterplan for the Isle of Dogs development. Songbird will build a 20-storey tower at 25 Churchill Place, the last building to be realised in a plan encompassing more than 30 blocks and 15 million square feet of space, says the Guardian.

Gold hit a new record high of $1,719 today as a fresh rush for the safe haven followed the US credit downgrade. A trading high of $1,719.3 per ounce for spot gold was hit at 5.50pm as investors ploughed more money into bullion amid another day of volatility on the markets, the Daily Mail reports.