ADVFN Morning Euro Markets Bulletin - August 24th 2011

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London Market Reports

After a strong start on Wall Street – which saw the three benchmark indices gain at least 1.1% each – the Footsie ended in positive territory, despite dipping into the red in the afternoon. However, gains were only modest as volatile trade continued.

Security services provider G4S was the high riser of the day, after seeing its organic revenue growth accelerate in most regions and business sectors. Group turnover rose 5% on a constant exchange rates basis to £3.76bn in the first six months of 2011, while pre-tax profits climbed 5% to £149m.

Wood Group, the oil and gas services firm, was wanted after saying it is seeing “good momentum” across its business, with the order book remaining strong and the bid pipeline healthy. First half EBITA rose 25% to $192m, while profit from continuing operations before tax and exceptional items rose 49% to $102.4m. Total revenues were up by 17% to $2.83bn.

A big mover on the FTSE 250 was engineering group Charter International which surged over 20% after it confirmed speculation that it has received a second offer following a previous one from rival Melrose.

Heading the other way were the miners, led by silver and gold producer Fresnillo, whose share price took a hit on the back of falling prices of the precious metals. Meanwhile, South America-focused copper miner Antofagasta was lower despite posting a sharp rise in profits for the six months to 30 June. Fellow FTSE 100 miners Randgold Resources andVedanta Resources also fell.

Shares in sector peer Peninsular Gold fell back after the Malaysian miner said revenues and profits for the year to 30 June may be lower than the market expects due to delays caused by heavy rains and low gold grades at its Raub mine.

Spectris, the instrumentation and controls company, saw pre-tax profits rise 74% in the first half of 2011 to £77.7m, on the back of revenues that rose 25% to £507.2m. The firm also hiked its dividend by 15% to 8.2p per share.

Persimmon, the house builder, saw underlying profits surge in the first half of 2011, strengthening its share price.

Publisher and events organiser Daily Mail and General Trust (DMGT) was in demand after announcing that it is to sell its US events management firm George Little Management (GLM).

Legacy software firm Micro Focus registered strong gains, recovering after taking a tumble on Monday following the announcement that bid talks had terminated.


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FTSE 100 - Risers
G4S (GFS) 264.40p +8.54%
John Wood Group (WG.) 542.50p +4.63%
ARM Holdings (ARM) 514.00p +4.47%
Glencore International (GLEN) 367.45p +3.51%
Essar Energy (ESSR) 255.50p +3.07%
Lloyds Banking Group (LLOY) 28.30p +2.69%
Aggreko (AGK) 1,755.00p +2.27%
ITV (ITV) 55.70p +2.11%
SABMiller (SAB) 2,087.00p +2.08%
Serco Group (SRP) 532.00p +1.92%

FTSE 100 - Fallers
Fresnillo (FRES) 1,892.00p -7.21%
Randgold Resources Ltd. (RRS) 6,640.00p -3.35%
International Consolidated Airlines Group SA (IAG) 164.00p -2.09%
Legal & General Group (LGEN) 95.45p -1.65%
Vedanta Resources (VED) 1,225.00p -1.37%
3i Group (III) 200.70p -1.33%
GKN (GKN) 177.00p -1.23%
Petrofac Ltd. (PFC) 1,199.00p -0.99%
Capital Shopping Centres Group (CSCG) 315.00p -0.79%
Compass Group (CPG) 533.50p -0.74%


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European Market Report
European markets finished mixed on Tuesday as gains in France and Germany were met with falls in Italy and Spain. However, a strong start for Wall Street helped all major benchmark indices come off their lows of the day.

Speculation that the US Federal Reserve will take stimulus measures to kick start the US economy was putting a bit of extra juice into the markets, and probably will not go away until Fed chairman Ben Bernanke makes his speech on Friday at the central bankers' talking shop in Jackson Hole, Wyoming.

The German manufacturing Purchasing Managers' Index (PMI) in August unexpectedly held steady at 52, versus expectations of a slide to 50.6. A reading above 50 indicates expansion.

Meanwhile, a sub-50 reading for the PMI in China still was seen as optimistic as it showed that manufacturing was contracting at a slower pace than expected. In August, the reading was 49.8, above the 49.3 seen in July.

However, sentiment was dampened slightly after German investor confidence took a knock in August, falling to its lowest level in more than 30 months. ZEW's index of investor confidence retreated to -37.6 from -15.1 in July. Economists had been braced for a decline, but only to around -26.

The Cac in Paris rose 33 to 3,084, while in Frankfurt, the Dax climbed 59 higher to 5,532.

However, the Ibex in Madrid fell 14 to 8,280 and the FTSE MIB in Milan dropped 154 to 14,707, dragged lower by the banks as sovereign debt concerns continued to weigh on sentiment.

Meanwhile, Swiss bank UBS fell after revealing plans to eliminate 3,500 jobs, mostly from the investment banking unit, in an attempt to reduce annual costs by 2bn Swiss francs in 2013. The Swiss bank announced a restructuring plan last month after reporting lower-than-expected results.

Chemicals and pharmaceuticals giant Bayer and its Norwegian biotech partner Algeta were celebrating after the US Food and Drug Administration (FDA) gave fast-track status to the experimental prostate cancer drug Alpharadin.

Danish industrial vacuum cleaner maker NKT finished higher despite reporting second quarter profits that fell short of expectations and cutting its full-year outlook.

German car makers clawed back some of their recent losses. BMW was given a turbo boost by WestLB, which upgraded the shares to add from neutral.

In other broker news, Goldman Sachs upgraded chemicals firm Wacker Chemie and solar-panel machinery makerManz to buy from neutral, giving both stocks a lift. Elsewhere in the solar panel industry, Goldman Sachs also likesCentrotherm Photovoltaics, which it now rates a buy, having previously advocated selling the shares.

Air Berlin lost altitude after Deutsche Ban switched its stance on the airline to sell from hold.


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US Market Reports

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US stocks have opened higher as speculation that the Federal Reserve will act to spur the economic recovery stokes excitement.

The Dow Jones is up 115 at 10,970, the S&P 500 climbs 11 to 1,135 and the NASDAQ is 40 higher at 2,385.

The chairman of the US central bank, Ben Bernanke, is due to make a speech at its annual meeting on Friday and traders are already speculating that some new measures may be unveiled or hinted at.

July new home sales data came in slightly below expectations at 298,000 its lowest level in five months.

In stocks news, baked bean and ketchup maker Heinz is lower after it reported first quarter sales growth of 14.9% “fuelled by dynamic growth in Emerging Markets and higher global sales of ketchup” though quarterly earnings were lower. It also reaffirmed its earnings targets for the full year.

In mergers and acquisitions news, Omnicare, which provides pharmaceutical care to senior citizens, has offered to buy rival PharMerica for $441m. Omnicare is up 8%, Pharmerica by 33%.


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Broker tips: Micro Focus, Persimmon, H&T
Following Monday’s announcement that signalled the end to bid talks at legacy software firm Micro Focus International, Swiss investment bank UBS has slashed its price target on the stock from 450p to 380p.

The broker’s previous price target was calculated using an EV/NOPAT multiple of 12 (EV/NOPAT: enterprise value divided by net operating profit after tax). However, “we move to a 10x from 12x multiple until evidence of Micro Focus’s ability to grow is re-established,” said analysts Michael Briest and Chris Grundberg.

Nevertheless, a buy rating was kept.

Prime Markets says that the dividend boost at house-builder Persimmon should support a break higher in the shares and reiterates its buy recommendation on the stock.

“Housebuilder Persimmon has today produced a sterling set of numbers, offsetting a revenue fall with a profits boost while reducing net finance costs and net borrowings,” said head of dealing at Prime Markets, Richard Curr.

The broker expects shares to pick up to 413p in the coming seven to ten days.

FinnCap says that H&T Group has made good progress in its core areas, and reiterates its buy rating on the pawnbroker.

“This pattern of events follows 2010, and gold price-related profit upgrades will no doubt follow,” said analyst Duncan Hall.

The price target of 450p is left in place.