ADVFN Morning Euro Markets Bulletin - Oct. 5th 2011

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London Market Reports

Footsie jumps back above 5,000, retailers mixed

Market Movers
techMARK 1,728.69 +1.26%
FTSE 100 5,040.59 +1.94%
FTSE 250 9,588.90 +1.73%

The Footsie has clawed its way back over the 5,000 level on Wednesday morning, with just four stocks registering losses, following on from a dramatic rally on Wall Street late Tuesday night.

Driving the bull market in the last hour in the US - which saw the Dow swing 400 points - were reports from the Financial Times that finance ministers in Europe are looking at ways of co-ordinating recapitalisations of financial institutions. According to the paper, European commissioner for economic and monetary affairs Olli Rehn said, “There is an increasingly shared view that we need a concerted, co-ordinated approach in Europe while many of the elements are done in the member states."

“Capital positions of European banks must be reinforced to provide additional safety margins and thus reduce uncertainty...This should be regarded as an integral part of the EU’s comprehensive strategy to restore confidence and overcome the crisis," he said.

Banking giant Barclays was the highest riser early on, gaining 5.2%, recovering after its recent sell-off: despite the comeback, shares are still over 9% lower over the last week.

The miners - sensitive to swings in the global economic outlook - were among the best performers in the morning, with Rio Tinto, BHP Billiton, Antofagasta, ENRC and Xstrata making good gains.

Meanwhile, weighing on investors minds will surely be the Moody's downgrade of Italy's credit rating by three notches. Among the drivers for the downgrade is the increased long-term funding risks for highly indebted countries in the Eurozone "as a result of the sustained and non-cyclical erosion of confidence in the wholesale finance environment for euro sovereigns, due to the current sovereign debt crisis," Moody's said.

In other company movements in the UK, some retailing heavyweights were mixed after a number of updates. Supermarket chain Tesco was the heaviest faller after like-for-like (LFL) sales (excluding VAT and petrol) fell by 0.5% in the first half, its worst LFL performance in two decades.

Rival retailer Sainsbury headed the other way after accelerating sales in the second quarter. Despite many expecting the supermarket to report a weaker second quarter than the first, when sunny weather and the UK royal wedding gave a boost to takings, sales by 7.8% in the second quarter, surpassing the 7.3% growth rate seen in the first three months of the year.

In other company news, trendy fashion retailer SuperGroup saw its share price plummet over a quarter after revealing a major problem at its new Barnwood warehouse in Gloucestershire, which it estimates will cut profits by £6-9m this year.

Out-of-town homewares retailer Dunelm fell after seeing like-for-like sales fall by 2% in the first quarter.

Specialist healthcare firm BTG was in demand after it said that its overall financial performance in the first half has been "well ahead of expectations", helped by its Licensing & Biotechnology division.

ECONOMIC NEWS

Three major UK economic announcements are due out in this morning:

The UK Purchasing Managers' Index Service Sector Survey is expected to have kept its head above 50 – the level that separates an expansion of activity from a contraction – in September, but only just. Market consensus forecast is for a reading of 50.5, down from August’s 51.1.

The final reading of the second quarter gross domestic product data for the UK is expected to show quarterly growth of 0.2%, and year-on-year growth of 0.7%.

On the UK plc trading front, the second quarter current account deficit is tipped to widen to £10.6bn from the first quarter reading of -£9.4bn.

FTSE 100 - Risers
Barclays (BARC) 151.85p +5.20%
Burberry Group (BRBY) 1,160.00p +4.22%
Rio Tinto (RIO) 2,826.00p +4.18%
Hargreaves Lansdown (HL.) 429.80p +4.17%
BHP Billiton (BLT) 1,735.50p +4.11%
Man Group (EMG) 165.40p +3.96%
Antofagasta (ANTO) 936.00p +3.94%
Eurasian Natural Resources Corp. (ENRC) 542.50p +3.93%
Xstrata (XTA) 793.90p +3.91%
Resolution Ltd. (RSL) 241.50p +3.65%

FTSE 100 - Fallers
Tesco (TSCO) 375.30p -1.26%
Randgold Resources Ltd. (RRS) 6,090.00p -0.57%
Inmarsat (ISAT) 471.40p -0.42%
Autonomy Corporation (AU.) 2,549.00p -0.04%


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UK Event Calendar
INTERIMS
Tesco

INTERIM DIVIDEND PAYMENT DATE
ARM Holdings, Greencore Group, Novae Group, Rathbone Brothers, Timeweave

INTERIM EX-DIVIDEND DATE
Advanced Medical Solutions Group, AG Barr, Bodycote, Brammer, Camellia, Charles Taylor Consulting, Dillistone Group, Downing Absolute Income VCT 1 'C' Shares , F&C Asset Management, Fisher (James) & Sons, Goals Soccer Centres, GVC Holdings, Henry Boot, Huntsworth, Hydrogen Group, Inmarsat, Judges Scientific, Keller Group, Kingfisher, Lighthouse Group, Martin Currie Global Portfolio Trust, Morson Group, Motivcom, Nationwide Accident Repair Services, New Britain Palm Oil Ltd. (DI), Petropavlovsk, Primary Health Properties, Raven Russia Ltd., Severfield-Rowen, SIG, StatPro Group, Weir Group

QUARTERLY EX-DIVIDEND DATE
British Land Co, Investors Capital Trust 'A' Shares, Merchants Trust, Torchmark Corp.

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Crude Oil Inventories (US) (15:30)
GDP (2nd release) (EU) (10:00)
ISM Non-Manufacturing (US) (15:00)
ISM Services (US) (15:00)
MBA Mortgage Applications (US) (12:00)
PMI Composite (EU) (09:00)
PMI Composite (GER) (08:55)
PMI Services (EU) (09:00)
PMI Services (GER) (08:55)
Retail Sales (EU) (10:00)

Q4
Sportingbet

GMS
Strathdon Investments

FINALS
Imperial Innovations Group, Sportingbet

IMSS
Dunelm Group

SPECIAL DIVIDEND PAYMENT DATE
Polo Resources Ltd. (DI)

TRADING ANNOUNCEMENTS
Marston's, Sainsbury (J), Tricorn Group

UK ECONOMIC ANNOUNCEMENTS
Balance of Payments (09:30)
Current Account (09:30)
GDP (quarterly national accounts) (09:30)
Official Reserves (09:30)
PMI Services (09:30)

FINAL DIVIDEND PAYMENT DATE
Betfair Group, Iomart Group, Newmark Security PLC, PZ Cussons, Stagecoach Group

FINAL EX-DIVIDEND DATE
Abbey, Alumasc Group, Begbies Traynor Group, City of London Investment Group, Eckoh, Edge Performance VCT 'C' Shares, Edge Performance VCT 'D' Shares, Edge Performance VCT 'E' Shares, Edge Performance VCT 'F' Shares, Fidelity Asian Values, Galliford Try, Haynes Publishing Group, Pacific Horizon Inv Trust, Petmin Ltd. (DI), Produce Investment, Qatar Investment Fund, Ruffer Investment Company Ltd., Tricorn Group, Utilico Investments Ltd (DI), Zetar


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Commodities Market Report

FTSE 100 Euronext Dax perf CAC 40


Oil falls to one year low

Crude oil tumbled to a one year low in New York on Tuesday on concern that demand will drop amid slowing US growth and the ongoing European debt crisis.

Prices fell 2.5% in a rapid sell-off as confidence in global economic growth prospects fade. Even an impressive last minute turnaround among US equities failed to resuscitate interest in oil as fears of a recession drive prices lower.

Crude for November settled $1.94 lower at $75.67 a barrel on the New York Mercantile Exchange, the lowest level since 23 September 2010. Oil prices have fallen for three consecutive sessions.

On the ICE Futures Europe exchange Brent crude fell below $100-a-barrel, down $2.36 at $99.35 a barrel.

Gold lost its allure on Tuesday as Federal Reserve Chairman Ben Bernanke brushed off concern about inflation and expectations that the central bank will unleash another round of quantitative easing.

Gold for December delivery fell $41.70 or 2.52$ to $1,616.00 a troy ounce on the Comex division of the New York Mercantile Exchange.

Silver for December fell 0.956 or 3.10% at $29.84 a troy ounce while copper for the same month dropped 1.49% to $3.10 a pound.

FX round-up:

Euro rises ahead of ECB meeting

The euro enjoyed some relief from recent selling on Tuesday, pulling off an eight month low against the dollar, as markets eye the upcoming European Central Bank policy meeting.

The single currency also perked up after Federal Reserve Chairman Ben Bernanke's downbeat assessment of the US economy. Overall he downplayed inflation risks and the likelihood of more quantitative easing measures. At the same time he said the US central bank would take further steps to sustain a recovery if it came close to faltering.

The euro advanced to $1.3320 from $1.3176 late Monday.

Meanwhile European Central Bank President Jean-Claude Trichet said the ECB should avoid financing bailouts ahead of the central bank's policy meeting. It is widely expected that Trichet will indicate a possible rate cut at the meeting, taking borrowing costs down to 1% from 1.5% by the year end.

Sentiment towards the euro was also buoyed by news that France and Belgium had come to the aid of Dexia in what looks like will be a state rescue of the European bank. Both governments are part owners of the bank.

The ICE Dollar Index, which measures the US dollar against a basket of six other currencies, fell around 0.4% at 79.30.

The dollar rose to 76.93 yen from 76.64 yen.

Sterling fell to a 13 month low against the dollar on rumours that the Bank of England will introduce more stimulus measures. The UK currency also came under pressure against the euro after weaker than expected UK construction data added fuel to QE speculation.


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US Market Reports

Dow Jones NASDAQ NYSE AMEX

Please click on the images to view our interactive charts

Stocks Close Sharply Higher On Late-Day Rally

After showing considerable volatility over the course of the trading day, stocks ended Tuesday's trading sharply higher on the heels of a late-day rally. A report that European finance ministers are examining ways to recapitalize banks contributed to the substantial upward move.

The major averages ended the session just off their best levels of the day, bouncing well off the one-year closing lows set on Monday. The Dow rose 153.41 points or 1.4 percent to 10,808.71, the Nasdaq jumped 68.99 points or 3 percent to 2,404.82 and the S&P 500 surged up 24.72 points or 2.3 percent to 1,123.95.

The rally seen going into the close of trading came as traders reacted to a report from the Financial Times indicating that European finance ministers have agreed that additional measures are needed to shore up the region's banks and are examining ways to recapitalize financial institutions.

While the Financial Times said that the details of the plan are still under discussion, officials told the paper that the ministers have concluded that they have not done enough to convince financial markets that Europe's banks could withstand the current debt crisis.

"There is an increasingly shared view that we need a concerted, co-ordinated approach in Europe while many of the elements are done in the member states," Olli Rehn, European commissioner for economic affairs, told the Financial Times. "There is a sense of urgency among ministers and we need to move on."

The market reaction to the report reflects the recent volatility among stocks as well as the focus on the financial situation in Europe.

Concerns about the financial situation in Europe contributed to early weakness on Wall Street, as reports suggested that European Finance Ministers are considering forcing banks to take a bigger haircut on Greek debt.

News that European officials have postponed a decision on providing additional financial aid to Greece until mid-November added to the uncertainty.

Traders were also digesting comments from Federal Reserve Chairman Ben Bernanke, who testified before Congress' Joint Economic Committee regarding the economic outlook and recent monetary policy actions

Bernanke acknowledged that the recovery from the financial crisis of 2008 has been much less robust than earlier projections and said the Fed expects a somewhat slower pace of economic growth over coming quarters than it did when making projections in June.

Nonetheless, economic growth in the second half of the year seems likely to be more rapid than in the first half, Bernanke said.

The Fed Chief also noted that the central bank will continue to closely monitor economic developments and is prepared to take further action to promote a stronger economic recovery.

Sector News

After helping to lead the markets lower in the previous session, airline stocks moved sharply higher over the course of the trading day. The NYSE Arca Airline Index surged up by 5.3 percent, bouncing off the nearly two-year closing low it set on Monday.

American Airlines parent AMR Corp. (AMR) showed a strong move back to the upside, ending the session up by 20.7 percent. Delta (DAL) and US Airways (LCC) also posted notable gains.

Electronic storage stocks also saw considerable strength on the day, resulting in a 6 percent gain by the NYSE Arca Disk Drive Index. Hutchinson (HTCH), Quantum (QTM), and Imation (IMN) turned in some of the sector's best performances.

Most of the other major sectors also showed substantial moves to the upside in late day trading, with networking, banking, and commercial real estate posting significant gains.

On the other hand, gold stocks saw continued weakness despite the rally by the broader markets. The NYSE Arca Gold Bugs Index fell by 3.3 percent amid a notable decrease by the price of gold.


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Wednesday newspaper round-up
Italy suffered a bruising downgrade by ratings agency Moody's on Tuesday night in move that is expected to intensify pressure on European leaders to shore up the eurozone's banks in a bid to resolve the sovereign debt crisis. Just hours after chancellor George Osborne and officials in Brussels were united in calling on eurozone leaders to bolster the financial strength of their banks, Moody's delivered a huge three-notch downgrade on Italy's debt – its first downgrade of Italy since May 1993, says the Guardian.

European Union finance ministers are examining ways of co-ordinating recapitalisations of financial institutions after they agreed that additional measures were urgently needed to shore up the region’s banks. Although the details of the plan are still under discussion, officials said EU ministers meeting in Luxembourg had concluded that they had not done enough to convince financial markets that Europe’s banks could withstand the current debt crisis, the Financial Times reports.

Barclays' chief executive, Bob Diamond, yesterday insisted the bank would hit its profitability target despite the slowing economy and extra costs imposed by the Independent Commission on Banking (ICB). In his first public comments on shareholder returns since the ICB reported last month, Mr Diamond told a banking conference: "We set a target in February to generate a return on equity of 13 per cent by 2013. After the Independent Commission on Banking report, we reiterate that target," writes the Independent.

Apple has unveiled its latest iPhone, the iPhone 4S, at an event in Cupertino, California. The new iPhone 4S, which comes with 16, 32 or 64GB of storage, will be released in seven countries, including Britain, on October 14th. The new handset looks the same as the iPhone 4 but contains considerable upgrades to its components. Phil Schiller, Apple's vice president of product marketing, introduced the new iPhone 4S saying: "Don't be deceived because inside it is all new," the Telegraph reports.

UBS, the Swiss bank hit by a rogue trading scandal, yesterday insisted it would still make a profit for the third quarter. In an attempt to soothe investor nerves amid continuing turmoil on the markets, the bank said it would make a “modest profit” for the three months to September, despite the rogue trader’s £1.5billion loss and a £282million hit from restructuring costs, according to the Daily Express.

High house prices are ‘destroying family life’, a senior minister warned yesterday – as he launched a staunch defence of the Government’s controversial planning system reform. Planning minister Greg Clark said the changes were vital to increase house building and curb soaring prices. Critics, led by the National Trust, have warned that the Government’s reforms will lead to a development ‘free-for-all’ and bring Los Angeles-style urban sprawl to the UK, writes the Daily Mail.

The size of the internet advertising market has overtaken television for the first time as Britain’s biggest advertisers flock to social networks and online video sites to target a younger audience. Companies spent £2.3 billion on internet advertising in the first half of the year, almost 14 per cent more than in the first half of last year, according to the Internet Advertising Bureau and PwC, the Telegraph reports.