ADVFN Morning Euro Markets Bulletin - Nov. 4th 2011

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London Market Reports

Equities have started the day on the front foot but are not straying too far from last night's levels, bearing in mind that the market-moving US October jobs report is due out this afternoon.

Nationalised lender Royal Bank of Scotland (RBS) is leading the advance after its third quarter advance, alt hough headline writers are having difficulty deciding on whether to focus on profit before tax (up) or operating profits (down).

RBS's profit before tax of £2,0004m for the third quarter of 2011 represented a sharp turnaround from a loss of £1,560m in the third quarter of last year. Profits were boosted by a £2,3657m upward adjustment in the fair value of its own debt, whereas last year it made an £858m downward adjustment.

The operating profit, however, fell to £267m from £726m in the third quarter of last year. That was below the £343m expected by the market.

"Our Core Tier 1 capital ratio is strong. Our loan:deposit ratio improved again, as did our liquidity position. Non-Core run-down is on-track for year end targets. Impairment charges fell, especially in Ireland," noted RBS chief executive, Stephen Hester.

IAG, the company formed through the merger of British Airways and Iberia, is to add British Midland (BMI) to the mix, after agreeing in principle to buy the UK-based airline from Deutsche Lufthansa. The price has yet to be determined. IAG announced a profit before tax for the first nine months of 2011 of €355m, after exceptional items, up from €63m the year before.

Medical technology business Smith & Nephew's profit before tax eased to $188m in the third quarter from $201m the year before, despite revenue climbing 10% to $1,032m from $941m. On an underlying basis, revenue grew 5%. Net debt tumbled to $196m from $600m a year earlier.

Though pleased with the revenue growth, Oliver Bohuon, the chief executive of Smith & Nephew, said he was disappointed with the margin performance. "We are taking the steps necessary to reduce a cost base in Orthopaedics that is too high for on-going market conditions. I expect to see material improvements from Q4 onwards and am confident that the group will deliver a Q4 trading profit margin above 24%," Bohuon said.

Miners are on the up as metal prices harden. Anglo-Swiss miner Xstrata is to sell $3bn worth of bonds, which it plans to use to repay debt and for general corporate purposes. Meanwhile, in a deal rich in historical significance, mining giant Anglo-American has acquired a controlling stake in the diamond producer De Beers for $5.1bn.


FTSE 100 - Risers
Royal Bank of Scotland Group (RBS) 23.68p +3.86%
Barclays (BARC) 190.25p +3.09%
Anglo American (AAL) 2,399.50p +1.82%
Antofagasta (ANTO) 1,209.00p +1.60%
Kazakhmys (KAZ) 950.00p +1.50%
ARM Holdings (ARM) 611.00p +1.50%
Land Securities Group (LAND) 689.00p +1.47%
Rio Tinto (RIO) 3,495.50p +1.44%
Weir Group (WEIR) 1,941.00p +1.41%
Morrison (Wm) Supermarkets (MR W) 311.20p +1.34%

FTSE 100 - Fallers
Smith & Nephew (SN.) 535.00p -3.95%
International Consolidated Airlines Group SA (IAG) 162.50p -3.50%
Meggitt (MGGT) 383.80p -2.51%
SSE (SSE) 1,345.00p -0.88%
Pearson (PSON) 1,138.00p -0.87%
Intertek Group (ITRK) 1,944.00p -0.82%
InterContinental Hotels Group (IHG) 1,113.00p -0.80%
Inmarsat (ISAT) 476.10p -0.71%
BP (BP.) 453.60p -0.68%
BAE Systems (BA.) 276.00p -0.65%

FTSE 250 - Risers
Gem Diamonds Ltd. (DI) (GEMD) 215.50p +4.66%
New World Resources A Shares (NWR) 500.50p +3.20%
Lancashire Holdings (LRE) 730.00p +2.82%
Genesis Emerging Markets Fund Ltd. (GSS) 478.30p +2.64%

FTSE 250 - Fallers
Afren (AFR) 77.10p -11.43%
Unite Group (UTG) 166.50p -4.37%
Redrow (RDW) 111.10p -3.48%
Renishaw (RSW) 975.00p -2.79%




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UK Event Calendar
Friday November 04

INTERIM DIVIDEND PAYMENT DATE
Advanced Medical Solutions Group, BBA Aviation, Bodycote, Brammer, Derwent London, Dillistone Group, Fiberweb, Goals Soccer Centres, GVC Holdings, Hydrogen Group, Judges Scientific, M. P. Evans Group, Motivcom, Nationwide Accident Repair Services, Northbridge Industrial Services, SIG, UK Select Trust Ltd., Weir Group

QUARTERLY PAYMENT DATE
Investors Capital Trust 'A' Shares

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
PMI Services (GER) (07:55)
PMI Services (FRA) (08:50)
PMI Composite (EU) (09:00)
PMI Services (EU) (09:00)
Producer Price Index (EU) (09:00)
Unemployment Rate (US) (13:30)
Change in Non-farm Payrolls (US) (12:30)

Q3
Lancashire Holdings, Millennium & Copthorne Hotels, Polski Koncern Naftowy Orlen SA GDR (Reg S), Smith & Nephew

GMS
Group NBT

ANNUAL REPORT
Victoria Oil & Gas

IMSS
Meggitt

EGMS
Aer Lingus Group

AGMS
Dechra Pharmaceuticals

FINAL DIVIDEND PAYMENT DATE
Eckoh, Qatar Investment Fund, Zetar


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European Market Report

FTSE 100 Euronext Dax perf CAC 40


It's a mixed showing for Europe's main stock exchanges, with investors reluctant to commit themselves ahead of this afternoon's release of US non-farm payrolls data, an economic item that very often moves markets, because it is the first major indicator from the preceding month to be released.

Trading interest may also be muted because of a desire to wait for the smoke to clear in Greece, with the nation's government facing a vote-of-confidence motion in parliament today.

The CAC is down 3 points at 3,192 in Paris while the DAX is off 30 points at 6,104 in Frankfurt. The IBEX 35 index in Madrid is 29 points firmer at 8,741, however, while Milan's MIB index is also on the up, rising 10 points to 15,776.

Network equipment giant Alcatel-Lucent is a major drag on the CAC index after disappointing third quarter figures. Revenue fell 6.8% from a year earlier to €3.8bn and the company warned that turnover in the fourth quarter is likely to be lower than previously envisaged. Guidance on operating margin was also lowered, with the company predicting the full-year margin will be around 4% of sales.

In Germany, Commerzbank is the big faller after its third quarter numbers came up short. The bank made a net loss of €687m versus a profit of €113m a year earlier, as it took a €798m hit on the value of the Greek sovereign bonds it has on its books.

Deutsche Lufthansa and International Airlines Group (IAG) are both lower after the pair agreed, in principle, for ownership of Lufthansa subsidiary BMI to pass to IAG.

IAG said revenue in the third quarter of 2011 rose 2.2% to €4,490m from €4,392m the year before, but warned that high fuel costs continue to have a significant impact on our business. Underlying operating profit was down by just over a third to €351m from €528m the year before, while underlying profit before tax fell 34.4% to €316m from €482m last year.

CAC 40 - Risers
Lafarge (LG) € 31.27 +6.27%
BNP Paribas (BNP) € 32.60 +2.15%
Credit Agricole (ACA) € 5.38 +1.88%
Natixis SA (KN) € 2.22 +1.23%
Societe Generale (GLE) € 18.84 +1.21%
Vinci (DG) € 35.55 +1.12%
AXA (CS) € 11.06 +1.10%
ArcelorMittal SA (MT) € 14.81 +0.71%
Air Liquide (AI) € 92.81 +0.65%
ST Microelectronics (STM) € 5.28 +0.48%

CAC 40 - Fallers
Alcatel-Lucent (ALU) € 1.83 -9.25%
Accor (AC) € 23.08 -1.83%
Peugeot (UG) € 15.02 -1.48%
EDF (EDF) € 21.48 -1.29%
Publicis Groupe Sa (PUB) € 35.94 -0.94%
LVMH (MC) € 117.05 -0.89%
Michelin (ML) € 51.42 -0.89%
Renault (RNO) € 29.91 -0.86%
L'Oreal (OR) € 78.70 -0.86%
Suez Environnement Company (SEV) € 11.10 -0.72%


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US Market Reports
Events in Europe were driving things Stateside, as investors welcomed a surprise cut in interest rates by the European Central Bank (ECB) and then, later, a volte face by Greece on the referendum issue.

The Dow Jones industrial average notched up its second triple-digit gain in succession, rising 208 to 12,044, with no constituents in the red. The broader based S&P 500 climbed 23 to 1,261 while the NASDAQ Composite advanced 58 to 2,698.

Spurring buying early on was a surprise move by the European Central Bank to lower its benchmark interest rate from 1.5% to 1.25%. The move was unexpected despite calls from many corn ers for rates to be cut in order to inject some life into the economy. ECB president Mario Draghi said that today's decision was unanimous as the economic environment was one of particularly high uncertainty and intensified downside risks.

Later, after a certain amount of confusion over the political fate of the Greek Prime Minister, George Papandreou, it was announced in the Greek parliament that the proposal to hold a referendum linked to the country's continued membership of the Eurozone had been abandoned.

US economic data was not encouraging, but was largely ignored in the euphoria over Greece's back-down. The Institute for Supply Management's index of economic activity in the non-manufacturing sector fell to 52.9% last month from 53% in September. While anything above the 50 level indicates expansion, the rate of growth had slowed slightly.

Initial weekly unemployment claims fell by 9,000 to 397,000 last week, according to the latest data released by the Labour Department, but came short of the 400,000 expected by the market consensus. Also, last week's reading was revised higher to 406,000 from a preliminary estimate of 402,000.

Nevertheless, the Labour Department said that non-farm productivity rose by 3.1% (annual rate) in the third quarter, after falling in the first two quarters. The consensus estimate was for a 2.8% rise.

COMPANY MOVEMENTS

Mobile phone chip-maker Qualcomm jumped higher after giving a bullish outlook for 2012.

Cosmetics brand Estee Lauder surged after net income rose 46% in the first quarter, smashing earnings forecasts. Sales in the first quarter of the company's financial year rose 18%.

Limited Brands fell despite having raised its third quarter earnings forecasts. Investors may be concentrating on like-for-like sales which rose by 6% in October, slightly under consensus expectations of a 6.2% rise.

Youth clothing retailer Abercrombie & Fitch hit the skids after it said sales of its expensive clothes in its European flagship stores had fallen. Quarterly like-for-like sales worldwide rose 7%, driven by a strong performance in the US during the back-to-school season.

Retailer TJX Companies was in demand, however, after seeing like-for-like sales rose by 3% last month, surpassing a 2.8% forecast from a survey by Reuters.

Oil and gas group Apache Corp rose after third quarter earnings jumped by 29%. Steven Farris, the group's chairman and chief executive, hailed it as a "very productive quarter, both in operations and commercials activity."

Satellite TV outfit DirecTV was flying high after it announced a 7.7% increase in subscriber s in the third quarter.

Breakfast cereals maker Kellogg was looking a bit soggy after the company lowered full-year earnings guidance. The Corn Flakes maker said earnings per share this year will be $3.33 at most, disappointing the market, where the consensus forecast had been $3.48.

OTHER MARKETS

Bonds were shunned, as investors retained their appetite for risk. The benchmark 10-year treasury's yield rose nine basis points to 2.07%.

On the New York Mercantile Exchange, West Texas sweet light crude for December delivery rose $1.56 to $94.07 a barrel.


S&P 500 - Risers
Estee Lauder Co. Inc. (EL) $118.92 +17.94%
Netflix Inc. (NFLX) $92.29 +10.67%
Micron Technology Inc. (MU) $5.84 +7.55%
QUALCOMM Inc. (QCOM) $56.11 +7.53%
Rowan Companies Inc. (RDC) $35.54 +7.08%

S&P 500 - Fallers
Abercrombie & Fitch Co. (ANF) $59.26 -19.93%
MEMC Electronic Materials (WFR) $5.10 -11.76%
Kellogg Co. (K) $49.91 -7.64%
Frontier Communications Co. (FTR) $5.73 -7.58%

Dow Jones I.A - Risers
Hewlett-Packard Co. (HPQ) $26.84 +3.59%

Dow Jones I.A - Fallers
None

Nasdaq 100 - Risers
QUALCOMM Inc. (QCOM) $56.11 +7.53%
Qiagen N.V. (QGEN) $13.80 +6.24%
DIRECTV (DTV) $47.63 +6.17%
Nvidia Corp. (NVDA) $14.65 +6.04%
Teva Pharmaceutical Industries Ltd. ADS (TEVA) $41.80 +5.13%

Nasdaq 100 - Fallers
Vertex Pharmaceuticals Inc. (VRTX) $36.63 -0.73%
Research in Motion Ltd. (RIMM) $18.85 -0.32%
Sears Holdings Corp. (SHLD) $79.19 -0.28%


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Newspaper Roundup: Interest rates, referendum, pensions, BT
In a speech on Thursday, Barclays chief executive Bob Diamond gave his strongest endorsement yet of the government's economic policy, saying it had saved Britain from having to pay far higher rates to borrow on international markets."I know it's oversimplified, but if the UK government had to pay 6% interest on its current outstanding debt, it would cost all of us in the UK another £40bn a year. That's about half the annual budget for the National Health Service," said Mr Diamond. The Barclays chief warned that if the country was not able to generate stronger economic growth it could risk "further social unrest", The Telegraph reports.

Despite hints from Greek Prime Minister George Papandreou that a referendum on the Greek bail-out would be abandoned if the coalition was formed, the opposition walked out of parliament. Antonis Samaras, the opposition leader, demanded Papandreou’s departure. “Mr Papandreou pretends that he didn’t understand what I told him. I called on him to resign,” he declared. A former governor of the Greek central bank was being lined up last night to take over in the event the government collapses after a no-confidence vote tonight, The Telegraph comments.

Nick Clegg is threatening to veto a controversial Treasury plan to freeze pensions and state benefits next April. George Osborne, the Chancellor, is considering whether to break the government's pledge to raise benefits in line with inflation in order to save up to £10bn, but the move has provoked a rift with the Liberal Democrats, who are arguing that the most vulnerable people in society should not bear the brunt of efforts to reduce the deficit, says The Independent.

As leaders convene at the G20 in Cannes, one of America’s leading economists calls on them all – includ ing David Cameron and George Osborne – to back the controversial Financial Transactions Tax and bring the banks to heel. A recent study by mathematicians confirmed what most of us feel intuitively: that the financial sector lies at the core of global corporate power. Barclays, Deutsche Bank, Goldman Sachs, and other financial houses are at the very nerve centre. It is no wonder that our politicians often cower in their presence.This week’s G20 summit offers a rare opportunity to bring this sector under some control, by adopting the long-discussed Financial Transactions Tax, says The Daily Mail.

France was caught up in the Eurozone panic yesterday as it was forced to accept a sharp rise in interest rates for long-term bonds. In an issue seen as a barometer of investors’ diminishing faith in the Eurozone, the French Treasury Agency managed to raise a total of €6.9bn (£5.9bn).(…) However, the rate on debt due to be repaid in 2026 fell from 4.03% to 3.77%. The gap between German and French yields diminished slightly to 132.4 points on secondary markets after the issue, but remained significant. Commentators said the spread illustrated France’s difficult, halfway position between the safety of Germany and the fragility of southern Europe, writes The Times.

Britain is poised to provide billions of pounds for a new global economic rescue package, prompted by concerns that the EU plan to save the euro will not be enough to stabilise the world economy. A deal being negotiated by world leaders at the G20 summit in Cannes could see the International Monetary Fund (IMF) double in size. David Cameron will face strong opposition from Conservative MPs over the potential use of taxpayers’ money to assist European countries after repeated assurances from the Government that Britain would not provide extra funds to help the Eurozone, The Telegraph says.

BT has outstripped BSkyB in the race for TV and broadband customers, and pledged to raise the stakes in its battle with the satellite broadcaster by accelerating the rollout of a superfast network that will boost its appeal in the multichannel market. BT Vision, the company's pay-TV offering, reported its strongest performance in two years, adding 41,000 viewers in the third quarter compared with 26,000 for BSkyB. It is the first quarter that BT Vision has beaten BSkyB for pay-TV subscribers since launching in mid-2007, The Guardian reports.