ADVFN Morning Euro Markets Bulletin - Nov. 9th 2011

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London Market Reports

One in the eye for Admiral

Market Movers
techMARK 1,865.36 +0.26%
FTSE 100 5,580.14 +0.23%
FTSE 250 10,453.82 +0.33%

In keeping with most markets across the globe, London is on the up in the wake of the decision by Italian Prime Minister Silvio Berlusconi to proffer his resignation.

Look below the surface, however, and you will see that the top-share index's modest rise is largely due to the strength of mining stocks, such as Xstrata, Rio Tinto, Kazakhmys and ENRC.

STUCK IN REVERSE

Acting as a drag on the index are car insurer Admiral and oil outfit Tullow, the former after lowering profit expectations for the year and the latter after cutting its production forecast. Banking giant HSBC is also weighing down the index.

Admiral's group turnover increased by 30% to £582m in the third quarter of 2011 from £446m the year before, but the company warned that full-year pre-tax profits will be towards the lower end of market estimates if there is no reversal of the current trend of a higher than normal level of large insurance claims.

Tullow said "group production for 2011 is now expected to average 79-81,000 barrels of oil equivalent per day (boepd) due to slower than expected ramp up from the Jubilee field.

GULLIVER'S TRAVAILS

HSBC, the UK’s biggest bank has seen a massive drop in underlying pre-tax profits in the three months to the end of September. In 2010 the figure for the third quarter was $4.6bn, this year it is down to $3bn. HSBC blames decreased revenues in its investment banking division, an adverse movement in its hedging strategy of $0.7bn and an increase in loan impairment charges, primarily in North America.

Group chief executive Stuart Gulliver emphasised that the travails of HSBC are not specific to the company but industry wide.

Elsewhere in the financial sector, acquisitive insurance group Resolution is also on the slide, despite announcing a 'transformational' outsourcing arrangement with Diligenta, an insurance services specialist that is part of Indian information technology (IT) contractor Tata Consultancy Services, that it says will save it pots of money.

IN THE GLOOM

Gas and electricity group SSE saw its adjusted profit before tax fall 25.4% for the half year to September.

Talvivaara Mining saw net sales kick on in the third quarter, rising to €60.6m from €45.1m in the corresponding quarter of last year. However, the company fell into the red at the pre-tax level, losing €3.4m compared to a profit the year before €5.1m.

EDGING HIGHER

J Sainsbury, the owner of Britain’s number three supermarket chain, has seen profits before tax rise to £354m in the first six months of this year, a 6.6% improvement on the same point last year and a touch above analysts expectations of around £350m. Like-for-like sales, which strip out new store openings, were up 1.9%.

Bus and train firm FirstGroup said trading in the six months to the end of September has been in line with expectations, with profit before tax up 56.2% to £127.8m from £81.8m the year before, on revenue that grew just 3.2% to £3.17bn from £3.07bn.


FTSE 100 - Risers
Xstrata (XTA) 1,053.50p +2.58%
Legal & General Group (LGEN) 108.10p +2.27%
Rio Tinto (RIO) 3,599.00p +2.24%
Royal Bank of Scotland Group (RBS) 22.83p +2.24%
Kazakhmys (KAZ) 970.00p +2.05%
Eurasian Natural Resources Corp. (ENRC) 700.50p +2.04%
Lloyds Banking Group (LLOY) 29.49p +2.04%
Vedanta Resources (VED) 1,305.00p +1.79%
Weir Group (WEIR) 1,944.00p +1.73%
Aviva (AV.) 329.40p +1.60%

FTSE 100 - Fallers
Admiral Group (ADM) 858.00p -28.08%
Tullow Oil (TLW) 1,358.00p -5.43%
Resolution Ltd. (RSL) 260.00p -3.13%
HSBC Holdings (HSBA) 522.80p -2.73%
Unilever (ULVR) 2,078.00p -1.38%
Kingfisher (KGF) 258.30p -1.11%
SSE (SSE) 1,324.00p -0.90%
ARM Holdings (ARM) 618.50p -0.88%
Reckitt Benckiser Group (RB.) 3,296.00p -0.87%
Standard Chartered (STAN) 1,405.00p -0.64%

FTSE 250 - Risers
Kesa Electricals (KESA) 109.00p +7.07%
Premier Foods (PFD) 4.00p +4.93%
Regus (RGU) 83.40p +4.25%
Drax Group (DRX) 564.50p +3.01%
Ferrexpo (FXPO) 321.20p +2.88%
Salamander Energy (SMDR) 214.90p +2.82%
Dixons Retail (DXNS) 11.30p +2.82%
Spectris (SXS) 1,301.00p +2.68%
Oxford Instruments (OXIG) 835.00p +2.27%
Thomas Cook Group (TCG) 46.64p +2.26%

FTSE 250 - Fallers
Cape (CIU) 355.10p -23.63%
Allied Gold Mining (ALD) 158.80p -3.29%
Cable & Wireless Communications (CWC) 38.38p -2.96%
Talvivaara Mining Company (TALV) 219.50p -2.44%
Home Retail Group (HOME) 88.15p -2.43%
Homeserve (HSV) 264.00p -2.29%
Phoenix Group Holdings (DI) (PHNX) 508.50p -2.12%
Redrow (RDW) 109.80p -1.88%
Savills (SVS) 305.10p -1.71%
Supergroup (SGP) 713.50p -1.59%


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UK Event Calendar
INTERIMS
FirstGroup, Flybe Group, Great Portland Estates, Sainsbury (J), SSE

INTERIM DIVIDEND PAYMENT DATE
Carillion

INTERIM EX-DIVIDEND DATE
Aga Rangemaster Group, Anglo Pacific Group, Bunzl, Cable & Wireless Communications, First Derivatives, Home Retail Group, Invensys, Lombard Risk Management, Maven Income & Growth VCT, Pace, Scottish Mortgage Inv Trust, Stobart Group Ltd.

QUARTERLY EX-DIVIDEND DATE
Barclays, F&C Commercial Property Trust Ltd., Picton Property Income Ltd

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Bankruptcies (JPN)
Machine Orders (JPN)
Bank of France Business Sentiment (FRA) (07:30)
Wholesale Price Index (GER)
MBA Mortgage Applications (US) (12:00)
Crude Oil Inventories (US) (15:30)
Wholesales Inventories (US) (15:00)

Q3
Anglogold Ashanti Ltd., Shin Kong Financial Holdings Co Ltd. GDR (Reg S), Smurfit Kappa Group, Talvivaara Mining Company

FINALS
Fenner

IMSS
Admiral Group, Ark Therapeutics Group, Cape, HSBC Holdings, Legal & General Group, SIG, Tullow Oil

SPECIAL EX-DIVIDEND PAYMENT DATE
Asian Citrus Holding, Blackstar Group SE, Microgen

EGMS
Dragon-Ukrainian Properties & Development, Public Service Properties Inves (DI)tments Ltd.

AGMS
Crown Place VCT, Hays, Oilex Ltd., Quayle Munro Holdings

TRADING ANNOUNCEMENTS
Playtech Ltd., Safestore Holdings, Supergroup

UK ECONOMIC ANNOUNCEMENTS
BRC Shop Price Index (00:01)
Balance of Trade (09:30)
UK Trade (09:30)

FINAL EX-DIVIDEND DATE
Asian Citrus Holding, Centaur Media, Craneware, Dechra Pharmaceuticals, Downing Absolute Income VCT 1, Edinburgh Dragon Trust, Genus, Manchester & London Inv Trust, Pan African Resources, Swallowfield, World Careers Network


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Commodities Market Report

FTSE 100 Euronext Dax perf CAC 40


Crude rises for fifth straight session

Crude oil futures settled higher for the fifth consecutive session on Tuesday ahead of an expected drop in weekly supplies.

The US government's weekly oil inventory report is due out Wednesday and analysts expect it to show a modest 700,000 barrel increase to 339.5m barrels. Some market onlookers are expecting supplies to have tightened.

Crude for December delivery settled up $1.28 at $96.80 a barrel on the New York Mercantile Exchange. On the ICE Futures exchange Brent crude settled 44 cents higher at $115 a barrel.

Late Tuesday the American Petroleum Institute reported that crude oil supplies increased by 148,000 barrels for the week ended 4 November. Gasoline supplies fell by 1.5m barrels while distillate inventories, used in heating oil, dropped by 2.9m barrels.

Crude prices were also buoyed by a report from the Energy Information Administration that Chinese oil demand is expected to rise 7.5% in 2011.

Concern over Iran developing nuclear weapons technology was also a trigger for rising oil prices. The International Atomic Energy Agency said Iran was developing nuclear-weapons capabilities that gave it "serious concern" about possible military aspects to Iran’s nuclear programme.

Meanwhile gold puckered up to $1,800 an ounce on Tuesday as nerves about Italy sparked safe haven flows.

The EU’s third largest economy was in the spotlight on Tuesday as Prime Minister Silvio Berlusconi said he would step down after parliament passes the austerity package required by the European Union. The announcement came after Berlusconi failed to secure a majority of votes in the Chamber of Deputies earlier on Tuesday.

Gold for December delivery advanced $8.10 to settle at $1,799.20 an ounce on the Comex division of the New York Mercantile Exchange. Bullion traded at an intra-day high of $1,804.40.

FX round-up:

Euro perks up as Berlusconi plans resignation

The euro rallied on Tuesday, with gains underpinned by news that Italian Prime Minister Silvio Berlusconi would resign after parliament passes the austerity package required by the European Union.

The euro rose to $1.3836 from $1.3771 the previous session as news of Berlusconi's planned resignation soothed fears about Italy falling prey to the EU debt crisis.

Italy's 10-year bond yields soared to 6.72%, close to levels that Greece and Ireland reached shortly before accepting financial bailouts. With Italy's debt levels around €1.9trillion, the rising bond yields are increasingly hurting the country's ability to borrow money and tackle its debt pile.

The ICE Dollar Index, which tracks the US currency against a basket of six others, traded at 76.632 from 76.987.

Against the yen the dollar changed hands at ¥77.74 from ¥78.05 prompting speculation that Japan may again intervene on currency markets.

Sterling traded at $1.6087 from $1.6055 after UK think-tank the National Institute of Economic and Social Research said economic growth remained steady at 0.5% in the three months to October.

The report allayed concern that the UK could fall into the grips of recession again.


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US Market Reports
Stocks enjoy Berlusconi boost

The offer by Italian Prime Minister Silvio Berlusconi to resign perked up share prices on the other side of the pond.

Berlusconi has pledged to give up his office after the Italian parliament passes the austerity package required by the European Union. The decision came after Berlusconi failed to secure backing from a majority of voters in the Chamber of Deputies in a routine motion in the afternoon.

The Dow-Jones industrial average rose 102 points to 12,170, the S&P 500 jumped 15 to 1,276 and the NASDAQ Composite advanced 32 to 2,727.

Online travel agency Priceline led the S&P higher after third quarter figures came in ahead of expectations. Underlying earnings per share of $9.95 topped the consensus forecast of $9.30.

The industrial machine company Rockwell Automation was another higher flyer, after it reported earnings per share (EPS) of $1.39, more than the $1.21 expected. Net income rose to $201m compared to $131m in the same period of 2010.

Fast food leviathan McDonald’s was barely changed despite announcing a 5.5% rise in same-store sales for the month of October.

Computer games maker Activision Blizzard finished well off the day’s highs despite the release of the 8th edition of its hugely popular ‘Call of Duty’ video-game. After the bell, the company lifted its full-year earnings guidance after releasing forecast-busting third-quarter figures.

Analysts at Citi have upgraded their view on industrial conglomerate Honeywell to 'buy' from 'hold'. Research in Motion is being weighed down by a negative research note out from Barclays.

Like-for-like sales at retailer Urban outfitters fell 7% in October.

International Flavors & Fragrance was down very sharply after guiding lower for all of 2011.


MACROECONOMY:

The NFIB’s small business confidence index improved by 1.3 points to the 90.2 mark in October.

OTHER MARKETS

The price of West Texas crude for December delivery rose for the fifth day in succession, climbing $1.28 to $96.80 a barrel. OPEC has raised its oil demand forecasts out to 2015.

10 year US treasuries reversed course as equities surged, and finished down by 11/32 dollars, with yields hardening to 2.08% from 2.04% overnight.


S&P 500 - Risers
Priceline.Com Inc. (PCLN) $552.85 +8.61%
Rockwell Automation Inc. (ROK) $74.33 +6.47%
Devon Energy Corp. (DVN) $69.37 +5.30%
Regions Financial Corp. (RF) $4.38 +5.29%
Baker Hughes Inc. (BHI) $59.38 +4.54%

S&P 500 - Fallers
International Flavors & Fragrances Inc. (IFF) $55.03 -10.24%
Eastman Kodak Co. (EK) $1.14 -4.20%
Pioneer Natural Resources Co. (PXD) $88.59 -3.74%
Urban Outfitters Inc. (URBN) $26.34 -3.20%

Dow Jones I.A - Risers
3M Co. (MMM) $81.83 +2.69%
Wal-Mart Stores Inc. (WMT) $59.32 +2.38%
JP Morgan Chase & Co. (JPM) $35.02 +2.28%

Dow Jones I.A - Fallers
Hewlett-Packard Co. (HPQ) $27.84 -0.14%
International Business Machines Corp. (IBM) $187.12 -0.11%
McDonald's Corp. (MCD) $94.60 -0.02%

Nasdaq 100 - Risers
Hologic Inc. (HOLX) $17.84 +9.92%
Priceline.Com Inc. (PCLN) $552.85 +8.61%
Qiagen N.V. (QGEN) $14.66 +5.47%
Life Technologies Corp. (LIFE) $41.71 +4.07%

Nasdaq 100 - Fallers
Vertex Pharmaceuticals Inc. (VRTX) $30.45 -8.34%
Urban Outfitters Inc. (URBN) $26.34 -3.20%
Seagate Technology Plc (STX) $17.88 -2.56%
Expedia Inc. (EXPE) $28.22 -2.15%


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Wednesday newspaper round-up
Silvio Berlusconi has announced that he will resign, bringing to an end one of the most flamboyant but controversial political careers of modern times. However, the embattled Italian prime minister said he would not step down until after he has pushed through a package of economic reforms which have been demanded by the European Union to save Italy from a deepening debt crisis. Mr Berlusconi, 75, said that elections would probably follow his resignation. “The government no longer has the majority that we thought we had,” he told a television station minutes after his resignation announcement. (…) Exactly when Mr Berlusconi will hand in his resignation and bring to a close his 17 years in the political limelight was unclear last night, The Telegraph reports.

Money Mail is sending out a warning to all pensioners and those who claim benefits, about a dastardly sleight-of-hand being planned by the Government. In a cunning trick, which involves a technical change to the way the cost of living is measured, the Government may be about to deprive millions of increases worth nearly £3.5bn next year. On the face of it the difference to pensioners would seem small. For example, if the basic state pension of £102.15 a week were to be increased in line with September’s inflation figure it would rise to £107.45 a week. But if the average for 2011 were used, currently 4.4%, then the basic state pension would rise to £106.64. This could save the Coalition an estimated £1.5 bn. (…) But the Treasury would save billions as this would be just the tip of the iceberg, says The Daily Mail.

Jens Weidmann, head of the Bundesbank and the ECB's dominant governor, said that any move to leverage Europe's €440bn rescue fund through central bank financing would be a "clear violation" of the ECB's legal mandate.He said Article 123 of the EU Treaty imposed a legal "prohibition on monetary financing", implying that the ECB cannot attempt to shore up the debt markets of Italy and Spain for covert fiscal support. Mr Weidmann said Germany learned the bitter lesson under the Weimar Republic that funding public debt "via the money printing press" leads to hyperinflation and disaster, The Telegraph says.

The employers' organisation downgraded its 2012 outlook from the 2.2% it was predicting in August to 1.2%, largely because it expects the private sector to sit on its £70bn cash pile because of uncertainty caused by the Eurozone crisis. (…) John Cridland, CBI director-general, called for a year's employers' national insurance relief for recruits under the age of 24 and an exemption for energy-intensive industries from the carbon floor price. The measures would cost £500m, he estimated, and form part of a package of "creative" ideas to "unlock" private sector investment, according to The Telegraph.

Hopes of a swift end to the Greek political crisis were dashed last night when the Opposition leader Antonis Samaras refused to bow to eurozone demands for a written commitment to austerity measures. The row delayed the expected announcement of a new Prime Minister, the central banker Lucas Papademos, and has put in doubt the payment of €8 billion that was supposed to head off the country’s imminent default. “There is such a thing as national dignity,” said Mr Samaras, who heads the conservative New Democracy party. “I have repeatedly explained why the implementation of decisions taken [at the EU summit last month] are inevitable to protect the Greek economy and the euro.” He thus saw no need to sign a letter, requested by the euro-group leader Jean-Claude Juncker, pledging to carry out reforms demanded by Greece’s lenders, The Times reports.

Plans to make the Bank of England's governor all-powerful are wrong. He must be accountable. If the government has its way, the governor of the Bank of England will be handed unprecedented new powers to shape the British economy. While continuing to set interest rates, the Bank will take over the supervision of commercial banks and insurers, be responsible for identifying and tackling threats to financial stability – entirely new and pretty much uncharted territory – and have the power to restrict lending on mortgages, or order banks to increase their capital, The Guardian says.