ADVFN Morning Euro Markets Bulletin - Dec 2nd 2011

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London Market Reports

Investors raise a glass to RBS's pub sale

Market Movers
techMARK 1,850.77 +0.71%
FTSE 100 5,567.45 +1.42%
FTSE 250 10,294.46 +0.89%

The equity bandwagon is back on the road after pulling over into a lay-by for repairs yesterday, after French President Nicolas Sarkozy said last night it is necessary 'to put an end to all doubts' over the European Union's commitment to sorting out the region's debt crisis.

In what may be a sneak preview of the German-French stance, Sarkozy insisted on the need for governmental convergence of the Eurozone members.

BANKS AND MINERS LEAD THE CHARGE

Banks and miners are largely responsible for the blue-chip index bursting back above the 5,500 barrier.

Metal prices are on the rise, prompting demand for metal diggers such as Vedanta, BHP Billiton and Antofagasta. One of the big beasts of the sector, Rio Tinto, has given the green light to an additional $2.7bn capital investment to modernise its aluminium smelter in Kitimat, British Columbia. This new investment will allow for completion of the $3.3bn project in 2014. The Kitimat modernisation project will increase the smelter's current production capacity by more than 48% to around 420,000 tonnes per year.

Banks are led higher by Royal Bank of Scotland (RBS). The debt-laden government-owned lender has sold its tenanted pub business to Scottish & Newcastle Pub Company (S&NPC), a subsidiary of Dutch brewer Heineken. The business, which comprises 918 pubs across the UK, has been operated since 1999 by S&NPC under a management agreement. As a result of the sale, RBS received cash proceeds of around £422m.

NOT UP THE JUNCTION

House builder Berkeley Group is wanted after it saw profit before tax rise by 64.1% to £101.1m in the six months ended October 31st from £61.6m the year before. The figure was inflated by a £30.1m profit on the disposal of a 51% shareholding in a post-graduate accommodation scheme for Imperial College at Clapham Junction. Revenue rose 20.4% to £404.9m from £336.2m. In Central London, demand for prime residential property in good locations remained strong over the period as a whole and this has seen Berkeley increase its level of forward sales by 15.2% from £813.5m to £937.2m, the company said.

MERGERS AND ACQUISITIONS

The prolonged courtship of content creation software developer Alterian by document and patent translation specialist SDL is drawing to a close. The two companies are set to tie the knot, with Alterian agreeing to a deal worth 110p a share, a premium of around 73.2% over the share price of Alterian on the day before SDL's bid interest became public.

Repair services firm HomeServe is set to pay £83m for Veolia Environnement's 51% share of Doméo SA, giving HomeServe 100% ownership of the French provider of insured home emergency policies.

In what may be a blow to Aussie pride, global brewing colossus SABMiller has finally tied up its purchase of Foster’s, the iconic Australian lager firm. As part of the deal SABMiller had to agree to keep the management of Foster’s within Australia.


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FTSE 100 - Risers
ICAP (IAP) 359.20p +4.33%
Royal Bank of Scotland Group (RBS) 21.19p +3.11%
Lloyds Banking Group (LLOY) 24.74p +3.08%
Vedanta Resources (VED) 1,086.00p +3.04%
Barclays (BARC) 182.50p +3.02%
BHP Billiton (BLT) 1,978.50p +2.89%
HSBC Holdings (HSBA) 509.70p +2.82%
Antofagasta (ANTO) 1,202.00p +2.74%
Standard Chartered (STAN) 1,444.00p +2.63%
Xstrata (XTA) 1,034.00p +2.58%

FTSE 100 - Fallers
Admiral Group (ADM) 898.50p -1.48%
Rolls-Royce Group (RR.) 727.50p -0.82%
Morrison (Wm) Supermarkets (MRW) 323.00p +0.03%
G4S (GFS) 257.40p +0.08%
Meggitt (MGGT) 383.20p +0.10%
Sainsbury (J) (SBRY) 303.60p +0.13%
British Sky Broadcasting Group (BSY) 767.00p +0.13%
National Grid (NG.) 629.00p +0.24%
Severn Trent (SVT) 1,559.00p +0.39%
ARM Holdings (ARM) 594.50p +0.42%

FTSE 250 - Risers
Home Retail Group (HOME) 96.50p +6.75%
Supergroup (SGP) 521.50p +6.00%
Anglo Pacific Group (APF) 273.90p +4.46%
De La Rue (DLAR) 895.50p +3.95%
Inchcape (INCH) 331.80p +3.53%
Lamprell (LAM) 283.00p +3.28%
Aquarius Platinum Ltd. (AQP) 176.80p +2.97%
Mothercare (MTC) 160.40p +2.49%
Kesa Electricals (KESA) 86.95p +2.47%
Talvivaara Mining Company (TALV) 236.10p +2.39%

FTSE 250 - Fallers
SThree (STHR) 219.50p -10.04%
Thomas Cook Group (TCG) 16.10p -3.54%
Genus (GNS) 1,012.00p -1.75%
Unite Group (UTG) 172.60p -1.37%
Exillon Energy (EXI) 271.40p -1.34%
Rank Group (RNK) 140.20p -1.20%
Betfair Group (BET) 767.00p -1.16%
Computacenter (CCC) 334.80p -1.15%
Big Yellow Group (BYG) 250.00p -0.99%
Interserve (IRV) 314.90p -0.97%

UK Event Calenda

INTERIMS
Berkeley Group Holdings

INTERIM DIVIDEND PAYMENT DATE
BlackRock Smaller Companies Trust, DCC, Elderstreet VCT, Hansa Trust, Hilton Food Group, Laird, Marshalls, SThree, TDK Corp.

QUARTERLY PAYMENT DATE
Boeing Co, Duet Real Estate Finance Ltd

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Non-Farm Payrolls (US) (13:30)
Producer Price Index (EU) (10:00)
Retail Sales (GER) (07:00)
Unemployment Rate (US) (13:30)

SPECIAL DIVIDEND PAYMENT DATE
Aberdeen Asian Smaller Companies Inv Trust, Blackstar Group SE, SThree

AGMS
Ceres Power Holdings

TRADING ANNOUNCEMENTS
SThree

FINAL DIVIDEND PAYMENT DATE
Aberdeen Asian Smaller Companies Inv Trust, Ashmore Group, James Halstead, Matchtech Group, Tawa, United Carpets Group


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FX round-up

FTSE 100 Euronext Dax perf CAC 40


Euro fights back on European bond yields

The dollar strengthed against the euro in Thursday trading as US stocks retreated, but later the single currency raced ahead on improving market sentiment.

Late in the day the euro bought $1.3460, having reached as high as $1.35 in earlier trading.

The single currency was also boosted by the fact that European bond yields had fallen following large sales of government bonds.

The dollar index, which measures the currency against a basket of six major currencies, dropped from 78.345 on Wednesday to 78.293 late on Thursday.

Meanwhile, the euro fell against the pound to buy £0.8577, while the pound fell against the dollar to buy $1.5687.

The Australian dollar, damaged by reports from China, dropped 0.6% to settle at $1.0222. The Chinese purchasing managers' index showed a drop below 50 - the first time in three years, suggesting a slowdown in economic growth.

Elsewhere, the euro soared against the Swiss franc following news that Swiss powers are contemplating setting negative interest rates in the wake of an unexpected GDP rise during the third quarter.

Commodities

Falls seen across the board on a mixed bag of data

A mixed bag of data reports left commodities lower on Thursday, weakened by news of jobless claims in the US. Despite US manufacturing expanding, investors were clearly taking few chances ahead of employment figures due out today.

Janurary delivery for oil finished lower, falling 0.16% to settle at $100.20 a barrel on the New York Mercantile stock exchange. Falls were also seen for heating oil, natural gas and unleaded gas.

Crucially, oil remained about the key level of $100, having risen above that level for the first time in two weeks on Wednesday.

The ISM manufacturing sector purchasing manager survey results showed that the headline index rose to 52.7 from the previous month's reading of 50.8. The market consensus was looking for a reading of 52.0 points.

However, initial weekly unemployment claims rose by 6,000 last week, to the 402,000 level (Consensus: 390,000). The official US unemployment figures are due out later today.

Meanwhile, gold also ended lower, though it received some support from the lower dollar. Gold lost 0.60%, or $10.5 to settle at $1,739.80 per troy ounce on the Februrary contract, while silver lost 0.14% to $32.76 per troy ounce for March delivery.

Copper was hit by news on China's manufacturing, where it was reported that a purchasing managers' index had fallen from 50.4 in October to 49 in November. The metal lost 1.16% to finish at $3.53 per pound on the March contract, while platinum also fell, dropping 0.23% to end at $1,557.2 per troy ounce on the January contract.




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US Market Reports
Stocks mixed, markets awaits jobs report

US indices swung between gains and losses for most of the day Thursday, but finished broadly mixed following the largest three-day rally in over two and a half years. Markets are likely to be cautious ahead of a key jobs report due out tomorrow.

The Dow finished 26 points down (-0.21%) at 12,020, the Nasdaq rose 6 (+0.22%) to 2,626, while the S&P 500 fell 2 points (-0.19%) to 1,245.

Investors will still be digesting the news of a co-ordinated intervention by major central banks to provide cheap access to dollar funding which sent equities soaring yesterday.

ECONOMIC DATA MIXED, STREET AWAITS TOMORROW'S JOBS REPORT

Friday will see Labor Department release its monthly employment report, in which analysts are expecting 125,000 jobs to have been added to payrolls last month. Forecasts have been raised recently after a string of positive economic data such as yesterday's ADP employment report which showed a 206,000 rise in private payrolls for the month of November (Consensus: +130,000).

However, jobs data today wasn't so rosy. Initial unemployment claims rose by 6,000 last week to 402,000 according to the latest data from the US Labor Department. The market consensus was expecting a reading of 390,000.

Meanwhile, the latest ISM manufacturing purchasing managers' index came in at 52.7, from 50.8 the month before. Consensus was looking for a reading of 52.0 points.

Manufacturing data elsewhere weighed on sentiment though with UK, Eurozone and Chinese PMIs all coming in below the 50 mark, indicating a contraction. For China, this was the first dip below 50 since March 2009.

M&A SPECULATION ONGOING AT YAHOO!

In company news, Yahoo! rose strongly as M&A rumours continued. Blackstone Group and Bain Capital are negotiating with Asian partners a bid for Yahoo that would value the company at approximately $25bn ($20 a share), according to sources cited by Reuters.

Barnes and Noble tanked after reported a $6.6m net loss in the second quarter.

Procter and Gamble fell after despite an upgrade from neutral to overweight by RBS Capital Markets. Hewlett-Packard was being helped higher after Pacific Credit upgraded the stock to neutral from underweight. Unum Group was out of favour after SunTrust cut its rating from buy to neutral.


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Friday newspaper round-up
Extraordinarily serious and threatening...perilous – these are not the sort of words a central banker normally uses, yet every time the Governor of the Bank of England, Sir Mervyn King, appears in public these days, he ramps up the language of crisis still further. Regrettably, he's only telling it as it is. We stand on the brink, apparently incapable of pulling back. Events on the Continent have come to feel much like the drift into war. There is a feeling of powerless inevitability about it. Crisis summits come and go with no resolution in sight, but there's always the next one to set the world to rights, though we all know that in truth it won't. Markets and politicians cling to the belief that in the end, the single currency won't be allowed to fail, says The Telegraph.

Production lines across the world are slowing down as the malign influence of the eurozone crisis hammers confidence in Britain, continental Europe and as far afield as China. Activity in Britain’s beleaguered manufacturing sector tumbled to its lowest level in two and a half years last month, fuelling fears that the country is about to tip back into recession. (…) JP Morgan’s global manufacturing index dropped to 49.6 in November, from 49.9 the previous month. The eurozone fared the worst, with output in France falling to 47.3, from 48.5 in October, while output in Germany dropped to 47.9, from 49.1. (…) Prospects in America have begun to pick up with job creation improving and anecdotal reports of strong consumer spending after last week’s Thanksgiving holiday, The Times reports.

Royal Bank of Scotland and Santander fear the official cost of UK banking reforms is too low, Government documents revealed on Thursday. The Independent Commission on Banking (ICB) estimates that the changes it proposed in September will cost the industry between £4bn-£7bn. (…) These "are understated," according to Santander UK chief executive Ana Botin in a letter to the House of Lords' select committee on economic affairs earlier this month. Santander's analysis of the likely costs is in line with a £10bn estimate from analysts at Goldman Sachs, she added, The Telegraph reports.

Goldman Sachs has predicted at least two years of sky-high oil prices, in a forecast that would pile even more inflationary pressure on household finances if proven correct. The Wall Street giant predicted Brent crude – the benchmark applied to two-thirds of global oil supplies – could rise as high as $135 in 2013 and $127.50 next year. It said the European debt crisis could force the price back down if it tips the global economy into recession, but predicted industrialisation in developing countries would sustain demand. Any rise in the cost of fuel would damage the Bank of England’s efforts to pull the rate of inflation back well below its current 5%. Sceptics pointed to a prediction by Goldman analysts in May 2008 that oil could hit $200 within six months, only to see it fall to $40 by the end of the year. Recent oil price fears have been stoked by rising tensions between Iran and the West, The Daily Mail reports.

The seemingly unstoppable rise in the value of London’s most expensive homes could finally be losing momentum, with one chain of estate agents reporting a slowdown in the rate of price increases to 1.1 per cent this quarter. Cluttons said today that price increases across Central London had slowed sharply from 3.5 per cent in the second quarter of this year. The slowdown had been expected, Cluttons said, after uninterrupted gains in the past 12 months. But house prices across the capital are still near pre-recession levels, with average values only 2.48 per cent below the peak recorded in the third quarter of 2007. Some “sub-markets” in London, where demand is high, have already breached this pre-recession peak, says The Times.

The Government gave the go-ahead yesterday for a controversial proposal to convert Britain's plutonium waste into mixed oxide (Mox) nuclear fuel that could be "burned" in a new generation of nuclear power plants. The decision, which ends decades of uncertainty on how to deal with a growing stockpile of more than 112 tonnes of plutonium waste, was presented as a written Parliamentary statement by the energy minister, Charles Hendry. (…) But although Mr Hendry made it clear that the Government sees the "Mox option" as a priority, it is not certain that a new £3bn plant to convert the plutonium into Mox fuel will ever be built, writes The Independent.

Lloyds Banking Group has offered to exchange £4.9bn of its outstanding bonds in order to raise new capital. The part-nationalised lender has asked investors in the Tier 2 securities to swap their holdings for new bonds at a discount to face value of as much as 30%. By exchanging Tier 2 notes, banks dispose of securities that will start to lose their value as capital notes under new European rules from 2013. Lenders also get a boost to their capital against losses by swapping the debt at a discount. The transaction will contribute about 20% of the bank's funding needs for next year, according to Lloyds, according to The Telegraph.