ADVFN Morning Euro Markets Bulletin - February 7th 2012

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London open: Miners tank in early trade


Market Movers

techMARK 2,005.15 -0.07%
FTSE 100 5,888.28 -0.07%
FTSE 250 11,219.37 -0.16%
A fall in the mining sector outweighed a strong showing by oil stocks as the Footsie slipped in early trading.

Eyes will again be on Greece with as the meeting between Prime Minister Lucas Papademos and the country's three main political parties, originally scheduled for yesterday, is due to take place later today. Athens is attempting to reach an agreement on austerity measures requested by the Troika.

In domestic news, UK retail sales (in value terms) in January were down 0.3% on a like-for-like basis from the same month of 2011, when sales rose 2.3%, picking up after December 2010's snow disruption, according to the British Retail Consortium's (BRC) monthly retail sales monitor.

XSTRATA AND GLENCORE TIE THE KNOT

Miners dominated the fallers with the big news of the day surrounding Anglo-Swiss commodities firms Xstrata and Glencore, who have finalised terms of their agreed merger. The tie-up may be advertised as a "merger of equals" but it will be effected through commodities trader Glencore making a bid for mining firm Xstrata.

Xstrata shareholders will be offered 2.8 Glencore shares for every Xstrata held. The merger values each Xstrata share at 1,290.1p, representing a premium to its share price of 1,119.50p on February 1st, the last trading day before the official announcement of merger talks. Judging by the share price reactions, Glencore has emerged as the victor in the negotiation process between the two companies. Xstrata however, was a heavy faller.

While the news has prompted speculation of a bout of consolidation in the mining sector, miners were generally out of favour in the opening hour with Randgold Resources, Antofagasta, Kazakhmys, Rio Tinto, ENRC and Vedanta Resources among the worst performers.

Oil giant BP edged higher after announcing a 14% increase in its quarterly dividend, the first rise since the company resumed payouts a year ago. The company announced that replacement cost (RC) profit was $7,606m in the fourth quarter of 2011, taking the full-year figure to $23,900m, compared with a loss of $4,914m in 2010. Sector peers Cairn Energy and Shell were also in demand.

Burberry was also a heavy faller, tracking the luxury goods sector lower, as its European counterparts Christian Dior and LVMH taking a hit in Paris.

British Airways owner International Consolidated Airlines was lower as investors continued to assess the impact of the weekend's heavy snow across Europe which led to the cancellation of hundreds of flights.

TALKTALK ON THE RISE

Internet and telephone service provider TalkTalk Telecom soared after raising full year earnings guidance as projected cost savings come in ahead of schedule. With just under two months of its financial year left to run, the company has raised full year earnings per share (EPS) guidance by 6% to a range running from 17.0p to 17.5p.

Housebuilder Bellway fell despite saying completed home sales rose by 5% in the six months to January 31st 2012 with operating margins poised to reach double digits.

Insurance and reinsurance company Amlin has estimated that its worst case position resulting from the grounding of the cruise ship Costa Concordia would be less than 10m, net of reinsurance recoveries. Shares edged higher.


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FTSE 100 - Risers
Cairn Energy (CNE) 355.40p +3.04%
Shire Plc (SHP) 2,184.00p +2.58%
Glencore International (GLEN) 469.30p +1.86%
Essar Energy (ESSR) 133.20p +0.99%
Aviva (AV.) 377.50p +0.88%
Royal Dutch Shell 'B' (RDSB) 2,312.50p +0.87%
WPP (WPP) 782.50p +0.84%
Capital Shopping Centres Group (CSCG) 343.00p +0.79%
RSA Insurance Group (RSA) 112.80p +0.71%
Hargreaves Lansdown (HL.) 444.00p +0.68%

FTSE 100 - Fallers
Burberry Group (BRBY) 1,401.00p -3.11%
Kazakhmys (KAZ) 1,163.00p -2.27%
Eurasian Natural Resources Corp. (ENRC) 705.50p -2.22%
Xstrata (XTA) 1,233.50p -2.22%
Randgold Resources Ltd. (RRS) 7,405.00p -2.12%
Antofagasta (ANTO) 1,338.00p -1.83%
International Consolidated Airlines Group SA (IAG) 183.30p -1.66%
Wolseley (WOS) 2,257.00p -1.35%
Rio Tinto (RIO) 3,895.00p -1.29%
ARM Holdings (ARM) 570.00p -1.21%

FTSE 250 - Risers
TalkTalk Telecom Group (TALK) 130.00p +9.34%
Centamin (DI) (CEY) 99.00p +2.48%
Lamprell (LAM) 337.70p +2.24%
Henderson Group (HGG) 121.90p +2.01%
Shanks Group (SKS) 107.10p +1.90%
Ocado Group (OCDO) 105.40p +1.84%
JD Sports Fashion (JD.) 813.00p +1.75%
Amlin (AML) 343.00p +1.66%
Tullett Prebon (TLPR) 319.00p +1.56%
Spirit Pub Company (SPRT) 53.25p +1.43%

FTSE 250 - Fallers
Misys (MSY) 325.60p -2.81%
Barratt Developments (BDEV) 116.60p -2.51%
Bellway (BWY) 763.00p -2.24%
Taylor Wimpey (TW.) 43.95p -1.79%
Spectris (SXS) 1,592.00p -1.73%
Morgan Crucible Co (MGCR) 325.30p -1.72%
Ashtead Group (AHT) 243.60p -1.69%
Allied Gold Mining (ALD) 140.10p -1.68%
Fidelity China Special Situations (FCSS) 82.35p -1.61%

UK Event Calendar

Tuesday February 07

INTERIMS
Sabien Technology Group

INTERIM DIVIDEND PAYMENT DATE
Johnson Matthey, Workspace Group

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Consumer Credit (US) (20:00)
Industrial Production (GER) (11:00)

Q4
BP, GlaxoSmithKline, Torchmark Corp., Wolfson Microelectronics

FINALS
Beazley, BP, GlaxoSmithKline, Low & Bonar, St. Modwen Properties, Torchmark Corp., Wolfson Microelectronics, Xstrata

ANNUAL REPORT
Proventec

IMSS
888 Holdings

AGMS
Pressure Technologies, TUI Travel, United Drug, Victrex

TRADING ANNOUNCEMENTS
Bellway

UK ECONOMIC ANNOUNCEMENTS
BRC Sales Monitor (00:01)

Q1
TUI Travel




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Europe open: Stocks started higher, but investors are cautious

FTSE 100 Euronext Dax perf CAC 40


-Aussie soars as central bank refuses to cut rates.
-Saudi Finance Minister says too early to offer contribution to IMF.
-Iran parliament says ready to announce ban on oil exports to some EU states.
-Press reports Papademos to meet political leaders at 4pm local time.
-Banks deposited 503,388bn at ECB overnight.


FTSE-100: 0.20%
Dax-30: 0.25%
Cac-40: 0.40%
Ibex 35: 0.18%

The major European equity benchmarks have begun the session with slight gains. That ahead of the expected meeting, later today, between the Greek Prime Minister Lucas Papademos and the countrys three main political parties to try and reach an agreement that will give it access to aid from the European Union.

Acting as a backdrop, the relatively positive performance put in last night by equities on Wall Street, which finished close to the days highs.

Swiss lender UBS has this morning reported a 76% drop in its fourth quarter profit, to 393m Swiss francs, below analysts expectations.

The worlds largest steel maker, Arcelor Mittal, has today published fourth quarter profits before interest, taxes, depreciation and amortization of $1.71bn, slightly ahead of estimates. The company expects to see a rise in its firsthalf operating profits.

Fertilizer manufacturer Yara Intl. is leading gains on the Stoxx 600 after publishing results.

From a sector stand-point, the best performers now are: health care (0.55%), insurance (0.47%) and banks (0.39%).

MACROECONOMY

German industrial production data for the month of December is to be released at 11am.

The French trade deficit has come in at 5.0bn for December.

OTHER MARKETS

The euro/dollar is up by 0.16% to the 1.3144 dollar mark.

Front month crude futures are rising by 0.301% to the $116.28/barrel level in ICE trading.


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US close: Stocks fall as Greek talks drag on
Dow Jones: -17 at 12,845
Nasdaq: -4 at 2,902
S&P 500: -1 at 1,344

US stocks slipped on Monday as ongoing talks in Greece tested investor patience, with the country's Prime Minister, Lucas Papdemos, struggling to build a political consensus on austerity measures in order to secure the next bailout.

After a meeting last night between the three parties of Greece's coalition government, Papademos announced that they had agreed on "basic issues". However, it seems that the two smaller party heads remain opposed to excessive austerity measures.

Negotiations continue to crawl forward with Greek finance minister Evangelos Venizelos saying: "The gap between the successful completion of procedures and a deadlock, which could be accidental or due to a misunderstanding, is very small. We are on the razor's edge," he said.

German Chancellor Angela Merkel and French President both expressed their impatience at a news conference in Paris: "I honestly can't understand how additional days will help," Merkel said. "Time is of the essence. A lot is at stake for the entire Eurozone."

Meanwhile, Sarkozy added: "An agreement has never been so close, neither for private nor public creditors...We have to conclude it."

With the dollar index - which measures the greenback against a basket of six other currencies - hitting a high of 79.52, from yesterday's 78.94, gold prices took a tumble, pulling precious metals miners AuRico Gold, Eldorado Gold and Yamana Gold into the red.

Financial stocks were also under pressure as the markets focused their attention on Greece, with Genworth Financial and Capital One Financial Corp among the fallers.

Over big movers include biotech firm Dendreon which surged nearly 17% after rival Amgen after the Food and Drug Administration raised some questions with rival Amgen's Xgeva drug for prostate cancer. Meanwhile, health insurer Humana fell over 5% after fourth quarter sales fell short of expectations.

MACROECONOMY

Economists at UBS have raised their first quarter 2012 GDP estimate for the United States to 2.3% from 1.5% before.

S&P 500 - Risers
Abercrombie & Fitch Co. (ANF) $44.35 +9.48%
Sprint Nxtel Corp. (S) $2.46 +6.03%
Best Buy Co. Inc. (BBY) $24.67 +3.39%
Cabot Oil & Gas Corp. (COG) $33.54 +3.36%
R.R. Donnelley & Sons Co. (RRD) $12.31 +3.36%
Sunoco Inc. (SUN) $39.79 +3.35%
Alpha Natural Res (ANR) $23.54 +3.34%
Whirlpool Corp. (WHR) $70.74 +3.03%
First Solar Inc. (FSLR) $46.49 +2.96%
Denbury Resources Inc. (DNR) $19.20 +2.78%

S&P 500 - Fallers
Medco Health Solutions Inc. (MHS) $58.47 -8.08%
Humana Inc. (HUM) $85.25 -5.40%
Express Scripts Inc. (ESRX) $49.67 -4.64%
CSX Corp. (CSX) $22.32 -3.67%
Sysco Corp. (SYY) $29.79 -3.59%
Monsanto Co. (MON) $79.65 -3.04%
Southwest Airlines Co. (LUV) $9.75 -2.89%
Capital One Financial Corp. (COF) $47.90 -2.84%
Micron Technology Inc. (MU) $7.72 -2.83%
Weyerhaeuser Co. (WY) $20.70 -2.82%

Dow Jones I.A - Risers
Bank of America Corp. (BAC) $7.97 +1.66%
Procter & Gamble Co. (PG) $63.51 +1.18%
Walt Disney Co. (DIS) $40.46 +1.15%
Chevron Corp. (CVX) $106.67 +1.11%
Exxon Mobil Corp. (XOM) $85.75 +0.98%
Verizon Communications Inc. (VZ) $38.14 +0.79%
Cisco Systems Inc. (CSCO) $20.19 +0.50%
General Electric Co. (GE) $19.05 +0.16%
Merck & Co. Inc. (MRK) $38.40 +0.08%
AT&T Inc. (T) $29.97 +0.07%

Dow Jones I.A - Fallers
Travelers Company Inc. (TRV) $59.33 -1.31%
Pfizer Inc. (PFE) $20.95 -1.18%
Boeing Co. (BA) $75.46 -1.15%
Hewlett-Packard Co. (HPQ) $28.76 -1.07%
American Express Co. (AXP) $51.81 -0.84%
Johnson & Johnson (JNJ) $65.18 -0.70%
United Technologies Corp. (UTX) $80.57 -0.59%
McDonald's Corp. (MCD) $99.49 -0.52%
Kraft Foods Inc. (KFT) $38.69 -0.49%
E.I. du Pont de Nemours and Co. (DD) $51.78 -0.44%

Nasdaq 100 - Risers
Vertex Pharmaceuticals Inc. (VRTX) $38.24 +3.98%
First Solar Inc. (FSLR) $46.49 +2.96%
Gilead Sciences Inc. (GILD) $56.03 +2.43%
Google Inc. (GOOG) $609.09 +2.14%
News Corp. Class A (NWSA) $19.56 +1.45%
Warner Chilcott Plc (WCRX) $16.78 +1.45%
Vodafone Group Plc ADS (VOD) $28.24 +1.33%
Citrix Systems Inc. (CTXS) $69.44 +0.97%
Logitech International S.A. (LOGI) $8.39 +0.96%
Apple Inc. (AAPL) $463.97 +0.93%

Nasdaq 100 - Fallers
Express Scripts Inc. (ESRX) $49.67 -4.64%
Expeditors International Of Washington Inc. (EXPD) $43.47 -2.45%
Amazon.Com Inc. (AMZN) $183.14 -2.42%
Baidu Inc. (BIDU) $131.37 -2.35%
KLA-Tencor Corp. (KLAC) $50.83 -2.21%
Lam Research Corp. (LRCX) $43.23 -2.17%
FLIR Systems Inc. (FLIR) $26.05 -1.92%
Expedia Inc. (EXPE) $33.57 -1.90%
Priceline.Com Inc. (PCLN) $536.73 -1.87%


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Newspaper Round Up
Shoppers reverted to a bunker mentality over the new year, according to gloomy sales figures that quash any hope of consumers pulling the economy clear of a double-dip recession. Till receipts in January were 2.1% higher than a year ago, according to the British Retail Consortium. However, it said that this was the second most feeble growth in January in the 17-year history of its survey. Excluding new stores, sales fell by 0.3%. Separate research by Liberum Capital showed that shoppers' confidence is faltering and that people still want to repay their debts, with 27% saying that they wanted to reduce borrowing compared with only 8% who expect to borrow more this year, The Times says.

Greek politicians refused to yield to the austerity demands of their "troika" paymasters despite a stark warning from German chancellor Angela Merkel that the stand-off threatened the "entire Eurozone". The three main political parties in Greece's national unity government were reportedly given until 11am to respond to international demands on tougher spending cuts. But the deadline passed with no response - except for politicians claiming there was no deadline. Sources in Athens said the talks between Greece and its creditor banks were on hold while Lucas Papademos, the Greek prime minister, vacillated between negotiations with his own politicians and the "troika" officials from the European Union (EU), the International Monetary Fund (IMF) and the European Central Bank (ECB), The Telegraph writes.

Miner Xstrata and trading house Glencore will on Tuesday unveil details for their $90bn (56.9bn) merger, which will see the new copper-to-commodities trading titan catapulted to seventh place in the UK's FTSE 100. Glencore, which owns 34% of Xstrata, is expected to offer just shy of 2.8 shares for each Xstrata share implying an 18% to 20% premium to Xstrata's share price before rumours of the deal emerged. That premium described by analysts as "skinny" represents almost a 30% premium to the average 30-day share price of the two companies. However, Xstrata shareholders, who were made insiders on Monday, still complained the proposal represented a better deal for Glencore, whose 12 top executives own 31% of the company, according to The Telegraph.

The big freeze gripping much of Europe has sent the price of gas rocketing to a six-year high amid concern over a supply shortage as homeowners and businesses crank up their heating. A fall in gas imports from Norway yesterday, on top of the critical situation on the Continent, sent shockwaves through British gas markets. The wholesale price, which had risen by a third in the past week, soared by more than a quarter at one point yesterday. Gas demand across Europe has surged because of an unusually long period of sub-zero temperatures. On Saturday the Russian state-controlled Gazprom acknowledged that it had cut exports to some countries by as much as 30%. The company claimed that countries had been importing more than their quotas and that it needed the gas to meet soaring demand at home, The Times says.

BAE Systems is considering lowering the price of its Eurofighter Typhoon to win back an $11bn (7bn) Indian contract from France's Dassault. Ian King, BAE's chief executive, said the company was considering a range of options to secure the deal to supply fighter jets, which could help prevent a major industrial setback for Britain. A source close to the company said BAE was consulting with its partners in Germany, Italy and Spain to see what was feasible in the coming days and weeks. India had previously changed its mind on defence contracts, the source said, adding there was "still some way to go" before any decisions by the country had been made. The insider insisted the contract was still up for grabs, with Dassault's Rafale only having been named as the lowest-priced compliant bidder rather than being awarded the contract.

Authorities in the United States have levied a $22 million fine on Smith & Nephew over bribes paid to Greek doctors to induce sales of the company's medical devices. The London-based healthcare company, which specialises in surgical equipment, including artificial hips and knees, admitted yesterday that a distributor in Greece had made "improper payments" over a decade running up to 2008. According to charges laid by the US Department of Justice and the Securities and Exchange Commission, sums of $9.4m were paid by Smith & Nephew to an offshore shell company controlled by the Greek distributor. The US Government said that "some or all" of this money was passed on to physicians to "corruptly induce them" to favour the company's products, The Times says.

The average family will owe nearly 8,000 by the end of the year thanks to personal loans, overdrafts and credit cards and despite three years of repaying more than they borrow. According to research by PriceWaterhouseCooper, even after families paid off an average of 355 of their unsecured debt last year, UK households remain 'among the most indebted in the world'. The report predicted UK consumers will continue to pay down their debts, but will still owe around 7,900 by 2013. Average incomes have fallen by nearly 3.5% in real terms over the past year, squeezing budgets even further as consumers have faced soaring bills. Worryingly, 25% of those in the 25-34 year old age bracket admitted to using a credit card to fund essential purchases in the last year. The report also stated that credit card use could fall into permanent decline, with the rise of digital technology and alternative methods of accessing credit, such as payday loans, The Daily Mail reports.

The prices consumers pay for broadband and landline telephone services are expected to fall after Ofcom announced plans to reduce the amount BTcan charge rivals to rent lines. The communications regulator has proposed cuts of up to 19% in the amount that BT's wholesale network Openreach, which owns the majority of landlines in the country, will be able to charge from April, with further decreases the following year. This is the third time Ofcom has set the prices that Openreach charges other companies for using their lines and its proposals are expected to benefit BT's rivals such as TalkTalk and Sky, who may choose to pass on the lower costs to consumers, The Guardian says.