ADVFN Morning Euro Markets Bulletin - February 22th 2012

London Market Report

FTSE 100 Euronext Dax perf CAC 40

Please click on the images to view our interactive charts

Footsie slips as ex-div stocks provide a drag

Market Movers
techMARK 2,016.78 +0.04%
FTSE 100 5,914.39 -0.23%
FTSE 250 11,408.07 +0.25%


The FTSE 100 slipped slightly into the red in the opening hour on Wednesday as investors continue to digest the Greek bailout approved on Monday night. Meanwhile, Chinese manufacturing data has shown an improvement but still shows that the industry is contracting.

Eurozone finance minsters have granted Greece its next €130bn in aid, a move that was crucial to help the heavily-indebted nation avoid a near-term disorderly default. However, the market reaction to the long-awaited deal was rather muted though - the Footsie fell 0.29% yesterday - with doubts still remaining over the nation's longer-term outlook.

Bank of England policy-maker Charlie Bean last night said that while the Greek agreement is "welcome", there still remains “a possibility that events could unfold in a disorderly and damaging fashion at some stage in the future."

HSBC's purchasing managers' index (PMI) for the month of January rose to 49.7 points, above the reading of 48.8 seen in the month before, according to preliminary data just released by the lender.

However, the new export orders sub-index is said to have changed direction and begun to contract. China’s exports and imports fell for the first time in more than two years last month, and today's data is seen as validating worries regarding weakness in the external environment. Some economists believe that will lead to economic growth falling below the 8% mark in the first three months of the year.

In other news, Brent crude futures continue to rise, now well past the $120-a-barrel price, as the Greek deal and jitters about supply disruptions from Iran fuel gains.

In domestic news, the minutes of the February meeting of the Monetary Policy Committee will be released this morning.

ROYAL DUTCH TO SHELL OUT FOR COVE ENERGY

Shares in AIM-listed Cove Energy jumped after Anglo-Dutch integrated oil firm Royal Dutch Shell launched a bid of 195p per share. The deal values the east Africa-focused company at £992.4m, a 73.3% premium to the closing price of 112.5p on January 4th (the last day before Cove put itself up for sale).

Amongst other things, Cove has a 8.5% stake in the Rovuma Offshore Area 1, Mozambique, operated by Anadarko. Merchant Securities analyst Brendan Long has said this morning that the bid has a strong read-across for companies "that have discovered or are exploring for oil and gas resources that share a similar geological themes, often with higher equity stakes in the assets."

Long highlights six companies - Rockhopper Exploration, Ophir Energy, Falklands Oil & Gas, Chariot Oil & Gas, Borders & Southern Petroleum and Tower Resources - all of which were rising strongly this morning.

REXAM RISES STRONGLY, EX-DIV STOCKS PROVIDE A DRAG

Consumer packaging firm Rexam was a high riser early on after it saw underlying profits growth race ahead of sluggish sales growth on the back of a better than expected performance in its Beverage Cans business, primarily in Europe.

Banks were performing strongly with RBS and Lloyds gaining 1.4% and 0.8%, respectively. Mining peers Evraz, Glencore, Xstrata, Rio Tinto and Vedanta Resources were also on the up as metals prices continue to rise strongly on the back of yesterday's surge.

Cillit Bang maker Reckitt Benckiser was one of the heaviest fallers after going ex-dividend today. Banking giant Barclays and cruise operator Carnival were also lower after trading without the right to their latest quarterly dividends.


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FTSE 250: GALLIFORD TRY, HAYS, LOGICA RISE STRONGLY EARLY ON

Housebuilding and construction firm Galliford Try doubled its interim dividend and delivered strong profit growth. Pre-tax profit rose to £32.2m for the half year ended 31 December 2011 from £17m the same time a year earlier. Group revenue climbed to £746.8m from £575.9m previously.

Recruitment firm Hays jumped despite paring its dividend to 0.83p from 1.85p per share the year before. Nevertheless, net fees in the second half of 2011 rose 15%, or 11% in a like-for-like (LFL) basis to £373.8m from £326.1m at the half-way stage in 2010.

After a couple of warnings last year about weakening revenues it was with some relief that Logica, a provider of computer programming contractors, said its 2011 results were in line with guidance it issued in mid-December.

FTSE 100 - Risers
Rexam (REX) 400.60p +4.21%
Essar Energy (ESSR) 125.00p +1.63%
Royal Bank of Scotland Group (RBS) 28.61p +1.42%
Meggitt (MGGT) 385.00p +1.13%
Capita (CPI) 653.00p +1.01%
Petrofac Ltd. (PFC) 1,581.00p +0.96%
Lloyds Banking Group (LLOY) 36.03p +0.78%
Evraz (EVR) 415.50p +0.68%
BG Group (BG.) 1,490.50p +0.68%
Smiths Group (SMIN) 1,054.00p +0.67%

FTSE 100 - Fallers
Carnival (CCL) 1,896.00p -2.37%
Marks & Spencer Group (MKS) 347.30p -2.14%
Reckitt Benckiser Group (RB.) 3,503.00p -2.10%
International Consolidated Airlines Group SA (IAG) 166.70p -1.88%
Barclays (BARC) 243.75p -1.61%
Eurasian Natural Resources Corp. (ENRC) 711.50p -1.59%
Burberry Group (BRBY) 1,417.00p -1.53%
Tesco (TSCO) 318.60p -1.27%
CRH (CRH) 1,344.00p -1.18%
WPP (WPP) 791.50p -1.00%

FTSE 250 - Risers
Galliford Try (GFRD) 549.50p +9.68%
Hays (HAS) 88.15p +8.83%
Logica (LOG) 87.85p +7.92%
Ophir Energy (OPHR) 390.20p +6.76%
Travis Perkins (TPK) 1,071.00p +5.93%
Barratt Developments (BDEV) 135.60p +4.55%
Bumi (BUMI) 776.50p +4.09%
Soco International (SIA) 327.00p +3.28%
Afren (AFR) 136.90p +3.17%
Great Portland Estates (GPOR) 359.00p +3.01%

FTSE 250 - Fallers
Home Retail Group (HOME) 105.00p -3.67%
Kenmare Resources (KMR) 59.50p -3.25%
Allied Gold Mining (ALD) 116.10p -3.17%
COLT Group SA (COLT) 94.20p -2.89%
Ocado Group (OCDO) 100.00p -2.82%
BBA Aviation (BBA) 203.80p -2.30%
Supergroup (SGP) 545.50p -2.24%
African Barrick Gold (ABG) 451.20p -2.23%
Drax Group (DRX) 507.00p -2.22%
Cable & Wireless Worldwide (CW.) 26.56p -1.70%


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Europe Market Report

FTSE 100 Euronext Dax perf CAC 40


Stocks mixed following weak economic data

FTSE-100: -0.09%
Dax-30: -0.31%
Cac-40: 0.03%
Ibex 35: -0.38%
FTSE-Mibtel: 0.14%

European equity benchmarks are trading mixed this morning, following a similar result to yesterday´s trading on Wall Street. Weak data on new export orders in China and purchasing managers´ data in France and Germany this morning are weighing on investor sentiment.

Worth mentioning, Iran´s decision to bar International Energy Agency inspector from some sites has led to some talk in the markets that an Israeli strike against those installations is possible. There are experts however who believe that for any strikes to be successful they would need to be carried out by both Israel and the United States, something which is seen as unlikely at the moment.

Acting as a backdrop, all eyes are still on Greece and whether its lawmakers implement the measures asked of them by international creditors.

EQUITIES

Peugeot is rising sharply, by 8.3%, after saying that it is studying possible alliances; a report in La Tribune indicates that it has held talks with General Motors.

Hotel company Accor has announced full-year profit growth of 19%.

France Telecom has warned that it may cut its dividend payments by up to 14% in 2012; although the news may have already been discounted in its share price.

From a sector stand-point the best performers on the DJ Stoxx 600 now are: automobiles (0.52%), industrial goods and services (0.48%) and basic resources (0.38%).

MACROECONOMY

The German manufacturing sector purchasing managers´ index for the month of February has come in at 50.1 (Consensus: 51.5), while a similar gauge for the services sector fell to 52.6 (Consensus: 53.9), from the previous month´s reading of 53.7.

The French manufacturing sector purchasing managers´ index for the month of February has come in at 50.2 (Consensus: 49.0), while the services sector index fell to 50.3 (Consensus: 52.0), from the previous month´s reading of 52.3.

OTHER MARKETS
Front month Brent futures are rising by 0.074% to the $121.74/barrel mark in ICE trading.
The Euro/dollar is now up 0.10% at the 1.3250 dollar mark.

UK Event Calendar

INTERIMS
A&J Mucklow Group, Barratt Developments, Galliford Try, Hays

INTERIM EX-DIVIDEND DATE
Downing Absolute Income VCT 2, Heath (Samuel) & Sons, Mid Wynd International Inv Trust, Mountview Estate, PZ Cussons

QUARTERLY EX-DIVIDEND DATE
Barclays, Carnival

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Existing Home Sales (US) (15:00)
Industrial New Orders (EU) (10:00)
MBA Mortgage Applications (US) (12:00)

Q4
Millennium & Copthorne Hotels

FINALS
Anglo Pacific Group, Filtrona PLC, Logica, London Capital Group Holdings, Millennium & Copthorne Hotels, Rexam, St James's Place, Telecom Egypt SAE GDS (Regs), Travis Perkins

SPECIAL EX-DIVIDEND PAYMENT DATE
F&C Managed Portfolio Trust Income Shares, Independent Inv Trust

EGMS
Banco de Chile ADR

AGMS
Banco de Chile ADR, Gooch & Housego

UK ECONOMIC ANNOUNCEMENTS
BoE Interest Rate Minutes (09:30)

FINAL EX-DIVIDEND DATE
Brunner Inv Trust, Chrysalis VCT, Domino's Pizza UK & IRL, Framlington AIM VCT, Independent Inv Trust, Jersey Electricity 'A' Shares, Reckitt Benckiser Group, Throgmorton Trust


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US Market Report
Stocks mixed as Greek bailout underwhelms

Dow Jones: (+0.12%) 12,966.
Nasdaq: (-0.11%) 2,949.
S&P 500: (+0.07%) 1,362.

Wall Street's benchmark indices finished mixed on Tuesday, as markets digested last night's approval by Eurozone finance ministers of the next bailout for Greece. The market reaction to the long-awaited deal was rather muted though, with doubts still remaining over the nation's longer-term outlook.

While the Dow Jones Industrial Average finished the session at 12,965 points, the index briefly surpassed the 13,000 mark, the firm time it has done in intraday trading since May 2008.

EUROGROUP SIGNS OFF ON €130BN GREEK BAILOUT

Eurozone finance ministers worked more than 13 hours last night on an agreement originally penned last October. Eurogroup has now finally approved a deal that will provide a second €130bn bailout to Greece.

However, a confidential report prepared by EU, ECB and IMF experts, and cited in several media reports, was quick to sum up that debt reduction targets are best wishes at most given the worsening state of the Greek economy.

The Financial Times obtained a copy of the report and said that “even under the most optimistic scenario, the austerity measures being imposed on Athens risk a recession so deep that Greece will not be able to climb out of the debt hole.” The most “pessimistic” scenario suggests that at least €245bn would be needed.

WAL-MART DISAPPOINTS WITH Q4 PROFITS

Retailing giant Wal-Mart led the fallers on the Dow after fourth-quarter earnings missed consensus estimates. The firm, which owns Asda in the UK, closed the fourth quarter of the year with earnings per share (EPS) excluding extraordinary items of $1.44 ($1.51 including extraordinary items) compared to the consensus estimate of $1.45. Sales rose 5.9% to $122.29bn, less than the $123.92bn expected.

Foods group Kraft was in demand after delivering fourth quarter earnings in line with market expectations. The company reported fourth quarter earnings per share (EPS) of $0.57, in line with the consensus estimate. The group's revenue rose 6.6% over the final three months of 2011 to $14.69bn compared to $13.77bn in the same period of 2010 and the $14.8bn expected by the market.

DIY retailer Home Depot rose after beating consensus earnings estimates in fourth quarter. EPS came in at 50 cents, 32% higher than the previous year and ahead of the 42 cents forecast.

Meanwhile, computer firm Dell fell after hours after fourth-quarter profits came short of expectations. The Texas-based group saw adjusted EPS fall from 53 cents to 51 cents, shy of estimates of 52 cents from analysts surveyed by FactSet Research.

S&P 500 - Risers
Wynn Resorts Ltd. (WYNN) $119.40 +5.95%
Newmont Mining Corp. (NEM) $61.54 +3.52%
Genworth Financial Inc. (GNW) $9.54 +3.47%
Nordstrom Inc. (JWN) $52.79 +3.23%
CF Industries Holdings Inc. (CF) $184.30 +3.05%
Tyco International Ltd (TYC) $51.38 +2.86%
Alcoa Inc. (AA) $10.41 +2.56%
Apple Inc. (AAPL) $514.85 +2.54%
Baker Hughes Inc. (BHI) $51.24 +2.36%
Marathon Oil Corp. (MRO) $34.56 +2.34%

S&P 500 - Fallers
Sears Holdings Corp. (SHLD) $50.94 -6.58%
Gilead Sciences Inc. (GILD) $44.69 -4.91%
KLA-Tencor Corp. (KLAC) $48.21 -3.91%
Wal-Mart Stores Inc. (WMT) $60.07 -3.86%
Netflix Inc. (NFLX) $117.40 -3.65%
PulteGroup Inc. (PHM) $8.59 -3.59%
Lennar Corp. Class A (LEN) $22.53 -3.55%
Southwest Airlines Co. (LUV) $9.10 -3.50%
Computer Sciences Corp. (CSC) $31.97 -3.36%
Novellus Systems Inc. (NVLS) $45.23 -3.23%


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Wednesday newspaper round-up
At a G20 summit in Mexico in two days the EU will plead for increased IMF contributions by non-euro countries to help shore up a Eurozone "financial firewall" seen as vital to protecting Spain and Italy from Greek debt contagion. The IMF will refuse to make extra cash available to the EU and will threaten to pull the plug on its contribution to Tuesday's €130bn bailout of Greece unless the Eurozone creates a €750bn fund, a move opposed by Germany. In the wake of this week's deal to prevent a Greek default, Olli Rehn, the EU's economic and monetary affairs commissioner, insisted that a plan to merge two Eurozone bailout funds was vital over the next 10 days, The Telegraph says.

Vitol, the world’s largest independent oil trader, gave the stark warning about the risk of a record price spike after unveiling its annual results. Ian Taylor, Vitol chief executive, said the likelihood of an Israeli air strike on Iran had increased and was likely to push oil prices to $150 a barrel. “I used to think this would never happen but everyone you speak to says the Israelis will have a go at striking at Iranian nuclear sites,” he said to The Telegraph. “The day that happens, you have to believe the Iranians throw a few mines in the Strait of Hormuz and for a few hours at least, or maybe more, I cannot see a scenario where prices would not be at that sort of level [$150 a barrel].”

Greece was last night braced for a further wave of protests after Eurozone leaders struck a bail-out deal for the indebted nation that will bring a new round of painful spending cuts and public sector job losses. The Greek cabinet assembled to discuss how to implement a series of austerity measures. Ministers were given a copy of the rescue program and told within the coming week they must sign up to 79 measures being demanded by the ‘troika’ of the European Central Bank, the International Monetary Fund and the European Commission. The reforms will then have to be endorsed by parliament before troika representatives return to Athens in March, The Daily Mail says.

Pensioners have not been hit as hard as they claim by quantitative easing (QE) and should accept that they must bear the burden of the downturn alongside working households, according to the Bank of England's deputy Governor Charlie Bean. The comments by Mr Bean to the Scottish Council for Development and Industry are likely to inflame pensioner groups, who have argued that QE is eroding their incomes. Ros Altmann, director-general of Saga Group, said on Tuesday: "QE has permanently impoverished more than 1m pensioners, and thousands more annuity purchasers will receive reduced pensions every week." Mr Bean acknowledged that pensioner incomes have been hurt by the impact of QE, but claimed that the Bank's £325bn money-printing policy has lifted the asset value of their portfolios and helped secure the economic recovery, The Telegraph reports.

Labour’s tax-cutting proposals are unaffordable and would undermine investors’ confidence in Britain, the head of the CBI said yesterday. John Cridland slammed Ed Balls’s Budget suggestions, saying that his call for a reduction in VAT or income tax failed the affordability test — especially since Moody’s put Britain’s credit rating on a negative outlook. Mr Cridland also turned his fire on the Government, arguing that anti-business rhetoric from within the coalition was damaging efforts to boost economic activity. Parts of the Government “don’t seem to get the fact that the growth narrative is priority one, two and three”, he said — although he declined to name specific ministers, writes The Times.

Lloyds and Royal Bank of Scotland, the banks bailed out by the government at the height of the financial crisis, will this week reveal combined losses of at least £4bn. The deficit will revive fears that taxpayers will have to wait several more years before recouping their £66bn investment. Britain’s continuing economic slump, coupled with the Eurozone debt crisis, have hammered both banks and killed off hopes of a speedy return to the private sector. Royal Bank of Scotland is expected to reveal losses of £1bn to £2bn when it publishes its annual results on Thursday. Lloyds Banking Group is forecast to have recorded a deficit of about £3.5bn because of a big hit from the mis-selling of payment protection insurance, and huge new writedowns on loans made by HBOS before the two banks merged. A slump in the share price of both banks last year means the government is now nursing a paper loss of more than £30bn. Public accounting rules excludes the paper losses from showing up anywhere on the government’s books, according to The Times.

The government’s coffers received their biggest monthly boost for four years, figures for January show. The public sector received £7.75bn more than it paid out, helped by an uptick in tax and repayment of debts by local authorities. The figures were better than expected, and raised hopes that Chancellor George Osborne could cut taxes in the Budget. Rowena Crawford, research economist at the Institute for Fiscal Studies, said: ‘The worsening economic outlook seen over the last year has increased pressure for a temporary fiscal stimulus package…lower-than- expected borrowing this year may give the Chancellor scope for such a policy.’ But the Treasury tried to damp down hopes of any big giveaway. A source said: ‘The deficit plan…is keeping interest rates at record lows for families and businesses and helping to support the recovery.’ It now seems certain that the government will beat its target for borrowing for the full financial year. Capital economics forecast that borrowing for 2011/12 could be as low as £117m, The Daily mail reports.