WORLD FINANCIAL NEWS

Shares fall as Libya crisis intensifies

Market Movers
techMARK 1,929.76 -1.11%
FTSE 100 6,014.80 -1.12%
FTSE 250 11,727.66 -0.85%

The top share index was nursing big losses at trading’s close as worries over the turmoil in Libya sent the oil price soaring and continued high usage of the European Central Bank’s marginal lending facility stoked nervousness over banks.

Banks are granted the right to seek overnight loans from the European Central Bank, albeit at punitive rates, in the event of an urgent need for liquidity, and on Wednesday last week demand spiked to its highest level in more than 19 months, and went higher still on Thursday. Usage dipped on Friday to €14.2bn, down from €16bn on Thursday, but that figure is considerably higher than the normal level, which typically runs at about €1bn.

Royal Bank of Scotland (RBS) and Lloyds Banking, both of which are due to release results this week and both of which are reported to be in talks with sovereign wealth funds interested in buying the UK government’s stakes in the lenders, are hit hardest. though Barclays takes some licks too.

The oil price has topped $104 a barrel as protests spread across Libya. Fuel-hungry cruise operator Carnival is among the fallers. However, gold miner Centamin Egypt is winning back some of the losses it sustained during the turmoil in that country. Other precious metals miners, such as Fresnillo and Randgold Resources,also attract support in these nervy times.

Invensys is going well after weekend reports it is being stalked by international rivals considering a bid for the company. City sources say predators include Honeywell and Emerson Electric of the US, ABB of Switzerland, Alstom of France, Germany's Siemens and two Chinese firms, CSR and CNR.

Shares in grocery delivery group Ocado fell sharply today amid fears that a new delivery service operated by its main customer, the supermarket Waitrose, could hit sales hard.

South African paper and packaging firm Mondi increased full year pre-tax four fold and upped its dividend as demand continues to pickup from financial crisis levels. Pre-tax profit rose to €372m for the year ended 31 December 2010 from €49m a year earlier. Group revenue increased 18% to €6.2bn.

Royal Dutch Shell has agreed to sell most of its stake in nearly all its retail and distribution businesses in Africa to a private equity fund for around $1bn (£616m).

Property group Hammerson reported adjusted profit before tax of £144.5m for 2010, up from £130.0m in 2009. Profit adjusted for revaluations grew by 11% to £144.5m and adjusted net asset value per share had risen 17.6% to 495p by the end of 2010. Net rental income fell 3% to £284.7m, but was up 3.5% on a like for like basis. "This is a strong set of results which reinforces the strategy we are pursuing,” chairman John Nelson said.

Spirits brands giant Diageo is to buy Mey Içki, the leading spirits producer and distributor in Turkey. The company is being acquired for an enterprise value of TL3,300m (£1,300m) from investment firm TPG Capital and Actera. The transaction is expected to complete in the second half of 2011, subject to regulatory clearances.

In the FTSE 250, investors had an appetite for sausage skins maker Devro, which produced full-fat results for 2010 with operating margin improving sharply to 16.1% from 12.4%. Profit before tax and exceptional items in 2010 rose 44.4% to £36.3m from £25.1m in 2009.

However, bluetooth chip specialist CSR slumped after it unveiled a $680m merger with US peer Zoran accompanied by a $240m share buyback programme.

Property firm Great Portland Estates has swapped its freehold interest in 79/89 Oxford Street with a private investor in return for a new 250 year leasehold interest at both 79/89 Oxford Street and the adjoining property, 73/77 Oxford Street.

Soy sauce manufacturer China Food Company says that its full year figures will be moderately ahead of estimates, which has led its broker FinnCap to upgrade its 2010 profit estimate by £200,000.

Shares in Avingtrans, the designer, manufacturer and supplier of critical components and associated services to the energy, medical, industrial and global aerospace sectors, set a fresh 52-week high on Monday morning on news of a contract extension worth £5m over three years.

Australia-based loans provider and second hand products retailer Cash Converters International reported sharply higher profits in the six months to December 2010.

Power control components manufacturer XP Power has a habit of pleasing the market and today’s results provided another opportunity. Revenue grew 36% to £91.8m in 2010 but bookings rose even faster – up 51% at £103.4m – while underlying pre-tax profit more than doubled to £18.7m.

Speciality pharmaceutical company ProStrakan looks set to succumb to an agreed 130p a share bid from Japanese speciality drug company Kyowa Hakko Kirin. “The directors have recommended the offer and already 47.71% of the shares have been committed,” notes Charles Stanley analyst Franc Gregori.

FTSE 100 - Risers
Randgold Resources Ltd. (RRS) 5,235.00p +3.97%
Invensys (ISYS) 357.80p +3.71%
Fresnillo (FRES) 1,550.00p +2.85%
Hammerson (HMSO) 455.20p +1.72%
Tesco (TSCO) 413.50p +0.85%
Essar Energy (ESSR) 521.50p +0.68%
Morrison (Wm) Supermarkets (MRW) 286.30p +0.46%
Unilever (ULVR) 1,832.00p +0.27%
British Sky Broadcasting Group (BSY) 753.00p +0.13%
Reed Elsevier (REL) 564.50p +0.09%

FTSE 100 - Fallers
Lloyds Banking Group (LLOY) 66.55p -3.97%
Royal Bank of Scotland Group (RBS) 46.64p -3.89%
ARM Holdings (ARM) 597.00p -3.71%
Carnival (CCL) 2,808.00p -3.41%
Man Group (EMG) 294.70p -3.12%
International Consolidated Airlines Group SA (IAG) 239.50p -2.84%
Resolution Ltd. (RSL) 285.30p -2.76%
HSBC Holdings (HSBA) 704.40p -2.55%
Vedanta Resources (VED) 2,301.00p -2.54%
Pearson (PSON) 1,032.00p -2.46%

FTSE 250 - Risers
Centamin Egypt Ltd. (CEY) 129.30p +5.81%
Devro (DVO) 243.70p +5.04%
Booker Group (BOK) 58.30p +3.83%
Petropavlovsk (POG) 1,070.00p +3.58%
Hochschild Mining (HOC) 578.50p +2.66%
Kenmare Resources (KMR) 39.00p +2.63%
EnQuest (ENQ) 135.80p +2.57%
Charter International (CHTR) 750.50p +2.25%
Mondi (MNDI) 546.50p +2.15%
Go-Ahead Group (GOG) 1,435.00p +1.92%

FTSE 250 - Fallers
CSR (CSR) 392.00p -9.68%
Ocado Group (OCDO) 239.20p -7.75%
CPP Group (CPP) 290.00p -5.84%
Exillon Energy (EXI) 395.00p -5.14%
Heritage Oil (HOIL) 278.70p -5.14%
Avis Europe (AVE) 210.00p -4.98%
Premier Foods (PFD) 27.80p -3.97%
Ferrexpo (FXPO) 425.00p -3.23%
Schroder Asia Pacific Fund (SDP) 213.00p -2.96%
Hansen Transmissions International NV (DI) (HSN) 49.15p -2.87%

Higher oil prices on the back of unrest in Libya – an important supplier to Europe – helped send bourses lower.

The Dax 30 closed down 105 at 7,321 the CAC 40 finished 59 lower at 4,097 and the Spanish IBEX was down 257 at 10,810.

Italian oil firm Eni was particularly hard hit by events in Libya, with traders concerned that the protests will have an effect on the company’s operations in the North African country. Latest reports senior officials including the justice minister have stepped down after security forces shot at protestors in Tripoli.

Other Italian companies with interests in the region that were under a cloud include defence firm Finmeccanica and banking giant UniCredit. Austrian oil firm OMV, which also has exposure to Libya, is also on the slide.

Swiss banking giant UBS was an early bright spot after Goldman Sachs issued a “buy” note on the shares.

Dutch parcel delivery firm TNT delivered net income of €126m in the fourth quarter of 2010, up from €25m the year before, despite the effects of bad weather towards the end of the year which, along with integration costs and the fall-out from strikes, put a €45m dent in operating profits.

Sales edged up to €1.22bn from €1.21bn the year before.

Lager brewer Carlsberg issued results that were probably not the best results in the world. The Danish company’s fourth quarter post-tax profit was DKr.301m, down from DKr.383m the year before and well below the DKr.433m the market had been expecting.

Sales sank to DKr.13.40 from DKr.13.62bn in the fourth quarter of 2009.

The company thinks things are looking up in 2011, however, especially in Eastern Europe, where the Russian market is tipped to return to growth. Carlsberg is targeting adjusted net profit growth of more than 20% this year.

Broker Matrix Group said sales were 2.1% above its forecast but 1% below consensus, while earnings before interest, tax and amortisation (EBITA) was 2.7% below Matrix’s number and 2.3% below consensus.

“The miss was entirely down to central costs. The sales and EBITA of the beer division actually slightly beat our expectations in Northern and Western Europe and Eastern Europe and were in line with our forecast in Asia,” the broker said.

Matrix thinks current year forecasts will see a “sizeable increase” following the upbeat outlook statement. It rates the shares a “buy” saying they “are still at the bargain end of the sector” on 13.5 times current year projected earnings per share, versus 14.6 for Anheuser-Busch InBev and 17.2 for SABMiller.

Underlying earnings at Merck came in ahead of expectations in the fourth quarter at €1.79 a share; the market had pencilled in a figure of €1.49 for the drug maker's earnings per share.

In economic news, German business confidence rose to a record high in February, on the back of soaring exports. The Ifo institute’s business climate index climbed to 111.2 from 110.3 in January, defying economists’ expectations of an unchanged reading.

WS Atkins, Punch, Talvivaara
The threat of earnings downgrades has been hanging over WS Atkins but Numis thinks that over the medium term the engineering contractor’s growth prospects make the shares worth buying.

“Overshadowing the shares has been downgrade concerns - whether through UK Road spend pressures, the quality of earnings in the PBSJ acquisition or a higher pension cash payment,” notes Numis analyst Francesca Raleigh.

However, the broker is comforted that the group is becoming less dependent on the rail and roads business in the UK, which could see its contribution to earnings before interest, tax and amortisation (EBITA) slide to 13% of the group’s total. Meanwhile, the Atkins board is also making reassuring noises about the pension situation, indicating that it does not foresee a rise in cash contributions.

“In our view, the rating does not reflect the medium term growth prospects: a) circa 50% overseas - where there are good infrastructure spend prospects in the USA, Middle East and Globally in Energy; and b) The margin upside at PBSJ (each 1% adds £4.5m/c4.5% to profit before tax ) that will enable the shares to be re-rated to 11-12x” earnings per share,

At present, based on Numis’s projected earnings for the year to March 2012, the shares are trading on an earnings multiple of about 9.5, which the broker thinks is looking cheap for a stock that prior to the credit crunch shakeout was trading in the range of 12 to 16 in the years following the group’s Metronet (London Underground consortium) stumble. The projected dividend yield of 4.1% for the current financial year should also support the shares.

“This is a gentle re-rating situation and we would recommend starting to tuck these away as the news flow is likely to improve during the year and the stock will be seen as a US infrastructure and global energy play,” Raleigh concludes.

The broker’s price target of 882p equates to around 12 times projected earnings per share for the year to March 2012 or 11 times projected earnings for the year to March 2013.

A dismantling of debt burdened pubs group Punch Taverns could be on the cards, reckons Peel Hunt, with the group’s Spirit managed pub estate being sold to the highest bidder.

“Saturday’s FT reports that six bondholding institutions have approached Marston’s and Enterprise Inns (among others) to either buy or manage Punch’s 5,300 tenanted pubs in the event of default on the A and B securitisations,” notes Peel Hunt analyst Paul Hickman.

“The move, if correct, suggests that the bondholders do recognise the real possibility of default,” Hickman said. The broker has long argued that a straight default would be the most direct way to clarify value in the Spirit arm.

“Given the scale of Punch’s tenanted estate, we believe that both Marston’s and Enterprise would have significant issues with conflict on the ground against their own pubs. Such difficulties would make the prospect of default even less palatable to the bondholders and increase the relative attractions of continuation on reduced terms, as we suggested in our note [of December 2010]. This would have the advantage of giving the bondholders access to the administrative infrastructure necessary to operate the estate,” Hickman states.

Getting shot of the tenanted pub estate would leave the way clear for a rival such as Mitchells & Butlers to make a move on Spirit, the managed pub arm. “That could resolve the whole issue of Punch Taverns in short order,” claims Hickman.

Using as a benchmark the price Greene King paid for its acquisition of Cloverleaf Restaurants (8.7 times earnings), Peel Hunt has increased its price target for Punch from 96p to 100p.

There is more downside risk than upside at Finnish miner Talvivaara, reckons finnCap, with the broker suspecting company guidance on production estimates for 2011 and 2012 might be too optimistic.

“Last Thursday's disappointing fourth quarter results and subsequent interpretation of guidance from the conference call has led us to assume lower production estimates for 2011 and 2012 than those provided by the company. This is the first time we have deviated from guidance and is not something we undertake lightly, but we believe that metals recovery plant availability for 2011 is unlikely to average the required 91% to produce 30,000 tonnes of nickel,” explains finnCap analyst Joe Lunn.

The company had major issues in the first half of last year with the availability of the metal plant and even in the second half performance was “still running behind par,” Lunn notes, and with the company needing to time essential maintenance breaks carefully “we believe there remains significant downside risk to meeting its production targets”.

As a result of misgivings about the ambitious production targets, the broker has switched from a “buy” rating to a “sell”.

“Although we acknowledge the current supply tightness in the nickel market, our feeling is the company needs to make the market more confident that this year’s production target can be met before the shares can be rerated higher,” the broker concludes.

The broker has a price target of 490p for the stock.

Read more »

Posted in: world financial news

WEEKLY MARKET REVIEW

IN THIS ISSUE:
1. Weekly market review from Forex-Metal.
2. Weekly technical analysis.
3. Representatives Wanted!

Previous trading week started with a US dollar competitors’ weakness.
On Monday euro demonstrated sharp decrease against the competitors during the European trading sessions. Concerns over the Euro-zone budget crises reinforced. The 2-day meeting of the EC Ministers of Finance, which started on that day, might not result in a mutual agreement regarding target levels of reducing the country’s debt loads. In addition, according to the released information, chances of restructuring of the German state bank West LB AG were reducing, which rendered pressure on the euro as well. The Euro-zone Industrial production, published on Monday, turned out to be negative at the level of -0.1%, against the forecasts of 0.0% and previous month positive figure of 1.4%. As a result, the EUR/USD pair demonstrated minimums at $1,3426. The sterling demonstrated a decrease following the euro drop. The GBP/USD pair decreased to $1.5985 minimums.

By the end of the day the euro managed to rehabilitate and won back the previously lost positions. The EUR/USD grew to the levels of $1,3480. The pound managed to grow against the greenback during the American trading session as well. The GBP/USD reached the $1,6030 mark. Speculations regarding the possibility, that the Bank of England would increase the principal rate, reinforced.

On Tuesday the EUR/USD pair demonstrated growth up to the $1.3530 maximums during the Asian trading session. But the released Euro-zone fundamentals were diverse. German GDP data for the fourth quarter turned out to be below expectations. And the Euro-zone overall GDP for the same period was below forecasts as well. The German ZEW survey (Economic sentiment) for February was at the 15.7 level against the expected 20.0, which pressured the euro. But, at the same time, the German ZEW survey (Current situation) for February grew from the previous month and happened to be above forecasts: 85.2 against the 83.0, which rendered support to the euro. European session showed maximums of $1.3552 by EUR/USD pair.

Sterling demonstrated steady growth against its competitors due to the released strong British fundamentals on that day. UK Consumer price index turned out to be at the expected level of 4.0%. DCLG House prices were above forecasts too. And the Retail price indices were above expected level as well. Therefore, the GBP/USD pair reached the $1,6170 maximums. As a result, the speculations regarding possible increase of the principal interest rate reinforced.

According to the expectations, on Tuesday the Bank of Japan left the principal rate unchanged at the previous level of 0.10%. USD/JPY pair managed to grow to the Y83.80 mark.

Diverse US fundamentals were released during the American trading session. Eventually, the US dollar received support. Empire manufacturing index for February grew and hit 15.43 amid forecasts at 15.00 level. Net long-term TIC flows were above expectations. But advance retail sales dropped for 0.3% when the expectations were 0.5%.

On Wednesday the GBP/USD pair demonstrated maximums during the Asian trading session at the level of $1,6186. But later on the release of the negative UK fundamentals changed the trading dynamics. Nationwide Consumer confidence for January dropped to 47 against expected level of 50. Jobless claims increased for 2.4K when the indicator was forecasted to drop for 3.0K. Pound reacted with a sharp decrease. According to the publication of the Bank of England Inflation report, the inflation would likely remain high over this year. Following this report the GBP/USD pair dropped to minimums of $1,5985. The drop of the pound influenced the euro dynamics. The EUR/USD pair decreased to the $1.3459 mark.
The dollar price action was mixed on the same day. But the US fundamentals, which were released during the American session, changed the trading dynamics of the major currencies. Strong economic docket increased the demand for the risky assets, and the greenback turned out to be under pressure. The EUR/USD pair managed to rehabilitate and hit the $1,3587 maximums after the release of the Industrial production index, which turned out to be -0.1% against the forecasted 0.5%. The Federal release of the FOMC meeting, which was also in the market focus on Wednesday, did not have any relevant influence on the market.
Greenback was under pressure on Thursday. US dollar was not supported as a save-haven currency.

Political problems, which were spreading over the Middle East region, supported the growing demand for the save-haven assets. Iran confirmed that two warships were forwarded to the Mediterranean through the Suez Canal. As a result, the Japanese yen rate increased against its competitors. The USD/JPY pair traded around the maximum range of Y83.50 - Y83.70. Swiss frank received considerable support as a save-haven currency and reached two-week maximum.

Additional pressure on the US dollar was received from the released US fundamentals. The Initial jobless claims turned out to be elevated above the forecast and over the previous level as well: 410K against the expected 400K.
On Friday after the announcement of the ECB Board member, Lorenzo Bini Smagi, that the ECB would raise the principal rate due to the increasing pressure from the global inflation, the greenback competitors started to grow. The EUR/USD pair reached maximums of $1,3700, and the GBP/USD hit the $1,6250 level.


EURUSD
The pair is trading in the triangle. Upper border (resistance) is 1.41130, lower border (support) is 1.30651. The pair needs to break one of these levels to be able continue rising or falling.
Resistance: 1.37441, 1.41130, 1.44835
Support: 1.33427, 1.2800, 1.25667

GBPUSD
The pair has broken channel line. A return for a test to channel line maybe expected to 1.61380. If the pair stays above this level the pair will rise to Fibonacci retracement 38.2% at 1.64274 and Moving Average 9200) at 1.65789.
Resistance: 1.64274, 1.68504, 1.72652
Support: 1.59962, 1.52523, 1.48532



USDCHF
The pair has rolled back to 0.94501. Lower is stronger support at 0.93264.
Resistance: 0.96525, 0.99031, 1.01369
Support: 0.93264, 0.91074, 0.88022

USDJPY
The pair is closed in the triangle. Resistance 83.330 supports 81.010. The pair needs to break one of these levels to be able to continue rising or declining.
Resistance: 83.330, 86.836, 90.909
Support: 80.244, 76.535, 73.126

AUDUSD
The pair has risen to 1.01873 and may roll back to 1.00031.
Resistance: 1.01873, 1.03847, 1.05810
Support: 1.00031, 0.97889, 0.94048

FTSE 100 below 6,000 as Libya casts shadow
The FTSE 100 is back below 6,000 points as the ongoing turmoil in Lybia continues to jangle traders’ nerves.

Oil prices are higher again, not good news for British Airways owner IAG, which is one of today’s notable fallers. The high gold price as investors seek a safe haven has lifted African Barrick Gold, while silver producer Fresnillo is also going well.

Other miners are lower, including BHP Billiton. The firm is usually thought of as a miner but it has oil and gas assets too, and it bolstered those Tuesday with the acquisition of Chesapeake Energy’s Fayetteville shale assets.

Higher oil prices won't worry coal-fired power station operator Drax, though the chairman, Gordon Horsfield, did warn of "pressure on coal generation margins due to today's commodity market conditions," as he unveiled forecast-busting 2010 earnings. The shares are up today.

Drax's earnings before interest, tax, depreciation and amortisation in 2010 totalled £391m, up from £355m last year, and ahead of market expectations of £384m. Total revenue was comfortably ahead of market expectations at £1,648.4m, up from $1,475.8m; the market had pencilled in a figure of £1,426m.

Specialist business publisher and trade events group Informa posted a sharp rise in 2010 despite flat revenues as it adjusted to the tough climate by consolidating publications, getting rid of marginal ones and reducing the scale of some events. Pre-tax profits rose to £125m from £96.5m the previous year on revenues that rose to £1.226bn from £1.221bn.

The global economic recovery helped animal breeding business Genus lift revenues and profits in the half year to 31 December. The firm posted a pre-tax profit of £19.1m, up from £15.5m over the same period the previous year, on revenues that climbed to £153.2m from £134.9m.

Similarly, the global recovery helped speciality chemicals group Croda International more than double pre-tax profits in the year to 31 December, sparking a strong reaction from the shares today. Pre-tax profits jumped to £192m from £91m the previous year on revenues that rose to £1bn from £828m.

INTERIMS
Dechra Pharmaceuticals, Genus, Hargreaves Services, Pan African Resources, Savile Group

INTERIM DIVIDEND PAYMENT DATE
Income & Growth VCT

Q4
Frontline Ltd.

FINALS
Aeci 5 1/2% Prf, Brammer, Croda International, Dragon Oil, Drax Group, Informa, London Capital Group Holdings, Morgan Sindall Group

EGMS
X5 Retail Group NV GDR (Reg S)

AGMS
Bankers Inv Trust, Sinclair (William) Holdings

FINAL DIVIDEND PAYMENT DATE
Titon Holdings

Bourses lower as Lybia crisis continues
The ongoing turmoil on the other side of the Mediterranean Sea has helped send Europe’s main bourses lower.

The German Dax is down 44 at 7,277, the CAC 40 in Paris is 55 lower at 4,041, the Swiss market is 68 lower at 6,615 and the Ibex 35 is 174 lower at 10,636.

With violence continuing in Libya, a big oil-producer, crude prices have risen – bad news for the likes of Air France-KLM and IAG, the owner of British Airways and Iberia.

In company news, Danish bank Jyske Bank is in demand after fourth quarter earnings beat expectations.

Libya unrest drives dollar gains
The dollar nudged higher against the euro and the yen on Monday in subdued currency trading as investors nervously watched reports of escalating tensions in the Middle East, in particular Libya.

The euro was temporarily boosted by robust economic news. German business confidence rose to a record high in February, on the back of soaring exports. The Ifo institute’s business climate index climbed to 111.2 from 110.3 in January, confounding expectations of an unchanged reading.

The pound was little changed Monday but did find some support early on from comments by policymaker Martin Weale. He said a small rate hike now from 0.5% may reduce the need for a bigger rise later. Last month Weale joined Andrew Sentance in voting for a rate rise.

US financial markets were closed Monday for the Presidents Day holiday.

Halifax, Libya, interest rates
Hundreds of thousands of Halifax borrowers are set to receive a windfall because of a poorly drafted paragraph in mortgage offer letters that will cost Lloyds Banking Group £500m. The payout announced by the Halifax’s new parent yesterday is a record figure for customer redress by a single financial services company this century — and it is being made even though hardly any customers noticed or complained, the Times reports.

The spectre of full civil war in oil-rich Libya and reports of the creation of an Islamic emirate in country's "Barqa" region has moved the Mid-East crisis into a more dangerous phase, setting off an explosive rise in US crude prices. "This is potentially worse for oil than the Iran crisis in 1979," said Paul Horsnell, head of oil research at Barclays Capital, the Telegraph reports.

One of the two publicly declared hawks on the Bank of England’s rate-setting committee set forth the case yesterday for an immediate rise in interest rates. Martin Weale, one of the external members of the Monetary Policy Committee, said that a move was needed now to head off a rise in people’s inflation expectations, the Times reports.

However, the Independent reports that John Lewis's managing director has urged the Bank of England not to raise interest rates amid retail fears over how a rate increase would affect consumer confidence. Andy Street – speaking out about inflationary pressures on the industry as he unveiled plans to open a new store in Birmingham in 2014 – said: "Putting up interest rates would not make a jot of difference to inflation. But it would make a big difference to consumer confidence."

News Corporation is to buy Shine, the production company set up by Rupert Murdoch’s daughter Elisabeth, in a deal worth £415m. News Corp said that it had reached an agreement in principle to acquire the company whose hit television shows include MasterChef and Merlin. The deal is expected to be completed by the end of April, according to the Times.

The total exposure of Spanish savings banks to real estate and building amounts to €217bn, of which 100bn is classed as “potentially problematic”, the Bank of Spain said. However, Miguel Ángel Fernández Ordóñez, the governor of the Bank of Spain, insisted that such a risk level did not endanger the Spanish financial sector as a whole, says the Telegraph.

BAA should have been better prepared to deal with the winter snowfall that disrupted flights and caused chaos at Heathrow airport for four days in the run-up to Christmas, the airport operator's chief executive, Colin Matthews, has said. Flights were cancelled and thousands of passengers saw their travel plans thrown off course when severe weather led to the closure of Heathrow's runways, the Independent reports.

Health secretary Andrew Lansley has filed a high court legal claim, alongside 10 strategic health authorities and 144 primary care trusts, against household goods maker Reckitt Benckiser. The FTSE 100 company insisted it had not been served with papers and knew nothing about the action. It refused to be drawn on speculation that the action might be related to its controversial marketing of Gaviscon heartburn treatment products in 2005 which resulted in Reckitt receiving a £10.2m fine from the Office of Fair Trading for anti-competitive behaviour four months ago, the Guardian reports.

The chief executive of e-commerce group Alibaba.com – one of China's biggest online successes – has resigned after an internal investigation showed sales staff "intentionally or negligently" allowed more than 2,300 fraudsters to set up verified stores. David Wei and chief operating officer Elvis Lee departed amid what the firm described as "systemic breakdown in our company's culture of integrity", according to the Guardian.

House prices will slump by 20% over the next two years, experts have warned. The property market is heading for a ‘double-dip’ as rising unemployment and spending cuts strangle demand, according to the analysis. Interest rates are likely to be increased in the coming months to keep rising inflation in check and higher mortgage costs seem certain to add momentum to plunging property prices. Paul Diggle, property specialist at research consultants Capital Economics, said: ‘Prices are trending slowly downwards at the moment, but our view is that this is really the start of the second leg of the correction, and we expect prices to fall significantly further,’ the Daily Mail reports.

Read more »

Posted in: Weekly market review,Weekly technical analysis

EVENING EURO MARKETS

London Market Reports
Footsie falls back on mixed day for miners

Market Movers
techMARK 1,951.40 +0.17%
FTSE 100 6,082.99 -0.07%
FTSE 250 11,828.29 0.00%

Miners were in focus heading into the weekend, with precious metals groups going well, but the rest of the sector hurt by further attempts by the Chinese authorities to cool down the Chinese economy. The FTSE 100 was slightly lower at the close.

China has raised bank reserve requirements by half a percentage point, to a record level of 19.50%. It’s the fifth hike in the requirement since October and is designed to stop the banks having too much cash sloshing around to lend to customers.

Gold miner African Barrick defies the trend, as it features on Citigroup’s list of likely takeover candidates, but sector peers BHP Billiton, Rio Tinto, Xstrata and Vedanta take a battering, as does Anglo American, even though it doubled profits in 2010 and is merging its UK cement, aggregates and ready-mixed concrete business with French giant Lafarge.

Underlying earnings leapt to $4.98bn from $2.57bn in 2009 on revenue up 34% to $32.93bn. Profit before tax was up 171% to $10.93bn and underlying earnings per share of $4.13 was better than expected. Rio Tinto and Aquarius Platinum were also firmly in the red.

Support services group Rentokil sustained heavy losses after it missed forecasts in 2010 as the cold weather in December added to the woes of its parcels delivery business City Link. Pre-tax profits tumbled from £60m to £15.3m after huge write-offs of £150.5m. The firm swung from profits of £26.8m to a loss of £55.7m in the last three months of the year if all of the one-off charges of £110m are included.

Similarly, industrial engineer Charter was sharply lower. The company improved during 2010, but weakness in Europe, where the company makes most of its money, held the business back. Profit before tax jumped 55% to £144.1m last year and by 18% to £148.2m before exceptional items. Revenue was up 3.6% at £1.72bn.

But it was Centamin Egypt that took the booby prize as jitters in over the Middle East situation took hold again. The company moved to reassure investors after its share price fell, saying that its Sukari gold mine operations continue uninterrupted.

Go-Ahead raced ahead though. More people are leaving their cars at home and taking the bus, according to Keith Ludeman, the chief executive of the public transport group “Whilst rail remains difficult to predict, we now expect our full year operating profit across our rail and bus businesses to be higher than we previously anticipated and around the same as achieved last year (FY'10: £101.0m)." Ludeman said.

Anite has traded better than expected in the past three months with growing 4G demand lifting orders at its handsets and networks businesses to record levels and offsetting a flat travel side.

Sales have been slower than expected at mobile antenna maker Sarantel in the first five months of its financial year due to internal technical problems at two of its big customers. The firm, which raised £1.25m in December, said it is confident that once the clients have resolved the issues, their orders will return in the second half of the financial year. The shares are down more than 20%.

Shares in Lansdowne Oil & Gas have shot up again and, unlike last week, when the directors of the company said they were mystified by the sharp price rise, the catalyst for the latest rise is a resource update for the company’s Celtic Sea Acreage.

Profits for the full year are expected to be significantly ahead of market expectations at pipe and tubing specialist Tricorn. The company said trading in the second half of its financial year has remained strong, with demand from the Energy and Transport sectors especially vibrant.

FTSE 100 - Risers
African Barrick Gold (ABG) 571.50p +3.81%
Imperial Tobacco Group (IMT) 1,992.00p +3.48%
Kingfisher (KGF) 263.30p +2.65%
Randgold Resources Ltd. (RRS) 5,035.00p +2.36%
Fresnillo (FRES) 1,507.00p +2.10%
Next (NXT) 2,005.00p +1.93%
Tesco (TSCO) 410.00p +1.74%
Admiral Group (ADM) 1,753.00p +1.62%
Hammerson (HMSO) 447.50p +1.47%
InterContinental Hotels Group (IHG) 1,435.00p +1.34%

FTSE 100 - Fallers
Petrofac Ltd. (PFC) 1,444.00p -4.56%
Rio Tinto (RIO) 4,397.00p -2.26%
BHP Billiton (BLT) 2,391.00p -2.19%
International Consolidated Airlines Group SA (IAG) 246.50p -2.18%
Anglo American (AAL) 3,227.00p -2.08%
BG Group (BG.) 1,467.00p -2.00%
Standard Chartered (STAN) 1,664.00p -1.83%
ICAP (IAP) 543.00p -1.72%
Vedanta Resources (VED) 2,361.00p -1.62%
Kazakhmys (KAZ) 1,481.00p -1.59%

FTSE 250 - Risers
Imagination Technologies Group (IMG) 430.70p +8.41%
Go-Ahead Group (GOG) 1,408.00p +6.99%
Hochschild Mining (HOC) 563.50p +5.82%
Premier Foods (PFD) 28.95p +4.55%
Savills (SVS) 378.30p +4.21%
Northumbrian Water Group (NWG) 326.10p +3.49%
Thomas Cook Group (TCG) 202.00p +3.27%
QinetiQ Group (QQ.) 130.70p +3.16%
Ferrexpo (FXPO) 439.20p +2.98%
Beazley (BEZ) 139.20p +2.96%

FTSE 250 - Fallers
Centamin Egypt Ltd. (CEY) 122.20p -12.34%
Charter International (CHTR) 734.00p -6.79%
Rentokil Initial (RTO) 92.50p -5.61%
AZ Electronic Materials SA (WI) (AZEM) 298.00p -2.93%
Domino's Pizza UK & IRL (DOM) 500.00p -2.72%
Misys (MSY) 341.30p -2.51%
IG Group Holdings (IGG) 444.90p -2.50%
Debenhams (DEB) 62.00p -2.44%
EnQuest (ENQ) 132.40p -2.36%
Tate & Lyle (TATE) 586.00p -2.25%

European Market Reports
China's measures unsettle Europe
European bourses finished the week mixed as China unsettled markets with its hike in bank reserve requirements, which knock car stocks.

The Dax in Frankfurt finished 21 higher at 7,427, the Cac was up 5 at 4,157, while the Ibex in Madrid lost 45 to end at 11,068.

China raised bank reserve requirements by half a percentage point, to a record level of 19.50%. It’s the fifth hike in the requirement since October and is designed to stop the banks having too much cash sloshing around to lend to customers.

“If the Chinese start to take out the liquidity that’s been so important, it’s got the potential to be a disturbance for the world’s stock markets,” said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.

Carmakers were lower on the news as China’s measures to tame inflation could hinder growth.

Additionally, the China Association of Automobile Manufacturers revealed that the sales growth of passenger cars slowed to 16% in January (from the previous year), down from 18.6% year-on-year growth in December. BMW, Daimler, Renault, Peugeot and Fiat were all in the red.

Nevertheless, the Dax in Frankfurt edged higher as Germany’s producer price index for January rising by 1.2% over the month and 5.7% year-on-year, its highest reading since October 2008. The figures surpassed estimates of 0.6% and 5.1%, respectively, as energy prices had the largest effect on the annual rate, according to Federal Statistics Office, Destatis.

Banks in Spain finished higher after the government allowed its ailing savings banks – or cajas – six more months to boost capital buffers. Finance minster Elena Salgado said that cajas would be given until March 2012, extended from September 2011, to raise core capital ratios to 10%, from 6%, for “finance to be more readily accessible to borrowers.”

"This decree reinforces the solvency and credibility of banks and cajas, dissipating any doubt the market may have about the solidity of Spain's financial entities,” she said.

Commercial lenders Bankinter, Banco Popular Espanol, Banco de Sabadell and Banco Bilbao Vizcaya Argentaria (BBVA) were higher, offsetting negative broker comments on the sector from RBS.

RBS reiterated its cautious stance on Spanish lenders following a “watered down caja restructuring law”. The broker gives Banesto, BBVA and Banco Santander a ‘hold’ rating, while Bankinter, Banco Popular and Banco Sabadell are all given a ‘sell’ recommendation.

Lenders in Greece were higher after National Bank of Greece placed a €2.9bn offer for Alpha Bank . While both banks were suspended from trading, EFG Eurobank Ergasias and Piraeus Bank were making gains.

The European Central bank bought Portuguese bonds today after they came under pressure due to worries about the country’s economic state. Traders are quoted as saying that the ECB bought €150m worth of Portuguese bonds with three-to-seven years to maturity. This followed Portuguese bond purchases last week.

Cement giant Lafarge led the French market higher on the back of its deal with miner Anglo American. The two have formed a 50:50 joint venture incorporating the pair’s UK cement, aggregates, ready-mixed concrete, asphalt and contracting businesses to create a British construction materials firm.

Sat nav maker TomTom lost its way a bit. Fourth quarter net income fell 29% to €52m as increased marketing costs took their toll. Sales fell 3% from a year earlier to €516m. The group is expecting little or no revenue growth in 2011.

Austrian steel group Voestalpine has upgraded full year guidance after its third quarter proved better than expected. The company has lifted earnings guidance to around €850m.

US Market Reports
Wall Street rises on low volumes
Wall Street has gained momentum throughout the morning although volumes remain low.

US investors do not appear concerned by world economic events. China has raised bank reserve requirements by half a percentage point, as it steps up its attempts to rein in inflation. A G20 meeting in Paris will discuss global imbalances and the situation in the Middle East, which has been pushing up oil prices.

The Dow Jones is up 51 at 12,369, while the S&P 500 is up 3 at 1,344 and NASDAQ is 9 points higher at 2,840. The S&P has doubled in less than two years.

Caterpillar says that sales of its construction vehicles are accelerating, which is a positive indication for the world economy.

Campbell’s Soup reported net earnings of $239m for the quarter ended January 30, down from $259m a year earlier. The company “maintained strong levels” of advertising to cope with the competitive environment. It has cut its 2011 earnings and sales forecasts.

Chemicals group DuPont has extended its $6.1bn offer for Danish food and enzymes group Danisco to April in the hope of gaining more acceptances.

Department store Nordstrom’s quarterly earnings beat expectations.

Solar modules manufacturer SunPower comfortably beat full year earnings estimates. First Solar rose on the back of this news.

Strong figures from American Public Education helped Career Education and ITT Educational Services to make gains.

S&P 500 - Risers
Intuit Inc. (INTU) $54.50 +8.05%
Eog Resources Inc. (EOG) $108.66 +4.26%
Apollo Group Inc. (APOL) $45.27 +3.74%
Metropcs Communications Inc. (PCS) $13.56 +3.37%
Waters Corp. (WAT) $83.01 +3.13%
Ecolab Inc. (ECL) $48.51 +2.95%
Genworth Financial Inc. (GNW) $14.14 +2.84%
Stryker Corp. (SYK) $62.47 +2.78%
Zimmer Holdings Inc. (ZMH) $63.94 +2.71%
Adobe Systems Inc. (ADBE) $35.83 +2.43%

S&P 500 - Fallers
Campbell Soup Co. (CPB) $33.29 -4.72%
Patterson Companies Inc. (PDCO) $32.94 -4.13%
Windstream Corp. (WIN) $12.73 -3.78%
CF Industries Holdings Inc. (CF) $142.50 -3.59%
JDS Uniphase Corp. (JDSU) $25.71 -3.42%
Tesoro Corp. (TSO) $25.00 -3.23%
International Paper Co. (IP) $29.44 -2.79%
Target Corp. (TGT) $51.92 -2.32%
Qwest Comm International Inc. (Q) $6.80 -2.30%
CenturyLink Inc. (CTL) $41.27 -2.13%

Dow Jones I.A - Risers
Caterpillar Inc. (CAT) $104.98 +1.57%
Travelers Company Inc. (TRV) $60.68 +1.51%
Cisco Systems Inc. (CSCO) $18.94 +1.39%
Boeing Co. (BA) $73.14 +1.25%
Chevron Corp. (CVX) $98.24 +1.10%
Verizon Communications Inc. (VZ) $36.70 +0.91%
Intel Corp. (INTC) $22.17 +0.89%
E.I. du Pont de Nemours and Co. (DD) $55.96 +0.67%
United Technologies Corp. (UTX) $85.01 +0.55%
Exxon Mobil Corp. (XOM) $84.33 +0.54%

Dow Jones I.A - Fallers
Pfizer Inc. (PFE) $19.20 -0.87%
Walt Disney Co. (DIS) $43.40 -0.69%
Alcoa Inc. (AA) $17.40 -0.68%
American Express Co. (AXP) $45.49 -0.63%
General Electric Co. (GE) $21.42 -0.46%
Bank of America Corp. (BAC) $14.75 -0.41%
Microsoft Corp. (MSFT) $27.13 -0.31%
Hewlett-Packard Co. (HPQ) $48.49 -0.27%
Coca-Cola Co. (KO) $64.44 -0.17%
Merck & Co. Inc. (MRK) $33.05 -0.16%

Nasdaq 100 - Risers
Intuit Inc. (INTU) $54.50 +8.05%
Apollo Group Inc. (APOL) $45.27 +3.74%
Adobe Systems Inc. (ADBE) $35.83 +2.43%
Check Point Software Technologies Ltd. (CHKP) $51.43 +2.17%
Qiagen N.V. (QGEN) $20.40 +2.01%
Comcast Corp. (CMCSA) $25.63 +1.63%
Bed Bath & Beyond Inc. (BBBY) $50.22 +1.58%
Starbucks Corp. (SBUX) $33.99 +1.46%
Dell Inc. (DELL) $15.56 +1.43%
Maxim Integrated Products Inc. (MXIM) $27.90 +1.42%

Nasdaq 100 - Fallers
Patterson Companies Inc. (PDCO) $32.94 -4.13%
Logitech International S.A. (LOGI) $19.25 -2.36%
Garmin Ltd. (GRMN) $32.74 -2.06%
Henry Schein Inc. (HSIC) $67.92 -1.98%
NetApp Inc. (NTAP) $53.78 -1.81%
Seagate Technology Plc (STX) $13.62 -1.73%
Vertex Pharmaceuticals Inc. (VRTX) $39.34 -1.28%
Altera Corp. (ALTR) $41.29 -1.24%
Warner Chilcott Plc (WCRX) $24.74 -1.08%
Apple Inc. (AAPL) $354.63 -1.02%


Dunelm, Regus, Morgan Crucible
Nomura maintains positive about bedding and curtains retailer Dunelm, saying that while the first half saw higher costs, investors should expect a better top line from the fourth quarter onwards.

A 14.3% rise in costs limited operating profit to just 5.4% growth, as the group experienced £0.5m of warehouse expansion costs and an onerous lease charge of £0.75m. In the second half the group is expected to see higher depreciation and new head office running costs, says analyst Christopher Walker.

While growth has been limited in 2010, the Japanese broker notes that comparatives should ease in the future: having annualised +15.4% and +11.6% like-for-like sales in the first and second quarters, respectively, comparatives fall to +7.1% and -1.9% in the third and fourth, respectively.

“In our view, the third quarter may remain challenging, given the recent VAT rise and macro headwinds, however the fourth may represent a slowing of internal investment and an easing comparative,” says Walker. The price target is 550p.

Credit Suisse keeps an ‘underperform’ rating on engineering group Morgan Crucible, as the share price is close to a 40-month high.

“The release of group targets by management on 16 February, that included a doubling of underlying 2010 pre-tax profit of £75.7m by 2013, has provided a road map to both the expected future group progression over the short to medium term as well as a bench mark against which to measure performance,” the broker says.

While management has given increased guidance on profitability, Credit Suisse believes the targets are “financially stretching versus historic performance and as yet the finer details of the transition are yet to be released.” The broker remains cautious until further clarity.

However, the price target is raised from 230p to 267p to reflect a 2% and 5% upgrade to pre-tax profit forecasts for 2011 and 2012, respectively.

Royal Bank of Scotland (RBS) upgrades serviced office specialist Regus to a ‘buy’, from ‘hold’, as it believes earnings can surpass a previous peak.

The broker views the company as a “play on US economic recovery and continued emerging market growth.”

With confidence in US small- to medium-sized enterprises improving, RBS says that this bodes well for Regus, which derived 42% of its 2010 first half revenues for North America.

Additionally, much of the previous bear case for the group centred on its UK exposure (17% of first half revenues), but recent updates from its peers indicate that the market there is improving.

Additionally, with a growing emerging market footprint (which accounted for over 25% of first half revenue), the broker sees confidence building in the recovery and raises the price target to 140p, from 83p.

Read more »

Posted in: Evening Euro Markets