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.

Posted in: Evening Euro Markets