ADVFN III Evening Euro Markets Bulletin -October 22, 2012-.

ADVFN III	Evening Euro Markets Bulletin
Daily world financial news

Monday, 22 October 2012

London Market Report

FTSE 100 Euronext Dax perf CAC 40 Please click on the images to view our interactive charts

London close: Stocks decline after Caterpillar earnings Market Movers techMARK 2,104.00 -0.42% FTSE 100 5,882.91 -0.22% FTSE 250 12,040.01 -0.28% - Caterpillar disappoints with guidance - Kenny-Merkel statement reassures Ireland - BP falls after confirming Rosneft deal After a brief stint in positive territory, UK stocks fell into the red by the close on Monday after some disappointing guidance for US economic bellwether Caterpillar dampened sentiment late on. While Caterpillar beat earnings forecasts in the third quarter, the industrial machines giant's guidance was disappointing: the company estimates that full-year earnings per share (EPS) will be $9.00-9.25, down from $9.60 last year and below the current $9.40 consensus estimate. "The general trend of the earnings season appears to be continuing today. Of the 12 companies that reported before the opening bell, 10 beat earnings expectations however only half reported higher revenue from a year earlier. With the global economy expected to deteriorate before it improves, these figures are likely to worsen in the coming quarters," said market analyst Craig Erlam from Alpari. Nevertheless, improving newsflow from the Eurozone gave markets a lift earlier on, albeit only slightly. A decent outcome for Spanish Prime Minister Mariano Rajoy at the regional elections at the weekend and a joint statement issued by Irish Taoiseach Enda Kenny and German Chancellor Angela Merkel managed to ease concerns temporarily. Following on from Merkel's confusing comments at Friday's EU summit that there would be "no retroactive direct bank recapitulation", the Kenny-Merkel statement reassured that the Eurozone is committed to addressing Ireland's bank debts: "Ireland is a special case, and that the Eurogroup will take that into account." Worries about the Japanese economy were also weighing on investors' minds today after exports dropped by their most since the aftermath of last year's earthquake and tsunami. Exports declined 10.3% year-on-year last month, worse than the 5.8% decrease in August and the 9.9% fall expected. The trade deficit was 588.6bn yen, higher than the 547.9bn expected by the consensus of analysts. Imports rose by a more-than-expected 4.1%. FTSE 100: Aggreko, Petrofac hit by downgrades Following on from Friday's sharp fall, Aggreko was again the worst perfumer on the Footsie this afternoon after HSBC downgraded its rating on the stock from 'neutral' to 'underweight' and reduced its target for the shares. Jefferies, JPMorgan Cazenove and Barclays Capital also lowered their target for the stock today, after the temporary power and temperature control group said last week that exchange rates and increased bad debt provisions will have a 2.5% negative impact on its full-year bottom line. Meanwhile, chemicals group Johnson Matthey was under the weather after Citigroup cut its target on the stock by 10%, from 3,000p to 2,700p. The broker maintained a 'buy' rating though. Oilfield services firm Petrofac was lower after Liberum Capital lowered its recommendation to 'hold'. Mining stocks held up well today despite macroeconomic concerns weighing on the wider market. Randgold, Fresnillo and Antofagasta were among the best performers by the close. Tobacco peers British American and Imperial were lighting up after Credit Suisse retained its 'neutral' rating on US counterpart Philip Morris Internationa, saying that it sees "greater upside elsewhere in our coverage". The broker kept its 'outperform' ratings on the UK-listed stocks, highlighting that they trade at a discount to PMI. Oil titan BP finished lower after agreeing to the terms of sale agreement of 50% stake in TNK-BP to Rosneft. Closure of deal seen in first half of 2013. BP will receive $17.1bn in cash plus shares. Of that amount $4.8bn will be reinvested. BP will thus receive $12.3bn in net terms and a 19.75% stake in Rosneft. A newswire report this afternoon cited BP's Russian head saying they are mulling over whether to do a share buy-back with proceeds of the deal. FTSE 250: Spectris, Devro and Fidessa provide a drag Instrumentation and controls company Spectris dropped after Panmure Gordon cut the stock from 'buy' to 'hold'. Analyst Oliver Wynne-James said: "The 12% move following Friday's IMS removed a large chunk of the 12 month implied upside, so we cut the recommendation to 'hold'." Devro, a sausage casing supplier, was a heavy faller after warning that full-year operating profits will be slightly below expectations, although still ahead of last year. Trading systems developer Fidessa fell after warning persistent challenges in the financial markets weighed on third-quarter equity market volumes; the on-going pressure means that full-year revenue is likely to be unchanged from the year before. FTSE 100 - Risers Randgold Resources Ltd. (RRS) 7,615.00p +2.70% Aviva (AV.) 341.60p +1.30% Fresnillo (FRES) 1,916.00p +1.27% Imperial Tobacco Group (IMT) 2,310.00p +1.05% Associated British Foods (ABF) 1,373.00p +0.88% Lloyds Banking Group (LLOY) 40.81p +0.80% British American Tobacco (BATS) 3,216.00p +0.80% Capita (CPI) 734.00p +0.76% Glencore International (GLEN) 350.25p +0.72% Capital Shopping Centres Group (CSCG) 336.30p +0.69% FTSE 100 - Fallers Aggreko (AGK) 2,073.00p -2.99% Wolseley (WOS) 2,661.00p -2.49% Petrofac Ltd. (PFC) 1,578.00p -2.29% Experian (EXPN) 1,047.00p -2.24% Johnson Matthey (JMAT) 2,280.00p -2.10% Shire Plc (SHP) 1,822.00p -1.78% Wood Group (John) (WG.) 860.50p -1.71% International Consolidated Airlines Group SA (CDI) (IAG) 159.70p -1.54% BP (BP.) 443.45p -1.54% Centrica (CNA) 326.00p -1.51% FTSE 250 - Risers Homeserve (HSV) 239.10p +3.51% Essar Energy (ESSR) 136.70p +3.40% Diploma (DPLM) 459.90p +3.33% Hansteen Holdings (HSTN) 79.00p +2.60% NMC Health (NMC) 185.60p +2.54% Heritage Oil (HOIL) 207.90p +2.46% Go-Ahead Group (GOG) 1,374.00p +2.23% Carillion (CLLN) 308.80p +2.15% Kenmare Resources (KMR) 42.78p +2.10% Millennium & Copthorne Hotels (MLC) 518.00p +1.97% FTSE 250 - Fallers Spectris (SXS) 1,709.00p -3.93% Devro (DVO) 324.10p -3.54% Regus (RGU) 103.50p -3.18% Centamin (DI) (CEY) 104.00p -3.08% Afren (AFR) 140.40p -2.84% William Hill (WMH) 347.90p -2.69% Domino Printing Sciences (DNO) 534.50p -2.64% Yule Catto & Co (YULC) 152.50p -2.49% Hikma Pharmaceuticals (HIK) 752.50p -2.27% Cairn Energy (CNE) 281.20p -2.26% Europe Market Report FTSE 100 Euronext Dax perf CAC 40 Europe midday: Stocks trim losses -Ireland is not an exception to ESM conditions-DPA -Philips earnings rise on cost savings -Automobile suppliers lower after Deutsche Bank downgrade -German GDP may contract in quarter four -Buba -Investors watching technical support levels -Some still fear Spain will wait too long to as FTSE-100: 0.01% Dax-30: -0.17% Cac-40: 0.03% FTSE-Mibtel 30: 0.52% Ibex 35: -0.11% Stoxx 600: -0.03% The main European equity benchmarks are now trading somewhat mixed, but they have trimmed their earlier losses. That following the sharp drops seen last Friday on Wall Street, with some observers now fearing that recent poor company earnings from several technology heavyweights -such as IBM or Google- may be a harbinger of economic weakness to come. That, at last, is what some analysts are saying as the corporate confession season trundles on. To be had in account, this week will see another deluge of company earnings in the US, with those in Europe progressively ramping up. According to Thomson Reuters data, out of the 8% of companies on the STOXX Europe 600 index that have reported results so far, 48% have missed forecasts. Back in the US, of the 116 S&P 500 companies which have confessed thus far, 58% have missed on revenue expectations, as the economy took a tool on their results. Adding to the gloom, and acting as a backdrop, was the weak trade data out overnight in Japan. As well, in its latest quarterly report the Bank of Japan has cut its economic assessment for most regions in the country, due to the slowdown overseas it said. Results out this morning from the likes of Electrolux and Philips have not done much to assuage investors' concerns, such that technical support levels for the main equity benchmarks will now be closely scrutinized so as to guard against losses possibly deepening. Philips, the lighting company, has reported a 43% rise in earnings before interest, taxes, amortization and one-time items, to €562m, which is well above analysts' expectations. Positively, its sales figures also came in ahead of estimates, yet management attributed the better than forecast earnings to the cost savings initiatives undertaken. Deutsche bank has lowered its view on shares of French car parts supplier Valeo to hold. From a sector stand-point the worst performance on the DJ Stoxx 600 is now to be seen in the shares of the following industrial groups: Utilities (-0.57%), Banks (-0.68%) and Automobiles (-1%). No major economic data releases are due out this morning. Small moves in other asset classes The euro/dollar is now up by 0.28% to the 1.3057 dollar mark. Front month Brent crude futures are now rising by 0.118 dollars to 110.26 dollar mark on the ICE. US Market Report US mid-morning: Stocks trade mixed -Deutsche upgrades Amgen to buy from hold Dow Jones Industrials: -0.11% Nasdaq Comp.: 0.18% S&P 500: -0.15% The main US equity benchmarks are now being called to open 0.2% higher on average, following last Friday's sharp selling and ahead of a barrage of company results due out today. Worth pointing out, futures are holding up despite heavy-machinery manufacturer Caterpillar coming out and lowering its guidance for 2012. The company is projecting earnings in a range of $9 to $9.25 a share on sales of about $66bn, as opposed to previous estimates of about $9.60 a share and $68bn to $70bn, respectively. Results from Yahoo and Texas Instruments are due out after the close of trading. In M&A news, Halcon Resources will buy producing oil-and-gas assets in the Williston Basin from Petro-Hunt and an affiliated entity for about $1.45bn. Pfizer is to pay $680m for Next Wave. Permira advisors will acquire Ancestry.com for $1.6bn. Front month West Texas crude futures are now falling by 0.72% to the $89.40/barrel mark on the NYMEX. 10 year US Treasuries are off by 10/32 dollars, with yields now at 1.80%. Broker Tips Broker tips: RBS, Weir, Aggreko... Shares in part-nationalised lender Royal Bank of Scotland (RBS) are trading at 0.6 times tangible net asset value (tNAV) and close to a new 17-month high, which has prompted broker Investec to downgrade its rating for the stock from 'hold' to 'sell'. Investec forecasts another "jaw-dropping statutory loss" and a "bleak outlook for returns thereafter" when the company reports its third-quarter results on November 2nd. Specifically, the broker expects a pre-tax loss of £1.0bn and believes that return on equity (RoE) guidance will be 2% for 2013 and 4% for 2014. Panmure Gordon has cut its recommendation for engineering group Weir from 'buy' to 'hold' ahead of the group's trading update in two weeks' time. Analyst Oliver Wynne-James said that the current environment remains "challenging" for the firm: "the unconventional O&G storm still lingers (mix, pricing, reduced expenditures – see Q3 reports from customers such as Baker Hughes) and as the ever-deteriorating mining sector opex/capex storm begins. To an extent the company can rely on cost- cutting and on its more defensive aftermarket profile, but the risk-reward profile over the short - term looks less appetising," he said. Jefferies has cut its target for Aggreko but maintained its 'buy' rating for the stock, saying that the negative surprises in the group's third-quarter trading update represent a 'speedbump, not a slowdown'. "Whilst key risks remain macro slowdown, political risk, bad debt and FX, with the shares off 10% in the last month, we reiterate our 'buy' stance," the broker said. UBS has cut its recommendation for pharmaceuticals group Hikma from 'neutral' to 'sell', saying that the market is pricing in a 'blue sky scenario'. The broker said that it is hard to justify Hikma's valuation "as we believe that the market is pricing a blue sky scenario with the US Injectables supply issue continuing in 2013 and beyond, a strong EBIT [earnings before interest and tax] margin recovery in the Branded Generic division and a come back to 15-20% EBIT margin for the generic division. "The likelihood of all of these happening appearing rather slim to us and setting Hikma up for disappointment."