ADVFN III Evening Euro Markets Bulletin (February 5, 2013).

ADVFN III Evening Euro Markets Bulletin

Daily world financial news Tuesday, 05 February 2013

London Market Report

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

London close: Corporate earnings, services data push markets higher Market Movers techMARK 2,286.31 +0.54% FTSE 100 6,282.76 +0.57% FTSE 250 13,242.77 +0.50% The FTSE 100 staged a partial recovery today after Monday's sell-off, with decent corporate earnings and better-than-expected service-sector data doing their bit to repair damaged market sentiment. London's benchmark index slumped 100 points yesterday as political uncertainty in the Eurozone resulted in sharp falls across the continent: corruption scandals at Spanish Prime Minister (PM) Mariano Rajoy's governing People's Party and rising support for former Italian PM Silvio Berlusconi pushed bond yields in both nations sharply higher. However, yields in both countries have fallen back slightly today, while borrowing rates for 'safer' assets - such as those in the US, UK, Germany and France - rose strongly as risk appetite increased. Stock markets started Tuesday's session in a better mood though after some well-received results from heavyweight companies such as BP, ARM Holdings, Munich Re and UBS. Gains were cemented by news that the UK services sector returned to growth in January. The Markit/CIPS services purchasing managers' index (PMI) rose to the 51.5 point mark during the month of January, well ahead of the previous month's reading of 48.9 and the strongest reading since September. The consensus estimate had been for an increase to 49.5. Meanwhile, Eurozone services PMI also beat expectations, rising from 48.3 to 48.6 last month, a 10-month high. Analysts had forecast no change. FTSE 100: ARM jumps after full-year figures ARM Holdings reported a 16% rise in profit before tax for the fourth quarter, boosted by demand for the company's processor technology for smartphones and tablet devices. Normalised pre-tax profits for the British semiconductor and software design firm came to £80m for the three months to December 2012, compared to £69m for the same period a year earlier. Financial services group Hargreaves Lansdown was performing well ahead of its interim results due out on Wednesday. Financials on the whole were wanted as risk appetite increased, with RBS, Lloyds and Schroders making gains. Even Barclays was in positive territory despite announcing that it has put aside a further £1.0bn for redress in the fourth quarter for mis-selling products. Profits at oil titan BP slipped in the fourth quarter owing to lower upstream production levels, but the company assured that it well-positioned for growth after moving past "many milestones" last year, causing shares to rise this morning. Meanwhile, natural gas firm BG Group rose despite posting a sharp fall in fourth-quarter earnings on the back of a decline in cargo deliveries. British Airways owner IAG was flying high after releasing its traffic statistics for January. The company said that group traffic (measured in revenue passenger kilometres) rose 0.7% year-on-year, while group premium traffic increased by 2.7%. Broadcaster and broadband group BSkyB was out of favour after rival Virgin Media confirmed that cable company Liberty Global is considering bid for the firm, which would put it in direct competition with the FTSE 100 market leader. Medical technology group Smith & Nephew was lower ahead of its full-year results on Thursday; Panmure Gordon downgraded the stock from 'buy' to 'hold' after the shares surpassed its target. Insurance giant RSA was lower after Nomura downgraded the shares to 'reduce' ahead of the group' results on February 20th. After the stock's outperformance since November, the broker said that it doesn't "think there will be an additional catalyst to push the stock more from here". Admiral rose after the same broker named it as its "top pick" in the non-life insurance sector. FTSE 250: UBM and Victrex lead the fallers Business published and events organiser UBM was in the red after receiving an offer from Electra Partners to purchase a portfolio of UBM's Data Services businesses, known as 'Delta', for £160m. Nomura kept its 'buy' rating for the stock this morning, but said: "The sale will lead to a dilution of about 11.7% on our estimates, putting the stock at a price-to-earnings ratio of c.13.5x-14x, which could cause short-term weakness before the company begins to provide accretion through events acquisitions, we think." Telecoms group TalkTalk was lower despite saying that it customer base returned to growth for the first time in three years during he third quarter. Polymer manufacturer Victrex was a lower after despite saying that the business is showing "resilience in trading" in spite of continuing global economic challenges. The company said that group sales volumes in the four months to January were up 2.0% year-on-year. Europe-focused industrial property specialist SEGRO gained after completing the disposal of its MPM site in Munich one month earlier than originally planned.

FTSE 100 - Risers Hargreaves Lansdown (HL.) 734.50p +5.76% Eurasian Natural Resources Corp. (ENRC) 344.20p +4.52% ARM Holdings (ARM) 931.00p +4.37% BG Group (BG.) 1,142.00p +3.44% Royal Bank of Scotland Group (RBS) 337.50p +2.71% Vedanta Resources (VED) 1,272.00p +2.50% BT Group (BT.A) 268.90p +2.24% International Consolidated Airlines Group SA (CDI) (IAG) 215.10p +2.14% Lloyds Banking Group (LLOY) 51.48p +1.62% Schroders (SDR) 1,943.00p +1.57% FTSE 100 - Fallers Smith & Nephew (SN.) 707.50p -1.94% Randgold Resources Ltd. (RRS) 6,155.00p -1.91% Antofagasta (ANTO) 1,113.00p -1.24% Xstrata (XTA) 1,150.00p -1.16% Centrica (CNA) 345.10p -1.12% Aggreko (AGK) 1,581.00p -1.06% RSA Insurance Group (RSA) 129.40p -0.92% British Sky Broadcasting Group (BSY) 809.00p -0.86% Shire Plc (SHP) 2,136.00p -0.79% Glencore International (GLEN) 384.20p -0.77% FTSE 250 - Risers COLT Group SA (COLT) 113.60p +5.09% Tullett Prebon (TLPR) 251.60p +4.62% ICAP (IAP) 338.80p +4.57% RPS Group (RPS) 238.80p +3.83% Spirax-Sarco Engineering (SPX) 2,375.00p +3.26% Bovis Homes Group (BVS) 631.00p +2.94% Soco International (SIA) 400.00p +2.88% Supergroup (SGP) 627.50p +2.53% IG Group Holdings (IGG) 466.50p +2.50% Jupiter Fund Management (JUP) 337.70p +2.46% FTSE 250 - Fallers New World Resources A Shares (NWR) 261.50p -5.83% UBM (UBM) 740.50p -5.55% TalkTalk Telecom Group (TALK) 242.00p -4.50% Debenhams (DEB) 98.50p -2.86% Petropavlovsk (POG) 343.50p -2.53% Centamin (DI) (CEY) 62.55p -2.49% Oxford Instruments (OXIG) 1,709.00p -2.45% Daejan Holdings (DJAN) 3,040.00p -2.38% Aveva Group (AVV) 2,155.00p -2.27% Telecom Plus (TEP) 965.00p -2.08%

Europe Market Report

FTSE 100 Euronext Dax perf CAC 40

Europe midday: KPN craters following results - Munich Re announces a dividend increase - UBS announces debt buy-back - KPN craters following results - Spanish 10 year bond yields down 10bp to 5.37 per cent FTSE-100: 0.10% Dax-30: 0.19% Cac-40: 1.04% FTSE Mibtel 30: 1.22% Ibex 35: 1.74% Stoxx 600: 0.62% European equities are bouncing slightly higher with Spanish equities registering a large bounce following yesterday's thrashing. The latter came on the back of political uncertainty in Italy and Spain and despite news that at the conclusion of a quarterly review of Spain's financial reforms the Troika acknowledged that the country has already met the bulk of the strict conditionality attached to the memorandum. The above comes against the backdrop of an increasing sense of weariness over the slow pace of the economic recovery in Spain. In a strategy note published this morning Credit Suisse declares itself 'still constructive' on stocks, and goes on to point out how we have seen 59% of European sectors rotate (i.e. underperform after having outperformed in calendar year 2012, and vice versa) in January, versus an average of 74% in the previous two years. "If a sector continued to outperform in January (i.e. does not rotate), then 83% of the time in the last 3 years it has continued to outperform for the rest of year. This would imply banks, semis, media and pharma outperform for the rest of the year," the broker goes on to explain. "We are overweight semis, media and drugs, and benchmark banks," they added. KPN craters after results Dutch telecoms group KPN is cratering after announcing plans to cut its debt with a €4bn cash call to shareholders. That was more than expected and came on the heels of much poorer than expected results for the fourth quarter. As if that were not enough, the firm announced that it would forego a dividend payment this year. The company unveiled a fourth-quarter net loss of €162m. Nevertheless, and as a result of the above capital raising, analysts at RBS believe S&P may remove the company's debt from review for a downgrade. UBS said it will buy back 5bn Swiss francs (€3.437bn) in senior debt as the reduction in its investment bank entails dramatically reduced liquidity and funding needs. The world's biggest reinsurer, Munich Re, said it will increase its dividend for 2012 to €7 per share from €6.25 before. From a sector stand-point the best performers today are: Banks (1.47%), Insurance (1.07%) and Utilities (1.0%). Better than expected services PMI data Eurozone retail sales dropped by 0.8% month-on-month in December (Consensus: -0.5%). The Markit Eurozone January final composite PMI was revised up versus the "flash" estimate by 0.4 point to 48.6, increasing by 1.4 points from December 2012. The Eurozone manufacturing sector purchasing managers index for the month of January was revised up by 0.7 point to 48.7. The Eurozone service sector purchasing managers' index for the month of January has come in ahead of forecasts and at a 10 month high, at 48.6 points, versus a preliminary estimate of 48.3. The data nonetheless continue to sharp divergences amongst countries, albeit narrower than before. Slight losses in other asset classes The euro/dollar is now sitting at 1.3550, up by 0.30%. Front month Brent crude futures are now higher by 0.841 dollars to the 116.58 dollar level on the ICE.

US Market Report

US open: Dell to go private in all-cash transaction - ISM services PMI as expected - Dell to go private for 24.4bn dollars Dow Jones Industrials: 0.84% Nasdaq Composite: 0.89% S&P 500: 0.89% The major US equity indices are now registering a large bounce following yesterday's slide. That comes after the release of an in-line reading on the ISM Institute's service sector purchasing managers' index. Acting as a backdrop, the US Justice Department yesterday filed civil charges alleging wrongdoing by Standard & Poor's in its rating of mortgage bonds before the financial crisis erupted in 2008, according to people familiar with the matter. Back on the company front, shares of Virgin Media are surging after announcing that it has entered talks on a possible deal with John Malone's Liberty Global. Dell rose 0.9% after it was confirmed that the firm's Chief Executive and founder and private equity firm Silver Lake will take the company private in an all cash transaction valued at $24.4bn. The price offered represents a 25% premium over the outfit's closing price on the past January 11th. Fast food restaurant giant Yum! Brands is falling sharply after cutting its profit forecast. The ISM Institute's service sector purchasing managers' index (PMI) fell slightly in January, to 55.2 points, after a reading of 55.7 for the month before, but that was as expected. 10 year Treasury yields are now rising by 5 basis points to the 2.0% mark. Front month West Texas crude futures are higher by 0.68% to the $96.82/barrel level on the NYMEX. S&P 500 - Risers Computer Sciences Corp. (CSC) $46.00 +9.76% Estee Lauder Co. Inc. (EL) $65.08 +6.60% Archer-Daniels-Midland Co. (ADM) $29.76 +4.64% Electronic Arts Inc. (EA) $16.64 +4.00% GameStop Corp. (GME) $26.23 +3.88% CIGNA Corp. (CI) $60.57 +3.80% Eaton Corporation plc (ETN) $58.40 +3.21% Teradyne Inc. (TER) $16.75 +3.08% Janus Capital Group Inc. (JNS) $9.52 +2.92% Bank of America Corp. (BAC) $11.79 +2.70% S&P 500 - Fallers McGraw-Hill Companies Inc. (MHP) $47.10 -6.36% Edwards Lifesciences Corp. (EW) $87.63 -5.84% Diamond Offshore Drilling Inc. (DO) $73.38 -4.06% Yum! Brands Inc. (YUM) $61.40 -3.97% TECO Energy Inc. (TE) $17.00 -2.44% Moody's Corp. (MCO) $48.25 -2.43% Peabody Energy Corp. (BTU) $24.11 -2.33% Pitney Bowes Inc. (PBI) $13.06 -2.06% Constellation Brands Inc. Class A (STZ) $30.93 -1.97% Emerson Electric Co. (EMR) $56.42 -1.86% Dow Jones I.A - Risers Bank of America Corp. (BAC) $11.79 +2.70% Unitedhealth Group Inc. (UNH) $57.05 +2.33% Boeing Co. (BA) $76.77 +2.07% Coca-Cola Co. (KO) $38.07 +1.93% Procter & Gamble Co. (PG) $76.59 +1.78% American Express Co. (AXP) $60.40 +1.67% JP Morgan Chase & Co. (JPM) $48.40 +1.51% Cisco Systems Inc. (CSCO) $21.08 +1.22% Pfizer Inc. (PFE) $27.49 +1.18% General Electric Co. (GE) $22.57 +1.17% Dow Jones I.A - Fallers International Business Machines Corp. (IBM) $203.46 -0.16% Intel Corp. (INTC) $21.15 -0.07% Nasdaq 100 - Risers Virgin Media Inc. (VMED) $45.21 +16.85% Gilead Sciences Inc. (GILD) $40.58 +2.51% Bed Bath & Beyond Inc. (BBBY) $59.73 +2.37% Life Technologies Corp. (LIFE) $64.46 +2.28% Applied Materials Inc. (AMAT) $13.29 +2.24% Yahoo! Inc. (YHOO) $19.74 +2.07% Staples Inc. (SPLS) $13.60 +2.03% Amazon.Com Inc. (AMZN) $264.85 +1.87% Sears Holdings Corp. (SHLD) $47.20 +1.79% eBay Inc. (EBAY) $56.67 +1.75% Nasdaq 100 - Fallers Baidu Inc. (BIDU) $95.48 -10.93% Liberty Global Inc. Series A (LBTYA) $67.14 -3.34% Randgold Resources Ltd. Ads (GOLD) $97.23 -1.18% Sirius XM Radio Inc (SIRI) $3.13 -0.95% Akamai Technologies Inc. (AKAM) $41.20 -0.39% NetApp Inc. (NTAP) $35.57 -0.31% Regeneron Pharmaceuticals Inc. (REGN) $170.31 -0.22% Intel Corp. (INTC) $21.15 -0.07%

Broker Tips

Broker tips: Insurers, ARM, Smith & Nephew Ahead of earnings season for insurance stocks, Nomura has reviewed its coverage on the non-life sub-sector, highlighting Admiral as its top pick whilst upgrading its rating for Direct Line and downgrading RSA. In a research report on Tuesday, Nomura said: "We are not expecting any major surprises, and expect a good set of results from all the companies." The broker believes that the UK non-life insurance sector offers good dividend yields among the Pan-European insurance category and "should lead to good total returns, and which we believe are supported by strong balance sheets and relatively more stable earnings streams." Strong growth in Licensing sales at chip designer ARM Holdings helped the company beat expectations in the fourth quarter, according to Investec. "ARM has proved again it is the standout play in the tech sector. Our recent move to 'hold' was predicated in the stock hitting our 900p target which was based on our FY16E royalty scenario analysis. The upside beat on the licence performance should be enough to help the stock consolidate following its very strong run. At this stock price, the key will be on the sustainability of this licence level". With Smith & Nephew having reached Panmure Gordon's target, the broker has downgraded the stock from 'buy' to 'hold' despite it remaining bullish for the group's long-term outlook. Panmure said that it expects the medical technology firm's full-year results on Thursday to be "largely positive" but doesn't think that the outlook statement will be as strong as consensus forecasts imply - consensus estimates are for 5.4% growth in 2013 revenues.