ADVFN III Morning Euro Markets Bulletin (February 7, 2013).

ADVFN III Morning Euro Markets Bulletin

Daily world financial news

Thursday, 07 February 2013

London Market Report

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

Markets cautious ahead of policy decisions     Market Movers     techMARK 2,293.43 -0.06%     FTSE 100 6,297.61 +0.04%     FTSE 250 13,338.74 -0.02% The FTSE 100 index opened slightly higher on Thursday morning, helped by some decent gains by Vodafone, TUI Travel and Compass, but trade was cautious ahead of the monthly policy meetings at the Bank of England (BoE) and European Central Bank (ECB). The BoE decision is expected at midday, with forecasts for no change to the current record-low Bank Rate of 0.5% and the asset purchase programme of £375bn. However, as senior market analyst Michael Hewson from CMC Markets explained this morning, the markets are going to be more interested in what BoE Governor elect Mark Carney has to say during his testimony at 09:45 to the Treasury Select Committee. "Given Mr Carney’s recent references to nominal GDP targeting, markets will be looking to see if he expands on that theme, and whether he thinks the current policy toolbox of the bank needs expanding. Any hint of a dovish response could well be negative for sterling. "It seems more likely that he will try and maintain as neutral a stance as possible with respect to showing his hand on policy, given that he hasn’t as yet taken up the reins at the bank and will want to avoid ruffling too many feathers before he even takes up his seat," Hewson said. As for the ECB, President Mario Draghi is also expected to announce at 12:45 that policy makers have decided to hold rates, but the focus will be the following press conference. "It's looking more and more likely that the bank will cut interest rates at some point over the coming months, but the consensus appears to be that it won't be today. However, it's difficult to see what will be gained by waiting a few extra months, especially with inflation now at 2.0%," said market analyst Craig Erlam from Alpari. FTSE 100: Vodafone, TUI and Compass gain early on Telecoms group Vodafone rose despite posting a 1.8% drop in revenue for the last three months of 2012, blaming a difficult market conditions in Europe. However, the company said it expects adjusted operating profit in the upper range of £11.1bn to £11.9bn for the 2013 financial year. Travel and leisure firm TUI Travel gained after reporting a narrower operating loss in the first quarter as it saw outperform in the UK and Nordic markets. Contract caterer Compass was a high riser after having a good first quarter with expectations for the full year unchanged as its North America and emerging market performing strongly. Burberry sank early on after the luxury brand named Carol Fairweather, formerly Senior Vice President of Group Finance, as its new CFO. Medical technology group Smith & Nephew edged lower despite beating forecasts in the fourth quarter as it said that margins are expected to fall in 2013. FTSE 250: Ocado and SuperGroup surge Online grocer Ocado jumped after reporting a 13% rise in revenue in 2012, helped by rising demand. Trendy fashion brand SuperGroup also jumped after unveiling a 12.3% increase in sales for the holiday season as shoppers stocked up on jackets, knitwear and gifting accessories.

AIM/Small Cap Report

FTSE 100 - Risers Vodafone Group (VOD) 173.05p +1.58% TUI Travel (TT.) 307.80p +1.38% Amec (AMEC) 1,097.00p +1.11% Severn Trent (SVT) 1,654.00p +1.10% Compass Group (CPG) 773.50p +1.05% CRH (CRH) 1,326.00p +0.84% Aviva (AV.) 355.90p +0.82% Tesco (TSCO) 365.95p +0.76% Experian (EXPN) 1,103.00p +0.73% Royal Dutch Shell 'A' (RDSA) 2,213.00p +0.71% FTSE 100 - Fallers Burberry Group (BRBY) 1,376.00p -3.78% Hargreaves Lansdown (HL.) 799.00p -2.20% Eurasian Natural Resources Corp. (ENRC) 369.00p -1.76% IMI (IMI) 1,187.00p -1.00% Aberdeen Asset Management (ADN) 408.00p -0.99% Shire Plc (SHP) 2,120.00p -0.93% GlaxoSmithKline (GSK) 1,435.50p -0.93% Fresnillo (FRES) 1,670.00p -0.83% Associated British Foods (ABF) 1,763.00p -0.73% Vedanta Resources (VED) 1,289.00p -0.69% FTSE 250 - Risers Supergroup (SGP) 700.50p +10.58% Ocado Group (OCDO) 110.40p +6.26% Beazley (BEZ) 202.00p +6.09% Centamin (DI) (CEY) 62.30p +4.53% IP Group (IPO) 130.70p +4.14% Petra Diamonds Ltd.(DI) (PDL) 116.80p +2.55% Amlin (AML) 400.10p +2.07% Homeserve (HSV) 238.20p +1.79% Home Retail Group (HOME) 127.60p +1.51% Wetherspoon (J.D.) (JDW) 522.50p +1.46% FTSE 250 - Fallers Ophir Energy (OPHR) 476.00p -8.37% Dairy Crest Group (DCG) 412.80p -2.18% ICAP (IAP) 350.90p -1.68% SIG (SHI) 131.70p -1.57% IG Group Holdings (IGG) 490.70p -1.33% AZ Electronic Materials SA (DI) (AZEM) 384.00p -1.29% Genesis Emerging Markets Fund Ltd. (GSS) 597.50p -1.24% London Stock Exchange Group (LSE) 1,248.00p -1.19% St. Modwen Properties (SMP) 252.50p -1.10% Domino Printing Sciences (DNO) 652.00p -1.06%

Europe Market Report

FTSE 100 Euronext Dax perf CAC 40

Draghi not expected to voice opposition to euro's rise FTSE-100: 0.14% Dax-30: 0.11% Cac-40: 0.11% FTSE Mibtel 30: 0.80% Ibex 35: 1.06% Stoxx 600: 0.18% European stocks have begun the day ever so slightly higher ahead of this afternoon’s European Central Bank (ECB) policy meeting. Expectations, nevertheless, are that investors have bet too heavily that ECB President Mario Draghi will voice opposition to the recent rise in the euro's value. Of interest, however, is the possibility that he will warn banks not to be too hasty in returning the liquidity which they borrowed from it, or not. The latter may well determine the single currency’s reaction. Of interest in any case, Barclays Research today takes the same view which can be heard quite loudly of late as regards the poor outlook for the Euro this year, its recent sharp appreciation notwithstanding. Also to be had in account, the Spanish Treasury will today auction €4.5bn in long-term debt. Of possible interest as well, Reuters today points out how the broad DJ Stoxx Europe 600 index trades is trading at an average price-to-book ratio of 1.6, well below a 10-year average of 2.1, versus Wall Street’s 2.2. Undervalued or correctly priced? In terms of its price-to-earnings ratio the Stoxx is trading at 12 times its forward earnings, its best level in nearly three years, although still below a 10-year average of 12.2. Sanofi guides lower Investment bank Credit Suisse on Thursday announced further costs cuts, after fourth-quarter net profit missed expectations. French pharmaceutical giant Sanofi is moving lower after reporting a 24% decline in fourth-quarter profit. More damningly, the company is warning that earnings per share may drop by as much as 5% this year due to competition for some of its star products from generics. Shares of Alcatel Lucent are rocketing higher after releasing its own results and announcing that its Chief Executive Officer is to step down. From a sector stand-point the best performers today are: Telecommunications (0.79%), Oil&Gas (0.64%) and Automobiles&Parts (0.57%). Data-light calendar German industrial production data will be released at 11:00. Slight losses in other asset classes The euro/dollar is now rising by 0.32% to 1.3562. Front month Brent crude futures are again moving higher, by 0.571 dollars to the 117.40 dollar level on the ICE. UK Event Calendar INTERIMS Mcbride INTERIM DIVIDEND PAYMENT DATE FirstGroup INTERNATIONAL ECONOMIC ANNOUNCEMENTS Consumer Credit (US) (20:00) ECB Interest Rate (EU) (12:45) Industrial Production (GER) (11:00) Productivity (US) (13:30) Q4 Smith & Nephew FINALS Beazley, Smith & Nephew IMSS Avon Rubber, Supergroup, Vodafone Group EGMS Hotel Corporation (The) AGMS Avon Rubber, BlackRock New Energy Inv Trust, Compass Group, Downing Absolute Income VCT 1, Downing Absolute Income VCT 1 'C' Shares , Downing Income Vct, Downing Income Vct 4, Paragon Group Of Companies, Thomas Cook Group, TUI Travel, Unicorn AIM VCT TRADING ANNOUNCEMENTS Bellway UK ECONOMIC ANNOUNCEMENTS Balance of Trade (09:30) BoE Interest Rate Decision (12:00) FINAL DIVIDEND PAYMENT DATE Cardiff Property, JPMorgan Asian Inv Trust Q1 TUI Travel, TUI Travel

US Market Report

Stocks Close Roughly Flat After Choppy Trading Day After seeing considerable volatility over the course of the two previous sessions, stocks turned in a lackluster performance during trading on Wednesday before closing roughly flat. The major averages ended the day mixed, although they were all nearly unchanged. While the Nasdaq edged down 3.10 points or 0.1 percent to 3,168.48, the Dow inched up 7.22 points or 0.1 percent to 13,986.52 and the S&P 500 crept up 0.83 points or 0.1 percent to 1,512.12. The choppy trading on Wall Street came as traders expressed some uncertainty about the outlook for the markets after recent strength lifted the Dow and the S&P 500 to five-year highs. Following the big swings back and forth seen over the course of the two previous sessions, traders seemed reluctant to make any significant moves. Uncertainty about the financial situation in Europe helped to keep traders on the sidelines ahead of Thursday's monetary policy announcement from the European Central Bank. Along with the monetary policy meeting, the leaders of the European Union member states are due to hold a two-day meeting in Brussels beginning on Thursday. Amid a lack of major U.S. economic data, traders also kept a close eye on the latest batch of earnings news. Shares of C.H. Robinson Worldwide (CHRW) moved sharply lower after the freight and shipping company reported fourth quarter earnings that missed estimates. Insurance company Aflac (AFL) also posted a notable loss after reporting fourth quarter adjusted earnings that matched expectations but on weaker than expected revenues. Meanwhile, shares of Zynga (ZNGA) moved sharply higher after the social gaming company reported an unexpected fourth quarter profit. The company also provided upbeat revenue guidance. Disney (DIS) also moved to the upside after reporting first quarter earnings that fell year-over-year but came in above analyst estimates. The entertainment giant also reported better than expected revenue growth. Sector News Most of the major sectors ended the day showing only modest moves, contributing to the roughly flat close by the broader markets. Airline stocks saw considerable strength on the day, however, resulting in a 1.7 percent gain by the NYSE Arca Airline Index. United Continental (UAL) and Delta Air Lines (DAL) turned in two of the sector's best performances. Significant strength was also visible among steel stocks, as reflected by the 1.6 percent gain posted by the NYSE Arca Steel Index. Reliance Steel (RS) helped to lead the sector higher after announcing an agreement to acquire Metals USA Holdings Corp. (MUSA) for about $766 million. Computer hardware and healthcare provider stocks also saw some strength on the day, while modest weakness was visible among software stocks. Other Markets In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan's Nikkei 225 Index soared by 3.8 percent, while Hong Kong's Hang Seng Index ended the day up by 0.5 percent. In the bond market, treasuries ended the day notably higher, rebounding after coming under pressure in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.8 basis points to 1.968 percent. Looking Ahead Trading on Thursday could be impacted by the ECB's monetary policy announcement, although the central bank is expected to keep interest rates unchanged. Following today's lack of major U.S. economic data, traders are also likely to keep an eye on the release of reports on weekly jobless claims and labor productivity. On the earnings front, Allstate (ALL), Prudential (PRU), and Visa (V) are among the companies releasing their quarterly results after the close of today's trading, while Cigna (CI) and Sprint Nextel (S) are among those due to report before the start of trading on Thursday.

Thursday newspaper round-up

HSBC, Anglo Irish Bank, UK deficit... HSBC's biggest ever restructuring had been necessary to simplify the bank's complex structure which had made it attractive to money-laundering criminals, its chief executive said. Stuart Gulliver said HSBC's structure "was not fit for purpose for a modern world", adding that the restructure he launched on taking the helm two years ago had been the biggest since 1865 - the year the bank was founded. [The Telegraph] An attempt by Ireland to ease its debt burden was thrown into disarray early on Thursday as the government scrambled to introduce emergency legislation to liquidate Anglo Irish Bank, the failed lender, without having secured a key debt swap deal with the European Central Bank. The government had intended to announce the liquidation of the bank alongside a deal with the ECB on replacing €28bn in costly promissory notes, used to bail out Anglo Irish in 2009. But leaked reports of its plans on Wednesday afternoon forced the government to go ahead with the liquidation – which was agreed by the lower house of parliament in the early hours of Thursday morning – before reaching agreement in Frankfurt on replacing the notes. [Financial Times] Britain will have borrowed £64bn more than expected by the time of the next general election after weak growth played havoc with George Osborne's deficit reduction plan, the Institute for Fiscal Studies has warned. The UK's leading tax and spending experts said on Wednesday the public finances would be in a worse state in 2015 than permitted under plans made by the previous Labour government to tackle the deficit. In its "green budget" annual healthcheck on the public finances, the IFS said the chancellor was allowing extra borrowing to take the strain during the current parliament at the expense of another bout of austerity after the 2015 election. [The Guardian] The online scrapbooking start-up behind one of the internet’s fastest-growing websites is seeking new funding that would value the company at up to $2.5 billion — despite not yet having worked out how to make money. The astronomical valuation of Pinterest is based on the belief held by the two-year-old company and its investors that it can transform its millions of users into a working business model. Pinterest is a photo-sharing social network that allows people to create a virtual pinboard of things they have spotted on the web. The new funding is designed to help the company to work out a way of making revenues, with Pinterest believed to be ready to test ways to turn its huge traffic into sales. [The Times] Rupert Murdoch's News Corp paid out another $56m (£36m) in the final three months of 2012 to meet the costs of the ongoing phone hacking scandal that forced it to close The News of the World. Its publishing division, which includes HarperCollins as well as newpaper titles ranging from The Wall Street Journal to The Sun, still managed to post a $16m rise in operating profits to $234m in the quarter, thanks in part to the launch of the Sunday edition of The Sun newspaper a year ago. [The Independent] Sir Richard Branson is set to top up his bank account with another $316m (£201.7m) following the agreed takeover of Virgin Media by John Malone's Liberty Global for $16bn. The billionaire, pictured, who has an estimated £3.4bn fortune, owns 6.6 million shares in Virgin Media as the inheritance to the 2006 deal which saw him inject his Virgin Mobile into cable company NTL Telewest. Liberty is offering a mixture of cash and shares valuing each Virgin Media share at $47.87 which makes Sir Richard's stake worth $316m. The agreed bid is at a 24 per cent premium to Virgin Media's closing price on Monday before the deal became public. [The Independent] Energy giant SSE is selling off a portfolio of wind farms to a UK government-backed infrastructure fund that will offer shares with an inflation-linked dividend. Greencoat UK Wind aims to raise £205 million in an initial public offering (IPO) at the end of March, with the cash brought in from investors being used to buy four wind farms from SSE for £140m and a further two from RWE. In turn, SSE will invest up to £43m in the stock market flotation of Greencoat, as well as signing up to a deal to buy the energy produced by the wind farms through a long-term power purchase agreement. The Department for Business, Innovation & Skills (BIS) will take a £50m stake. [The Scotsman]