UK/Euro Financial Market Daily Morning Briefing 14-11-2007

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At 9.01 am, the FTSE 100 index was up 74.6 points at 6,437.0, having risen 24.5 points yesterday to close at 6,362.4. The FTSE 250 was up 156.6 points at 11,076.8. Volume was average, with 352.2 mln shares having changed hands in 91,310 deals.
   
The Dow Jones Industrial Average rose 319.54, or 2.46 pct, to 13,307.09 yesterday after reassuring news from Goldman Sachs Group Inc and Wal-Mart Stores Inc quelled some of the market's worst fears about the credit crisis and the economy. A plunge in the price of oil gave investors further incentive to buy.
   
Broader US indexes also rose sharply. The Standard & Poor's 500 index jumped 41.86, or 2.91 pct, to 1,481.04, and the Nasdaq composite index gained 89.52, or 3.46 pct, to 2,673.65.
   
Goldman Sachs said it does not expect a significant hit from the subprime mortgage turmoil. Goldman chief executive lloyd Blankfein said the bank has a short position in the subprime mortgage market and will not be taking any significant charges to write off losses.
   
Wal-Mart, the world's largest retailer, reported third-quarter profit above projections and hinted that consumer spending might be stronger than anticipated this holiday shopping season.
   
The upbeat pattern in the US continued in Asia this morning. Hong Kong's Hang Seng index ended the morning up 1,023.63 points or 3.68 pct at 28,826.98.
   
China Mobile led the large-caps after news that it is in talks with Apple Inc over possible launch of iPhone on the mainland, with the stock also boosted by positive comments from UBS and an attractive valuation.
   
In Japan, the blue-chip Nikkei 225 Stock Average rose 372.93 points, or 2.5 pct, to end the day at 15.499.56.  Back in the UK, banking giant HSBC was up 37 at 844 after its eagerly awaited statement, which included news on exposure to subprime mortgages.
   
The company said higher loan impairment charges in the US were more than offset by revenue growth in the group, with the result that net operating income was higher than in the prior year quarter.

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The loan impairment charge for its US consumer finance business was 3.4 bln usd in the third quarter of 2007.
 
Royal Bank of Scotland continued its recovery, up 14-3/4 at 472-1/2.  Land Securities was up 16 pence at 1,584 pence after saying it plans to demerge into three separately quoted companies which will reflect its three main business streams: retail property, the London property market, and its property outsourcing business Trillium.
   
The group also revealed that its interim pretax profit fell to 375.2 mln stg from 1.2 bln previously, as a result of a smaller valuation surplus.  Antofagasta was among the miners on the rise, up 26 pence at 729, with metal prices gaining again after falling in recent days. Lonmin was up 144 pence at 3,221, making it the top FTSE 100 riser, after its full-year results beat market expectations.
  
Friends Provident rose 6.5 pence to 166 pence after confirming the resignation of Philip Moore, its chief executive.  Perth-based Scottish & Southern Energy rose 21 pence to 1,544 pence after announcing that adjusted pretax profit for the first half was up to 664.7 mln stg, from 466.5 mln over the same period last year, ahead of analysts expectations.
 
Sainsbury, the supermarket chain that was the subject of two aborted takeover approaches this year, gave up early gains to trade 5-1/4 pence lower at 420-1/2 pence, after reporting first-half profits that were at the top end of market expectations.
   
Underlying pretax profit for the 28 weeks to Oct 6 was up 27 pct to 240 mln stg, from 189 mln stg the year before. Analysts' consensus forecast was 231 mln stg.

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The supermarket group also announced a joint venture with Land Securities to unlock development value from 113 mln stg of freehold assets.
   
Among the midcaps, Burberry, the global fashion brand, was 9-1/2 pence higher at 595 pence afterreporting an expected 13 pct increase in first-half underlying operating profit.
   
The company said it is on track to achieve its full-year expectations.  Balfour Beatty rose 33-1/4 pence to 484-3/4 after saying it expects its full-year trading performance for 2007 to be "higher than previously expected".
   
In a trading statement, the engineering, construction, services and investment group said trading in all parts of the group had been strong and was helped by good settlements on some completed projects. The closely-watched Bank of England quarterly inflation report is due later. This is a key indicator of how soon the central bank is likely to cut interest rates.
   
Data released yesterday, showing that inflation had risen to 2.1 pct for the year to October, above the BoE's 2 pct target, would suggest a cut is not on the cards. However, the Bank aims to anticipate future trends, rather than react to one month's data.
   
Unemployment data is due at 9.30 am. Today's figures are expected to show a fall of 6,000 in October, after a 12,800 drop the previous month. This would mark the 13th consecutive month-on-month fall and would leave the claimant count rate unchanged at 2.6 pct.

UK Diary of Events

For a diary of key financial and corporate events in the UK today, click here

US Summary:

For a summary of US stocks at yesterday's close of trade, click here

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Major indices:

CAC-40 up 75.18 points, or 1.36 pct, at 5,614.09
SBF-80 up 102.10, or 1.57 pct, at 6,610.64
SBF-120 up 55.68, or 1.38 pct, at 4,083.01

35 CAC-40 stocks up
5 CAC-40 stocks down

Major gainers:
BNP Paribas, up 2.54 eur, or 3.51 pct, at 74.89; Societe Generale, up 3.53, or 3.42 pct, at 106.66; Axa, up 0.75, or 2.72 pct, at 28.33. Financial stocks are rebounding sharply in the wake of reassuring comments from Goldman Sachs on the subprime impact
   
Alcatel-Lucent, up 0.17, or 3.02 pct, at 5.80. Alcatel shares have fallen sharply in recent weeks and are still down 15.65 pct over the month  ArcelorMittal, 1.53, or 3.12 pct, higher at 50.57. The share had fallen
significantly in the run-up to third-quarter results, on talk that the group could disappoint with its earnings. The steel group today unveiled a 12 pct rise in third-quarter net profit, ahead of expectations
  
Scor, up 1.04, or 6.08 pct, at 18.14. The insurance firm's third-quarter net profit came in ahead of consensus at 118 mln eur

Major losers:

Parrot, down 9.78, or 39.66 pct, at 14.88 after the group cut its full-year operating margin target to 12 pct from 14 pct previously France Telecom, down 0.17, or 0.66 pct, at 25.57; Gaz de France, down 0.09,
or 0.24 pct, at 37.59. Defensive stocks are underperforming as market jitters subside
   
Most active stocks:

Alcatel-Lucent, 5.93 mln shares traded
Axa, 3.43 mln shares traded

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FRANKFURT - Shares in the German banking sector were higher in earlier morning deals with traders pointing to a boost after Goldman Sachs chief executive Lloyd C. Blankfein said the bank does not anticipated further write-downs relating to the subprime credit crisis.
   
"The statements are definitely helping to boost German banking shares and to inspire greater confidence in the market," said a local trader.
   
At 10.01 am, shares in Hypo Real Estate were 1.66 eur, or 4.50 pct, higher at 38.56, making it the second best performer on the DAX, which had gained 52.99 points, or 0.68 pct, at 7,830.55.
   
Deutsche Bank AG shares were 2.38 eur, or 2.80 pct, higher at 87.28. Shares in peer Commerzbank AG gained 0.73 eur, or 2.70 pct, at 27.81, while Deutsche Postbank AG added 1.37 eur, or 2.59 pct at 54.20, rounding out the top five gainers among blue chips.
   
"But fears probably linger in the minds of some investors, as Goldman wasn't extremely affected by subprime-related credit problems last quarter. It will take a similar announcement from the other two giant US banks to really gain investors confidence back and helping the sector enjoy a rebound," the trader
added.
    
Goldman Sachs recorded 1.48 bln eur in charges for the third quarter, significantly less than Merrill Lynch & Co's 7.9 bln eur write-down from the same quarter or Citigroup's 6 bln eur in credit losses.
   
Presenting at the Merrill Lynch Banking and Finance Conference in New York yesterday, Blankfein said he expects no further significant costs tied to the drainage of demand from certain markets, including bonds backed by mortgages.
   
Wall Street's investment banks have written 43 bln eur off their balance sheets this year, according to a Deutsche Bank estimate.

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MAJOR INDICES:

AEX 514.20, up 6.31 points
AMX Midcap 696.53, up 6.57 points
Government bonds lower

MAJOR GAINERS:
Fortis rose 3.67 pct to 18.65 eur amid market expectations that the banking group can cope with the subprime crisis.  ArcelorMittal added 3.10 pct to 50.55 eur after presenting solid Q3 earnings and raised its dividend
   
Heijmans was up 2.85 pct to 25.30 eur after reiterating its full-year profit outlook

ASML put on 2.69 pct to 23.25 eur Vopak rose 1.46 pct to 38.79 eur after news of a new joint venture in

Indonesia Boskalis added 1.18 pct to 41.95 eur following a price target hike at Rabo Fugro put on 0.69 pct to 57.29 eur after a price target hike at ING ING added 1.52 pct to 27.41 eur after saying that it bought pension fund business in Argentina for 192 mln eur

MAJOR DECLINERS:

Unilever was down 0.50 pct to 23.81 eur
Heineken shed 0.15 pct to 46.80 eur
Wereldhave lost 1.53 pct to 75.42 eur
Tele Atlas dropped 0.64 pct to 32.79 eur

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