UK/Euro Financial Market Daily Morning Briefing 19-09-2007

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London shares soar after Fed rate cut, miners up, banks extend recovery

Leading shares were sharply higher in early trade after last night's surge on Wall Street, the biggest for nearly five years, following the Federal Reserve's decision to cut US interest rates 50 basis points to 4.75 pct, with financial shares continuing their recovery and shares in oil companies and miners rising.
   
At 9.12 am, the FTSE 100 was 138.3 points higher at 6,421.6 and reached 6,443.6 at one point. Yesterday, the index rose 100.5 points to close at 6,283.3. At 9.12 am, the FTSE 250 was 325.2 points higher at 11,128.7.
   
Volume was strong, with 668 mln shares having changed hands in 143,820 deals.
   
Any fallers in either the FTSE 100 or the FTSE 250 were only marginally in negative territory.
   
Northern Rock continued its recovery, as investors become more optimistic about its future following the government's guarantees to depositors. The shares were up 6-3/4 pence at 312-3/4 pence. Alliance & Leicester was 47 pence higher at 840. Both shares were gaining for a second day, after heavy falls on Monday.
   
Although some investors hoped for a rate cut of 50 basis points, most were betting on a smaller, quarter-point cut in the federal funds rate. The Fed responded to the spilling of credit market problems into the rest of the economy by saying: "The tightening of credit conditions has the potential to intensify the housing (market) correction and to restrain economic growth more generally."
   
The Fed lowered the benchmark fed funds rate to 4.75 pct after keeping it unchanged for more than a year and not lowering the rate since 2003.
   
The central bank's decision and the wording of its accompanying economic assessment gratified a market that plunged during August amid fears that credit market tightness, spawned by a continuum of mortgage defaults and delinquencies, would send the economy toward recession.
   
The Dow soared 335.97, or 2.51 pct, to 13,739.39. The last time it rose more than 300 points in one session was Oct 15, 2002, when it gained 378 points, and Tuesday's percentage increase was the biggest since April 2, 2003. The blue-chip index is now only about 1.9 pct below its record close of 14,000.41, reached in mid-July.
   
The Standard & Poor's 500 index rose 43.13, or 2.92 pct, to 1,519.78. The Nasdaq composite index gained 70.00, or 2.71 pct, to 2,651.66. The S&P and the Nasdaq had their largest point gains since July 29, 2002.
   
Small-cap stocks, badly beaten during the market's summer turmoil, shot higher. The Russell 2000 index surged 30.82, or 3.97 pct, to 806.63, the largest percentage gain since July 29, 2002.

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The rate move also sparked a major surge for Asian stocks. Hong Kong's key Hang Seng Index hit a fresh lifetime high when trading opened today.
   
The Hong Kong Monetary Authority followed the Fed's move and announced this morning it has reduced its base rate by half a percentage point. The HKMA usually mirrors any Fed moves on interest rates because the city's currency is pegged to the US dollar.
   
The Hang Seng Index ended the day up 977.79 points, or 4 pct, at 25,554.64, a record.
   
In Japan, the blue-chip Nikkei 225 Stock Average ended the day 579.74 points, or 3.7 pct higher, at 16,381.54. The Bank of Japan kept its key interest rate at 0.5 pct, as widely expected.
   
Oil prices have also reached new highs, as traders feel the rate cut will help to boost demand for energy.
   
In Singapore, at 10:20 am (0220 GMT), New York's main futures contract, light sweet crude for October delivery, was trading at a new all-time high of 82.32 usd a barrel, up 81 cents from its close of 81.51 usd in late US trades Tuesday.
   
Brent North Sea crude for November delivery was 79 cents higher at 78.38 usd a barrel. "We are in a new territory for oil pricing," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz.
   
Index heavyweight BP was 7-1/2 pence higher at 579. It was a similar story for commodities such as copper.
   
Both Xstrata and Antofagasta were higher, despite going ex-dividend today. Xstrata was up 158 pence at 3,015 pence. Antofagasta was up 22-1/2 pence at 760. Rio Tinto was 172 pence up at 3,902. BHP Billiton was up 63 pence at 1,593, a record. Anglo American soared 138 pence to 3,028.
   
Housebuilder Persimmon topped the FTSE 100 leaderboard, up 57 pence at 998, bouncing from a 12-month low, having suffered from worries over a housing slowdown.
   
Imperial Tobacco was up 15 pence at 2,225 after it said trading was in line with expectations. 9 ahead of the statement. The nake of Lambert & Butler and Golden Virginia said its UK market share was growing. The company said it had noticed a decline in cigarette volumes since the smoking ban came into effect in July, but said the impact would diminish over time.

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Misys, 18-1/2 pence higher at 226, topped the FTSE 250 leaderbaord after this morning's trading update showed the company making progress at its banking division, although Healthcare was still lagging.
   
The financial and healthcare software company said its first quarter like-for-like revenues rose 6 pct to 104 mln stg, mainly driven by a strong performance from Banking.
   
The software company also said its turnaround is making progress, and it is on track with its cost take out and margin improvement work.
   
Elsewhere, Moneysupermarket.com Group rose 4-3/4 pence to 160-1/2 pence after it announced that first-half revenue nearly doubled as it swung to a pretax profit, helped by a sharp increase in internet revenues.
   
The price comparison website reported a maiden pretax profit of 6.7 mln stg compared with a loss of 8.1 mln in the corresponding half of last year.
   
It said revenues for the first half of the year to end-June rose to 78.5 mln stg from 48.2 mln, with internet revenues rising 72 pct to 73.5 mln stg from 42.7 mln.
   
Margins increased to 66 pct from 55 pct over the period, it added.
   
Moneysupermarket.com said the third quarter had started "very strongly", adding its business had not seen any impact from the the "weakening of the credit markets". The company listed on the London stock market at the end of July and will be promoted to the FTSE 250 next week.
   
Capital & Regional, the midcap property investing company, rose 19 pence to 802-1/2 pence despite reporting that return on equity for the first half had fallen to 4.8 pct, compared with 19.2 pct a year earlier.

Diary of Events

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

US Summary

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

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PARIS - Market data at 10.14 am:

Major indices:
   
CAC-40 up 127.20 or 2.29 pct at 5,676.55
   
39 CAC-40 stocks up
1 CAC-40 stock down

Major gainers:
   
BNP Paribas up 3.46 or 4.66 pct at 77.65 as last night's decision by the US Federal Reserve to cut interest rates by 50 basis points, buoying the banking sector across Europe
   
Societe Generale up 6.35 or 5.59 pct at 119.85 on the Fed move and after Morgan Stanley raised its target to 154 eur from 147 eur
   
Michelin up 4.51 or 5.33 pct at 89.13
   
Major losers:
   
Credit Agricole down 0.41 or 1.57 pct at 26.88 after it revealed that its Calyon unit will take a 250 mln eur hit from unauthorised trading
   
Most active stocks:
   
AXA up 1.04 or 3.61 pct at 29.81; 7.08 mln shares traded
   
Credit Agricole down 0.41 or 1.57 pct at 26.88; 6.66 mln shares traded

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MILAN - Market data at 10.01 am:
   
Main Indices
   
Mibtel at 30,984, up 1.48 pct
   
S&P/Mib at 40,062, up 1.73 pct 

Main S&P/Mib gainers:
   
Lottomatica up 3.68 pct at 25.61 eur, after MF said the government is studying legislation to avoid Lottomatica and other companies from having to pay damages for having delayed connecting videogames to a telecoms network
   
Unicredito up 3.31 pct at 6.12, as bank rebounded strongly. Dealers said conditions imposed by the antitrust body to clear the bank's planned merger with Capitalia were broadly expected
   
Capitalia up 3.30 pct at 6.83
   
Intesa Sanpaolo up 2.51 pct at 5.54
   
Impregilo up 2.50 pct at 4.68
   
Main S&P/Mib losers:
   
No shares were negative, while among underperformers were utilities, like Snam RG, up 0.11 pct at 39.76, and Enel, up 0.38 pct at 7.85

Other stocks in the news:
   
UBI up 2.02 pct at 19.18, after it entered into exclusive talks to sell 61 branches to Popolare di Vicenza for 488 mln eur. A broker said the offer favours UBI
   
Atlantia up 0.87 pct at 23.27. Il Sole 24 Ore said Abertis has decided to exercise the right to sell its 13.3 pct stake in Atlantia's parent company in exchange for a 6.65 pct direct stake in the group. A broker said such a move would reduce the chanches of a merger between Atlantia and Abertis

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AMSTERDAM - Market data at 10.28 am

Major indices
   
AEX 539.32, up 8.32 points
AMX Midcap 704.62, up 10.71 points
Government bonds mainly lower

Major gainers
   
Randstad up 5.00 pct at 37.99 eur, while peer staffer Vedior surged 4.89 pct at 15.67 eur and midcapper USG People put on 4.16 pct to 20.80 eur
   
SBM Offshore 5.00 pct higher at 27.51 eur amid news it is ready to start selling offshore liquefied natural gas (LNG) production facility and amid news of a LNG partnership with Linde and a ship hull deal with Japan's IHI
   
Unibail-Rodamco up 4.02 pct at 182.78 eur as Morgan Stanley initiates coverage with 'overweight' rating and 205 eur price target. Midcap property stock peer Corio gains 2.97 pct to 56.58
   
Financials all trading higher, with Fortis up 2.28 pct at 26.03 eur, ING up 2.19 pct at 30.74 eur, Aegon gaining 1.74 pct to 13.42 eur and ABN Amro rising 0.91 pct to 36.60 eur after cut in US interest rates
   
DSM up 0.94 pct at 36.48 eur
   
Akzo Nobel gains 0.90 pct to 56.27 eur amid news the Dutch government will provide 45 mln eur in funding to a public-private R&D programme initiated by DSM. Akzo Nobel is a partner in the project
   
Aalberts Industries up 4.75 pct at 16.76 eur
   
Boskalis Westminster gains 3.89 pct to 31.80 eur
   
Major decliners
   
No blue chip decliners
   
CSM down 0.79 pct 23.85 eur
   
Stork down 0.31 pct at 45.21 eur amid threat of strike as union urges against split-up of company

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