UK/Euro Financial Market Daily Morning Briefing 20-12-2011

Market Movers

• techMARK 1,813.00 -0.37%
• FTSE 100 5,346.64 -0.34%
• FTSE 250 9,769.02 +0.21%

Though the Eurozone debt crisis rumbles on in the background, UK investors look to be already in holiday mood, with the market drifting lower at the outset in light trading.

The European Union (EU) member states announced late last night their plan to increase the International Monetary Fund's (IMF's) resources in order to "enhance the IMF's capacity to fulfil its systemic responsibilities in support of its global membership, which is especially important given the ongoing economic slowdown and financial market tensions."

The figure was €50bn shy of the amount expected by the markets.

Index heavyweights from the pharmaceutical and oil sectors are dragging the top-share index lower in London.

Pharmaceuticals giant AstraZeneca is down after it said full year core earnings per share are set to be in the lower half of its guidance range as a result of impairment charges taken following setbacks in two of its drug development programmes.

Sector peers Glaxo and Shire are also in the red in early trading, while oil giants Shell, BG and BP are all off the pace, despite a hardening oil price.

Bus and train group National Express remains firmly on track to deliver revenue and profit growth in 2011 in every one of its divisions. Trading across the group remains strong, the company said, and full year profit is expected to be in line with the board's previous expectations.

Advertising titan WPP has acquired a 49% stake in Chinese peer Nanjing Yindu Advertising and Commerco Co for an undisclosed sum.

Private equity group SVG Capital said it would return up to £170m to shareholders via share buy-backs and tender offers as part of a new investment strategy.

Small caps is where the action is

Shares in Silvermere, an independent oil and gas company, dived after the firm announced a delay in production plans for the I-1 Well on its Mustang Island asset located in Texas waters in the Gulf of Mexico.

Shares in Indian investment firm Dhir were a lot dearer after the company revealed it is considering a number of options to unlock the value in the company, including acceptance of a 42p a share cash offer from company director Alok Dhir.

Engineering consultant WSP said trading for the year ending 31 December 2011 is expected to be in line with company forecasts and currently expects the market dynamics and characteristics for 2012 to follow a similar pattern.

The shares climbed after the company said it has signed a new committed credit facility with its four relationship banks. The group's current £150m facility, due to expire in May 2013, will be replaced by a 4-year £152.5m facility with the same banking group. The new facility is set to expire in December 2015.

FTSE 100 - Risers
GKN (GKN) 172.20p +1.18%
Old Mutual (OML) 127.20p +1.11%
International Consolidated Airlines Group SA (IAG) 143.00p +0.99%
Aggreko (AGK) 1,865.00p +0.92%
Burberry Group (BRBY) 1,161.00p +0.87%
Anglo American (AAL) 2,293.00p +0.81%
Kingfisher (KGF) 241.20p +0.79%
CRH (CRH) 1,162.00p +0.78%
Meggitt (MGGT) 339.80p +0.74%
ARM Holdings (ARM) 559.00p +0.63%

FTSE 100 - Fallers
AstraZeneca (AZN) 2,869.00p -2.71%
GlaxoSmithKline (GSK) 1,430.00p -1.38%
BAE Systems (BA.) 267.30p -0.85%
Royal Dutch Shell 'B' (RDSB) 2,315.00p -0.77%
Glencore International (GLEN) 382.05p -0.75%
BG Group (BG.) 1,304.50p -0.72%
Xstrata (XTA) 950.10p -0.69%
Royal Dutch Shell 'A' (RDSA) 2,244.50p -0.66%
BP (BP.) 434.80p -0.65%
InterContinental Hotels Group (IHG) 1,075.00p -0.65%

FTSE 250 - Risers
SVG Capital (SVI) 186.00p +12.66%
Allied Gold Mining (ALD) 141.40p +3.21%
Howden Joinery Group (HWDN) 101.50p +3.15%
Rathbone Brothers (RAT) 1,027.00p +2.80%
Perform Group (PER) 210.40p +2.63%
Dunelm Group (DNLM) 435.90p +2.49%
International Personal Finance (IPF) 160.20p +2.36%
Savills (SVS) 317.80p +2.19%
Northgate (NTG) 199.20p +2.15%
Filtrona PLC (FLTR) 377.10p +1.92%

FTSE 250 - Fallers
Ocado Group (OCDO) 57.05p -3.63%
Laird (LRD) 139.90p -2.85%
Centamin Egypt Ltd. (CEY) 82.00p -2.21%
Galliford Try (GFRD) 440.80p -2.04%
DS Smith (SMDS) 187.70p -1.93%
Henderson Group (HGG) 99.20p -1.78%
Ophir Energy (OPHR) 259.50p -1.44%
Afren (AFR) 82.75p -1.43%
F&C Asset Management (FCAM) 62.75p -1.41%

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Tuesday December 20

INTERIM DIVIDEND PAYMENT DATE
Investec, Record

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Building Permits (US) (13:30)
GFK Consumer Confidence (GER) (07:00)
Housing Starts (US) (13:30)
IFO Business Climate (GER) (09:00)
IFO Current Assessment (GER) (09:00)
IFO Expectations (GER) (09:00)
Producer Price Index (GER) (07:00)

EGMS
Globaltrans Investment GDR (Reg S)

AGMS
Berkeley Mineral Resources, CIC Mining Resources, Gemfields, Henderson Far East Income Ltd., Independent Resources, JPMorgan Japanese Inv Trust, Keystone Inv Trust, Power Capital Global Ltd.

TRADING ANNOUNCEMENTS
National Express Group, WSP Group

UK ECONOMIC ANNOUNCEMENTS
CBI Distributive Trends Surveys (11:00)
Consumer Confidence (09:30)
GFK Consumer Confidence (00:01)

FINAL DIVIDEND PAYMENT DATE
CVS Group

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FTSE-100: -0.49%
Dax-30: -0.02%
Cac-40: -0.07%
Ibex 35: +0.48%
SMI: -0.29%

The main European benchmarks have begun the trading session slightly lower for the most part, following on the back of the retreat seen on Wall Street last night. Those losses, in turn, are said to have been provoked by the lack of a European agreement, at a meeting last night of Euro area finance ministers, on increasing the size of the European Stability Mechanism (ESM).

What was agreed, however, was for several countries (including four not ascribed to the single currency) to channel €150bn into the International Monetary Fund with the aim of boosting its crisis fighting ability. Of note, Germany forced an agreement by which said funds must be contributed into the general resources of the IMF, prohibiting any 'earmarking' of funds specifically for Europe. Greece, Ireland and Portugal will not be asked to contribute funds. Germany is also said to have blocked any immediate increase in the ESM to above €150bn.

If one looks at the DJ Stoxx 600 the worst performing sectors now are: telecommunications (-0.20%), oil (-0.41%) and health care (-0.95%).

At the individual company level, Deutsche Telekom is a stand-out loser this morning, on reports that AT&T has pulled its bid for T-Mobile USA.

Astra Zenaca is weighing on the pharmaceutical sector after warning on its fourth quarter results due to research setbacks.

MACROECONOMY

The German IFO business confidence index for the month of December will be released at 9AM.

The Spanish Treasury will today auction 3 and 6 month bills with the results expected to be announced towards 10AM.

OTHER MARKETS

The Euro/dollar cross is now trading up slightly, by 0.15%, to the 13020 dollar mark.

Front month Brent futures are rising 0.83% to the $104.49/barrel mark.

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Dow Jones Industrial: -100 at 11,766
NASDAQ Comp.: -32 at 2,523
S&P 500: -14 at 1,205

European worries returned to haunt US investors, after a speech by European Central Bank President (ECB) Mario Draghi in which he warned of risks while at the same time stating that his room to manoeuvre was limited.

While Draghi was declining to cast the ECB in the role of the cavalry, European Union finance ministers also disappointed the market by announcing that additional funding for the Eurozone bail-out fund from the International Monetary Fund would only be €150bn, not the €200bn many in the market had been hoping for.

Banks were friendless on expectations that the Federal Reserve will back a new global framework that will require systemically-important banks to beef up their capital bases.

Supermarket chain operator Winn Dixie will go private at a 75% premium, which sent its shares sky-rocketing.

Cable TV company Cablevision was another stock on the up, edging higher after Citigroup suggested the stock was oversold.

Semiconductor manufacturer Xilinx has cuts its fourth quarter revenue guidance.

Alliance Data has unveiled a $400m share repurchase programme.

Commercial Metals has urged shareholders to reject an unsolicited takeover bid from Carl Icahn.

OTHER MARKETS

West Texas crude for January delivery rose 35 cents to $93.88 a barrel in NYMEX trading. The price of gold declined $1.20 to $1,596.70 an ounce.

10 year US Treasuries rose 11/32 dollars, with yields at 1.81%.

S&P 500 - Risers
Cerner Corp. (CERN) $57.73 +2.45%
Cablevision Systems Corp. (CVC) $13.00 +1.96%
DTE Energy Co. (DTE) $52.23 +1.54%
W.W. Grainger Inc. (GWW) $181.71 +1.52%

S&P 500 - Fallers
Genworth Financial Inc. (GNW) $5.75 -8.15%
United States Steel Corp. (X) $23.85 -7.81%
Alpha Natural Res (ANR) $18.20 -7.24%
Cliffs Natural Resources Inc. (CLF) $59.71 -6.63%
Morgan Stanley (MS) $14.16 -5.47%
Advanced Micro Devices Inc. (AMD) $4.86 -5.26%
Peabody Energy Corp. (BTU) $31.33 -5.00%

Dow Jones I.A - Risers
Merck & Co. Inc. (MRK) $36.47 +0.61%
Pfizer Inc. (PFE) $21.15 +0.57%
Caterpillar Inc. (CAT) $87.25 +0.06%

Dow Jones I.A - Fallers
Bank of America Corp. (BAC) $4.99 -4.04%
JP Morgan Chase & Co. (JPM) $30.70 -3.73%
Alcoa Inc. (AA) $8.53 -3.18%
Hewlett-Packard Co. (HPQ) $25.13 -2.75%

Nasdaq 100 - Risers
Cerner Corp. (CERN) $57.73 +2.45%
Celgene Corp. (CELG) $64.58 +1.40%

Nasdaq 100 - Fallers
Logitech International S.A. (LOGI) $7.20 -5.39%
First Solar Inc. (FSLR) $30.50 -4.42%
Research in Motion Ltd. (RIMM) $12.89 -4.09%
Citrix Systems Inc. (CTXS) $61.52 -4.00%

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In a letter to the Daily Telegraph, 20 businessmen say it is "imperative" that Britain has a place on the negotiating table when major decisions about Europe are taken. Signatories including Sir Richard Branson, the Virgin tycoon, and Sir Mike Rake, the chairman of British Telecom, argue that the future of Europe is vital to Britain's economic interests. Their intervention, which comes 10 days after David Cameron vetoed EU treaty reforms, will put pressure on the Prime Minister not to bow to the Conservative right and demand the re-patriation of further powers from Brussels. (…) It says: "It is in Britain's interest that the Euro survives and we therefore should do everything we can to ensure the necessary steps are taken to guarantee its viability."

France's second-biggest car-maker, Renault, will stop taking orders for its Espace people-mover, Laguna mid-sized car, Kangoo passenger van, Modus compact minivan and Wind roadster in February. It will also cut about one-third of its 190 dealerships. "The decision is a result of the economic crisis," said spokeswoman Caroline De Gezelle. She added that sterling's weakness against the euro is "part of the difficulty we're facing in the UK". Separately, Honda gave a lift to the UK auto industry, announcing 500 new assembly jobs at its Swindon plant in anticipation of car production levels doubling next year. (…) Honda will increase the number of production shifts at the plant, its largest European site, from three to four, taking its workforce to 3,500 including the new recruits, writes The Telegraph.

The Government has diluted a key element of its crackdown on British banks in the wake of threats by HSBC to move its headquarters out of Britain. George Osborne announced a string of reforms yesterday designed to increase bank stability and reduce the chances of taxpayers having to bail out troubled banks again. (...) Sir John envisaged large banks being forced to build loss-absorbing cushions equivalent to at least 17% of their worldwide assets. But in his formal response yesterday, Mr Osborne said that the new formula need not apply to non-British assets so long as the bank could show there was no risk to British taxpayers. The concession could dramatically reduce the amount of extra loss-absorbing capital that HSBC needs to build up, because so much of its empire is not in Britain, The Times says.

The credibility of the tax collection system is hanging in the balance after a powerful committee of MPs accused Revenue & Customs of amassing up to £25bn in unresolved tax bills. The Public Accounts Committee today lays down a litany of charges at the feet of HMRC, which is ultimately accountable to George Osborne, criticising its personnel and its governance. It highlights a failure by those at the top to take responsibility for mistakes, and blames Dave Hartnett, its outgoing Permanent Secretary, for giving a "less than clear" account of himself to MPs. It also rounds on the scale of hospitality accepted by senior figures that allowed a "perception of conflicts of interest" to arise, according to The Times.

Britain's biggest industrial dispute in a generation has taken a significant step towards resolution after major trade unions agreed to suspend strike action while they considered proposals on public sector pension changes. Unions representing health, civil service and local government workers agreed to consider outline deals, while talks with education representatives were adjourned and will continue in the new year, according to the National Union of Teachers. The largest public sector union, Unison, confirmed it would not set strike dates while it consulted on the proposals, as labour movement sources acknowledged Monday's developments headed off the prospect of a further public sector general strike in the new year. However, there was dissent from one important player, as the biggest civil service union, the Public and Commercial Services union, rejected a deal, The Guardian reports.

The Miller family has given up control of its eponymous house building and construction firm, the Miller Group, to US private equity giant Blackstone under a £160m refinancing deal that could trigger fresh consolidation in the sector. The majority of the new cash is coming from Blackstone through its GSO Capital Partners subsidiary, but Miller chief executive Keith Miller, his management team, merchant bank Noble Grossart and the builder's three lenders are also taking part in the long-mooted deal. Few details of the arrangement were revealed yesterday but it is expected Lloyds Banking Group, National Australia Bank (NAB) and Royal Bank of Scotland (RBS) will have swapped some of the firm's £730m debt for equity.

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