UK/Euro Financial Market Daily Morning Briefing 23-12-2011

Market Movers

• techMARK 1,846.53 +0.50%
• FTSE 100 5,493.56 +0.67%
• FTSE 250 9,952.12 +0.49%

The top-share index briefly broke through the 5500 barrier this morning but could not sustain it, as traders' thoughts turn to mince pies, mulled wine and a dash to the shops for a bit of last minute Christmas shopping - and, while they are at it, to check that the shops are still in business.

Blacks getting ready to fold up its tents

On that subject, the situation is looking very bleak for Blacks Leisure, the outdoor clothing retailer which looks to be in a death spiral. The company has given up looking for a saviour, and seems resigned to the prospect of interested parties camping outside its headquarters, waiting for it to go into administration so they can pick up the best of the retailer's assets on the cheap.

Blacks says it continues, however, to hold discussions with a number of selected parties with a view to concluding the sale of trade, assets and brands of the company in January 2012.

It warns, however, that "it is most unlikely that any value will be attributable to the ordinary shares."

While Blacks struggles to weather the storm, Amlin, the insurance company, has increased its coverage against hurricanes and earthquakes in the US and wind-storm peril in Europe through a $150m bond.

The deal has seen Bermudian company Tramline Re take on the re-insurance contract then package it up into "principle-at-risk" three-year variable rate notes or bonds. The proceeds from these notes will make up the collateral for Tramline Re's obligations to Amlin.

Out in the UK section of the North Sea, there has been good news for Antrim Energy and Premier Oil. Antrim Energy, the Canadian oil company, says it has drilled a successful sidetrack well to assess the Erne discovery, an asset it jointly owns with Premier Oil. Antrim says the work on Erne has "de-risked" other drilling in the region.

M&A activity

Property group London and Stamford has sold 17 warehouses, comprising the Triangle Distribution Portfolio and including the recently acquired 5110 Magna Park, Lutterworth. The selling price is £265m, a figure which exceeds the valuation figure for the portfolio as at 30 September 2011. The sale will only complete at the year end so allowing the Company to retain the benefit of this income for its full financial year.

Perform, the digital media firm specialising in sports content, has acquired two related German businesses: Spox Media and mediasports Digital. The two businesses are being acquired for an initial cash consideration of €3.65m, with a maximum deferred cash consideration of €12.35m payable.

FTSE 100 - Risers
BP (BP.) 459.30p +2.00%
ITV (ITV) 65.70p +1.94%
National Grid (NG.) 614.00p +1.82%
Pearson (PSON) 1,208.00p +1.43%
Admiral Group (ADM) 831.00p +1.40%
Reed Elsevier (REL) 510.00p +1.29%
Burberry Group (BRBY) 1,199.00p +1.18%
Barclays (BARC) 178.15p +1.16%
Schroders (Non-Voting) (SDRC) 1,068.00p +1.14%
Randgold Resources Ltd. (RRS) 6,660.00p +1.14%

FTSE 100 - Fallers
Hargreaves Lansdown (HL.) 431.40p -0.51%
HSBC Holdings (HSBA) 487.95p -0.12%
Standard Chartered (STAN) 1,387.50p -0.11%
International Consolidated Airlines Group SA (IAG) 149.80p -0.07%
Evraz (EVR) 390.30p +0.08%
BHP Billiton (BLT) 1,871.50p +0.08%
Carnival (CCL) 2,109.00p +0.09%
Glencore International (GLEN) 396.15p +0.09%
Resolution Ltd. (RSL) 248.50p +0.16%
Experian (EXPN) 841.50p +0.18%

FTSE 250 - Risers
Cape (CIU) 324.50p +3.11%
Domino Printing Sciences (DNO) 516.00p +2.58%
Ocado Group (OCDO) 60.45p +2.46%
Exillon Energy (EXI) 247.60p +2.02%

FTSE 250 - Fallers
COLT Group SA (COLT) 84.85p -1.45%

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FTSE-100: 0.45%
Dax-30: 0.21%
Stoxx 600: 0.53%
SMI: 0.35%
Cac-40: 0.80%

European equities are now trading with slight gains, ahead of the release of a new set of economic indicators expected Stateside this afternoon and with some of the major US market averages very close to important levels of technical resistance, which may cap any gains in the next to last week of trading for the year.

Acting as a backdrop we have the agreement reached last night in the US to extend payroll-tax cuts and benefits for the long-term unemployed, which will help to avoid any unwanted fiscal shock to the economy in early 2012.

Also worth noting, the International Monetary Fund has today indicated that it lacks the necessary votes to go through with a previously accorded increase in its permanent resources to about $735bn, from $387bn now.

Finally, one of the European Central Bank´s outgoing executive board members, Lorenzo Bini Smaghi, has today indicated in the Financial Times that the ECB should not shy away from employing quantitative easing should there risks of deflation arise.

Looking at the DJ Stoxx 600 the best performing sectors now are: utilities (1.08%), Media (0.95%) and oil (0.79%).

MACROECONOMY

French GDP growth for the third quarter has been revised down to a 0.3% quarterly rate of change from 0.4% before.

OTHER MARKETS

Front month Brent futures are now down by 0.09% to the $107.9/barrel mark in NYMEX trading.

The Euro/dollar is now moving up by 0.15% to the 1.3070 dollar area.

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Dow: +0.51% to 12,170
Nasdaq Comp.: +0.83% to 2,599
S&P 500: +0.83% to 1,254

US stocks finished the day higher after positive economic data boosted markets, with the economic indicators generally better than expected.

BARRAGE OF ECONOMIC DATA

Initial weekly unemployment claims have dropped to their lowest level since April 2008, although many observers wonder if such positive data surprises will suffice to allow the US economy to achieve 'escape velocity' from the Eurozone crisis.

Initial weekly unemployment claims fell by 4,000 to 364,000 in the week until the past 18th of December (Consensus: 380,000).

The final University of Michigan consumer confidence index for the month of December has risen to 69.9 points (Consensus: 68.7), from 64.1 the month before.

The November index of leading economic indicators rose 0.5% on month (Consensus: 0.3%).

House prices fell 0.2% on month in October (Consensus: +0.2%), according to the FHFA.

Third quarter GDP grew at a 1.8% annualised rate (Consensus: 2.0%). Growth in personal consumption expenditures has been revised down to 1.7% from 2.3% previously.

COMPANY NEWS

Yahoo is said to be studying the sale of most of its 40% stake in Chinese internet firm Alibaba.

Macquarie Infrastructure Partners is to acquire WCA Waste, in a deal valued at $526m.

Akamai Technologies is buying Cotendo for $268m.

Amazon.com will hire 1,350 workers as part of its plans to build two centres in Virginia.

Analysts at Wedbush Morgan have upgraded Micron Technology to overweight from underweight.

From a sector stand-point the best performers were the banks (rising 2.86%), coal (rising 2.66%) and semiconductors (rising 2.34%).

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The Financial Times (FT) leads with an appeal from European Central Bank (ECB) board member, Lorenzo Smaghi, for quantative easing if the Eurozone is threatened by deflation. 

His comments are controversial as Germany believes such measures are dangerous and contrary to the treaties which underpin the ECB. Smaghi is due to leave the ECB at the end of this year. 

The FT’s second story is a report on the up-swing on stock markets following the beginning of the ECB’s new long-term loan facility. Markets in both the US and Europe showed strong gains on Thursday in an apparent response to nearly half a trillion euros in loans going to European banks. 

The Times's business section has a revealing interview with the French Foreign Minister Alain Juppe who asks for an end to hostilities between France and the UK. 

Senior politicians from both sides have made disparaging remarks in the wake of the failed EU summit two weeks ago. 

Juppe makes clear he still believes France and Britain have a strong relationship but equally that there will be no concessions to Britain in the disagreement over financial regulation. 

The Times worries that yesterday’s UK gross domestic product (GDP) figures for the third quarter of this year may be an anomaly as we head into a very difficult period, in the shadow of the euro crisis. It points out that the comparison over second quarter looks strong because of the royal wedding and the Japanese tsunami. 

The Telegraph leads with a warning from the Governor of the Bank of England, Mervyn King, that the Eurozone debt crisis is leading to a “dependence on central banks”. This is being read by the Telegraph as a disapproval of the European Central Bank’s policy of providing unlimited loans for up to three years to Europe's struggling banks. 

The Telegraph also looks at the takeover of BMI by International Airlines Group, the company which also owns British Airways. Unsurprisingly, Virgin Atlantic has said it will fight the deal which will give IAG 56 landing slots at Heathrow, taking its total for Britain’s busiest airport from 44% to 53%. 

The Daily Mail makes the point that the vendor of BMI, Lufthansa, bought the firm back in 2009 for £223m and is now selling out for £172.5m ... so perhaps not the best piece of business in the German carrier’s long history. 

The Independent highlights a hitch in Sainsbury’s delivery systems which it claims has led to some customers’ online orders being cancelled. 

The Guardian leads with the positive movements in world stock markets, attributing some of the sentiment to the new Italian Prime Minister, Mario Monti, surviving a confidence vote in the country’s upper house of parliament. It warns, however, that there are renewed riots in Greece. 

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