UK/Euro Financial Market Daily Morning Briefing 25-06-2012

London open: Shire provides a drag early on

Market Movers

• techMARK 1,980.15 -0.93%
• FTSE 100 5,489.91 -0.43%
• FTSE 250 10,795.01 -0.27%

- Shire tumbles after generic ADHD deal gets approval
- Polymetal rises after broker upgrade
- Investors look to EU summit

Banking and mining stocks were providing a drag in London on Monday morning, as investors showed caution ahead of the EU summit later this week.

Trader Jordan Lambert from Spreadex said: "In the absence of any economic data overnight in Asia and during today we are seeing the troubles of the Eurozone resonating throughout the market as the main focus yet again."

Meanwhile, analyst Craig Erlam from Alpari thinks that stocks and other risky assets are likely to "struggle" this week. "There are ongoing concerns that we are still not seeing the tough decisions being made by the Eurozone leaders to get the economies moving again," he said.

Investors will be looking ahead to the crucial European Union summit on June 28-29th, where a banking union will be discussed along with measures to boost growth.

Meanwhile, debt auctions in both Italy and Spain will be in focus for the markets this week.

FTSE 100: Shire plummets after FDA disappointment

Shares in pharmaceutical giant Shire tanked in early trading after the US Food and Drug Administration approved a rival's application to make a generic version of its attention deficit and hyperactivity disorder (ADHD) drug, Adderall XR.

Also out of favour was Morrisons after the supermarket group announced that its Finance Director Richard Pennycook is to leave next year to concentrate on building a "portfolio career".

Banking stocks and miners were registering losses as investors fled from risk. Lenders Lloyds and RBS were lower, while BHP Billiton and Rio Tinto fell after UBS cut earnings forecasts for both companies by 4%.

Anglo American and Chile's Codelco have agreed to extend talks as they seek to negotiate an agreement in their bitter battle over the former's Anglo Sur assets. The argument centres around state-owned copper firm Codelco announcing it wanted to exercise an option to buy 49% of Anglo Sur. Anglo edged lower in the opening minutes.

Precious metals miner Polymetal was gaining after Nomura upgraded the stock by two notches from 'reduce' to 'buy', saying that "now that Polymetal has passed the FTSE re-weighting, we believe that these levels provide a decent entry point." SABMiller was lower after Liberum Capital downgraded the stock to 'sell'.

FTSE 250: Premier Oil abandons dry hole in the UK

Premier Oil fell after plugging and abandoning two exploration wells. The Coaster exploration well in Block 28/10 (UK) was found to be a "dry hole", while the Benteng-1 well (Indonesia) was labelled as "a small but potentially commercial oil discovery."

Industrial property specialist Segro fell despite selling four "non-core" industrial estates for £204.5m.

Essar Energy, the India-focused integrated energy company, was in the red despite saying that the first of two 255MW units at its Vadinar Phase 2 power plant has been synchronised with the transmission grid.

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Monday June 25

INTERIM DIVIDEND PAYMENT DATE
Titon Holdings

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
New Homes Sales (US) (15:00)

GMS
Monitise

FINALS
Bango, City of London Group, Cohort

ANNUAL REPORT
HydroDec Group

AGMS
Andes Energia, Anglo Asian Mining, Coca-Cola HBC S.A., Condor Resources, Crawshaw Group, Energetix Group, European Islamic Investment Bank, HydroDec Group, Open Joint Stock Company Inter Rao Ues GDR RegS, Oxus Gold, Pactolus Hungarian Property, Panmure Gordon & Co, SeaEnergy, Westside Investments, YCO Group

FINAL DIVIDEND PAYMENT DATE
Nippon Telegraph & Telephone Corp.

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Europe open: Investors looking ahead to EU summit

-German referendum on further EU integration possible-Der Spiegel
-Soros believes Greece will not be able to meet austerity targets
-German FM tells Greece to get on with reforms

FTSE-100: -0.50%
Dax-30: -1.32%
Cac-40: -1.27%
Stoxx 600: -0.88%
Ibex 35: -1.95%

The major European equity benchmarks have begun week lower, as investors look out to the EU summit at the end of the week and with the crisis in Greece and Spain not far from investors´ minds. That on a day in which the economic calendar is rather light.

As regards the EU summit, according to a document prepared for the June 28-29 meeting, European leaders will discuss specific steps towards a cross-border banking union, closer fiscal integration and the possibility of a debt redemption fund, Reuters is reporting. Investors, nonetheless, are still at a loss over how authorities will try to severe the link between banks´ and sovereigns´debts. As well, in the last few days however German chancellor Angela Merkel has reaffirmed her opposition to any sort of debt mutualisation.

The above comes after the Bundesbank´s criticism of the European Central bank´s decision, last Friday, to ease collateral requirements for periphery banks in a bid to ease financial market tensions.

Meantime, and as regards Greece, German Finance Minister Wolfgang Schaeuble has told the country that it should get on with the reforms that it promised to carry out instead of asking what else others scan do for it.

Anheuser Busch in talks to take over Mexican outfit Grupo Modelo

Slight falls in the euro and oil futures

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US close: Stocks surge as banks shrug off downgrades

Dow Jones: 12,641 (+0.53%)
Nasdaq: 2,892 (+1.17%)
S&P 500: 1,335 (+0.72%)

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Monday newspaper round-up: Retailers, BoE, RBS

Tax loopholes uncovered by The Times will be investigated by Parliament, the chairman of the powerful House of Commons Public Accounts Committee will reveal today. Abuses uncovered by a series of articles looking into income tax avoidance "wouldn't look out of place in a banana republic", says Margaret Hodge. Writing in this newspaper today, she confirms her committee will demand to know what work the taxman is doing to identify rogue methods and how accountants circumvent the system. Officials from Revenue & Customs face being hauled before MPs to explain what action they are taking, after revelations that thousands of wealthy people in Britain are able to pay as little as 1% income tax using aggressive financial schemes.

Nearly three quarters of shops have sales on as the nightmare combination of bad weather, squeezed budgets and Eurozone fears conspire to keep shoppers at home. Figures from PwC show that 73% of stores were advertising special offers last week, up from 40% for the same week three years ago when the country was in the grip of the first stage of the double-dip recession. It comes as retailers face paying their quarterly rent bills today, a cash strain that in previous quarters has provided the final blow for struggling companies, says The Times.

The Bank of England may be putting the economy at risk by persisting with low interest rates and money printing, according to the world's central banking supervisor. In its annual report, the Swiss-based Bank for International Settlements (BIS) warned that artificially low rates and inflated asset prices could also be holding back growth by masking lenders' bad debts and deterring them from cleaning up their balance sheets. "Prolonged and aggressive monetary accommodation may delay the return to a self-sustaining recovery," BIS said. "It can undermine the perceived need to deal with banks' impaired assets," The Telegraph reports.

The 'virulent' European crisis could infect the UK and the global economy unless governments take urgent action to tackle their problems, one of the world's leading financial watchdogs has warned. In its grim diagnosis the Bank for International Settlements (BIS) said the chaos spreading across the single currency block could be a 'harbinger' of a global meltdown. It urged leaders to tackle the 'vicious cycle' of debt and instability in the banking system that is 'bedevilling Europe' and called for a pan-European banking system to restore confidence, The Daily Mail says.

Millions of bank customers face continued uncertainty today after the Royal Bank of Scotland, owner of NatWest, warned that the fallout from its unprecedented software glitch could still interfere with accounts. As the catastrophic IT fiasco at the state-owned bank drags into its sixth day, RBS said last night that it could not guarantee business as usual for its 16.9 million account holders today. Massive system strains after a routine software upgrade sparked a meltdown last Tuesday night means that some customer accounts might not be fully updated, the bank said. Its continued problems come after RBS opened 1,200 branches and called in 7,000 additional staff yesterday — the first time in its history that the bank had opened outlets on a Sunday, The Telegraph reports.

Germany has told Greece to stop asking for more help and get on with implementing the reforms it has already promised as tensions mount before this week's crucial summit of European Union leaders. In unusually blunt remarks, German finance minister Wolfgang Schaeuble said: "The most important task facing new prime minister [Antonis] Samaras is to enact the programme agreed upon quickly and without further delay instead of asking how much more others can do for Greece." His comments highlight Germany's growing impatience with the Eurozone's problem nations in what is shaping up to be another significant week for the single currency bloc, The Telegraph reports.

Europe´s debt turmoil has forced experts to downgrade forecasts for Scotland's economic growth amid fears the world is "stumbling deeper into crisis". Growth in the Scottish economy is now expected to be reduced to a sliver at 0.3% in 2012, down from a previous estimate of 1.1% and lower than the tiny 0.4% growth achieved in 2011, according to accountancy firm Ernst & Young's Scottish Item Club think-tank. The club warned that large companies are putting off their investment plans and are instead stock-piling cash. Dougie Adams, senior adviser to the Scottish Item Club, warned: "There are fears that the world is stumbling deeper into crisis. The Eurozone dilemma has entered a dangerous new phase, questions are being asked of China's ability to avoid a property-driven hard landing and the US recovery can be described as lack-lustre at best," The Scotsman reports.

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