Stocks followed Wall Street lower on credit worries
From Standard & Poor's European MarketScope
The FTSE 100 closed well in the red tracking losses on Wall Street, hit by credit concerns. US 2Q GDP data came in stronger than expected, while the core PCE indicator suggested that inflation was contained. (£ = US$2.0296.) Oil held firm as traders bet on tight summer supplies. WTI was trading at US$76.06/bbl.
In earnings news, Alliance & Leicester (-1.75%) said 1H core operating profit rose 10%, but the rate of growth in both the UK commercial lending and mortgage markets will slow during 2H following recent rate increases. Pay-TV company BSkyB (-1.04%) posted FY operating profit of £815m, well ahead of consensus estimates of £775m. BG (+0.20%) drilled out a 13% rise in 2Q earnings, saying that damage to the CATS pipeline will impact UK production in 3Q. Reuters (unch) reported a forecast-beating 13% rise in 1H trading profit. United Utilities (-0.67%) said it is trading in line with expectations. In M&A news, Xansa (+35.29%) jumped after it confirmed it was in advanced takeover talks.
The CAC 40 (-0.55%) closed in the red, though off lows. Trading was very volatile. Wall Street was trading lower, with credit concerns appearing to sustain bearish sentiment, though US indices were also changeable.
Reporting season continued apace. Saint-Gobain's (+1.27%) 1H earnings topped expectations with adjusted net profit coming in at €1.067bn - and it raised its guidance. LVMH's (+0.95%) 1H net profit rose 2% to €834m - just shy of expectations. LVMH is upbeat about the rest of 2007. Cap Gemini (-2.27%) posted 1H07 net profit of €168m, a touch disappointing. The tech company has denied being in talks to take over the UK's Xansa - a rumour that had been doing the rounds. Lagardere's (-1.92%) interim sales rose 6.8% to €3.955bn, a touch above expectations. Repeated its 2007 financial targets. Michelin (-3.72%) posted 1H07 op. margin of 10.2%, with in-line op. profit of €860.6m. In other news, Carrefour (+0.62%) has sold its Portuguese operations to Sonae for €662m. UBS upgraded EADS (+1.17%) to neutral.
In the wider market, Siemens described a rumour it might bid for Atos Origin (-2.65%) as 'absurd', Reuters reported. Areva (+2.9%) posted a 6.7% rise in 1H revenue to €5.4bn. Havas (+2.01%) tabled 1H sales of €729m, +1.3% or +4.4% organic, slightly ahead of expectations. Valeo (-0.5%) reported net income of €71m, -24.5%.
Xetra-Dax (-0.76%) closed in the red, while Wall Street was also lower at European close. Global fears about the credit market remained a dent on sentiment today.
Locally, VW (+3.55%) outperformed as it posted core 1H operating profit before items of €981m, helped by cost cuts. VW said it will meet its 2008 pretax profit target of €5.1bn a year earlier than planned. Meanwhile, Porsche (+3.16%) said it was prepared to up its stake in VW if 'need be'. Remaining in the sector, Scania is not in any concrete discussions with MAN (-0.7%), the Swedish group reportedly said.
Elsewhere, Infineon (+0.08%) reported flat fiscal 3Q operating earnings of €13m, half of what consensus had in mind as charges came in higher than expected, at its core logic business. However, the chip group forecast a strong increase this quarter. Software AG's (-1.1%) 2Q licence sales rose 39% to €57.3m, supported by acquisitions and ahead of market expectations.
In the pharma sector, an investor filed a complaint in a district court in New York against GPC Biotech (-7.64%) for allegedly violating securities laws by issuing false statements about the development of its key prostate cancer drug, Satraplatin. Finally, Siemens (+0.73%) is ready to launch a €3.9bn bid on Atos Origin, writes Capital.fr. Siemens' CFO, however, says talk of an interest in the French group is 'absurd'.
The Ibex 35 ended a choppy session on positive ground, with gains in the major banks and Telefonica. Wall Street was trading in the red at the European close, as traders balance the prospect of a global credit crunch with stronger-than-expected 2Q GDP data.
Locally, Santander (+1.48%) sold its LatAm pensions business to ING for US$1.3bn, or €960m, making a capital gain of €600m. BusinessWeek wrote that BBVA (+0.68%) would make a good takeover candidate. Ferrovial (+0.7%) moved up as Caja Madrid's trading desk suggested taking a long position. Ferrovial will deliver 1H results on Monday. Telefonica (+0.41%) was also eyed ahead of Monday's results. The CMT (telecoms watchdog) froze Telefonica fixed line fees for 2009.
In earnings news, ACS (-0.55%) last night delivered 1H net profit of €1.01bn, ahead of forecasts, amid higher extraordinary items. Indra (+2.02%) also delivered 1H net profit ahead of expectations at €74.8m, with LFL sales up 11%. Acciona (-2.96%) reported 1H EBITDA up 5.1% y/y to €481m, matching consensus. Union Fenosa's (-0.17%) 1H EBITDA met forecasts, up 4.5% to €1.016bn. BME (+3.1%) unveiled inline 1H07 results. In broker action, Goldman Sachs cut Repsol's (+0.15%) target.
In New York credit concerns weighed on indexes despite above-forecast 2Q GDP data. Back in the Nordics shares closed mixed; with Sweden and Finland in the black, while Copenhagen and Oslo lower.
H&M (+2.63%) rose on Swedish June retail sales, which beat estimates at 8.5%. In earnings, TeliaSonera (unch) announced 2Q results with sales and EBITDA exceeding forecasts, while net profit and EPS failed to impress, coming short of expectations. Lars Nyberg will become CEO.
In Oslo, Renewable Energy (+0.78%) delivered a 2Q report with numbers exceeding last year's figures, though short of high expectations - seen more than doubling y/y. Fast Search (-28.33%) plunged as the group warns in 2Q profits. In Helsinki, YIT (+4.35%) rose as 1H came in ahead of consensus and an upward revision in FY07 revenues and operating profit guidance. In M&A news, ball bearing company SKF (+0.18%) signed an agreement with British company Edwards Limited to acquire its S2M subsidiary for some €55m. In broker action; UBS downgraded Novozymes (-4.48%) to reduce, while Goldman, JPM and ING took a positive stance on ABB (+1.3%). ABN, Morgan Stanley and UBS lifted target objective for Metso (+1.13%) and S&P Eq Res cut target for AstraZeneca (-1.82%). Credit Suisse initiated coverage of KONE (+0.15%) with outperform.