The FTSE 100 closed lower, tracking Wall Street after a disappointing Philly Fed survey. Weak energy and financial stocks also piled on the pressure. Oil prices gave up gains after China raised retail gasoline and diesel prices by c.18%. Energy stocks fell: BP (-1.64%), ROYAL DUTCH SHELL (-1.17%). Datawise, a surprisingly strong retail sales report helped stocks in the sector. May retail sales jumped 3.5% m/m vs forecast of a 0.1% fall. In company news, CADBURY (+0.48%) issued an upbeat trading statement, saying it expected 1H revenue growth above the 4%-6% goal range, with margins at least 150bps ahead. CENTRICA (+2.04%) said trading was in line. The group is expected to enter a bid battle for Belgium's SPE with EDF. Speculation mounted that VODAFONE (-0.83%) has pulled out of the bidding for Tiscali. HBOS (-5.88%) reported in-line trading but warned UK house prices will fall 9% this year. ITV (-3.01%) has signed a deal with Twentieth Century Fox TV to develop scripted co-productions. GLAXOSMITHKLINE (+0.82%) won a contract to provide HPV vaccination to girls across the UK. GO-AHEAD (+12.08%) said revenue growth in bus remains strong and FY performance should beat previous estimates. CATTLES (-7.77%) said trading to date is in line with management's expectations but it has tightened credit criteria to new business which has resulted in lower receivables growth.
The CAC 40 (-0.59%) closed in the red, with Wall Street down following disappointing initial claims and Philly Fed data. At home, banks weighed heavily while investors favoured utilities and energy stocks. BNP PARIBAS (-2.4%), SOCGEN (-2.67%), DEXIA (-6.14%) fell. Goldman Sachs sees further write-downs in 2Q08. Elsewhere, EADS (-2.51%) suffered a heavy blow when US congressional investigators urged the US Air Force yesterday to reopen a US$35bn tanker deal that EADS won against Boeing. VEOLIA's (-3.02%) CEO has reportedly said the company's FY08 net profit target will be 'difficult to attain.' Elsewhere, ARCELOR MITTAL (+4.03%) enjoyed news a Kazakh effort to claim US$830m in tax has been abandoned. Morgan Stanley lifted target on VALLOUREC (+6.15%). Exxon Mobil, BP, Royal Dutch Shell and TOTAL (+0.13%) are close to signing oil agreements with the Iraqi government, wrote The New York Times. In further news, Goldman upgraded Total to buy. Sources in Paris have suggested EDF (+1.49%) could offer a premium of 5-10% for Belgium's SPE in an effort to knock Centrica out of the race, The Times reported. In broker news, UBS downgraded UNIBAIL-RODAMCO (-2.64%) and Cheuvreux downgraded SAINT GOBAIN (-1.62%) to underperform.
Xetra-Dax (-0.12%) closed with marginal losses, as US markets were also trading a touch below break-even after a disappointing Philly Fed Survey and worse-than-expected initial claims. Utilities supported the index: E.ON (+1.34%) and RWE (+0.95%). ALLIANZ (+0.34%) was well bid on renewed talk of Spain's Santander showing an interest in Dresdner Bank. Staying with financials, the US$6.5bn leveraged buyout of US chemicals group Huntsman Corp., which DEUTSCHE BANK (-1.72%) and Credit Suisse are financing, was said to be on the verge of collapse after private equity firm Apollo Management said bank financing for the deal was in jeopardy due to Huntsman's current financial condition. In other news: BASF (-0.29%) said it plans a EUR 3bn share buyback, having completed its previous EUR 3bn repurchase programme ahead of schedule. Greece approved the sale of a stake in telco OTE to DEUTSCHE TELEKOM (+0.39%). German state prosecutors dropped a two-year probe into possible bribery at THYSSENKRUPP (+1.28%) in connection with the sale of four ships to the South African Navy. AIR BERLIN (+6.83%) said it will ground 10% of its fleet this winter, cutting capacity by 30% on long-haul routes to combat soaring fuel costs. Investors didn't share the football fever sweeping Europe at the moment, when PROSIEBEN (-5.5%) announced it gained rights to key UEFA and Champions League football matches.
The SLI (-0.45%) closed in the red as Wall Street indices fell after a disappointing Philly Fed.
In Swiss macro news, the SNB left its benchmark interest rate unchanged at 2.75%. Among stocks on the move: UBS (-3.71%) was once again the recipient of negative broker comments. Credit Suisse downgraded the stock to neutral from outperform and cut its target. It no longer assumes in its estimates that the private bank will quickly recover. Furthermore, it assumed CHF2.5bn of writedowns in 2Q08 and reduced investment banking earnings. Meanwhile, Goldman Sachs calculated that UBS could face total earnings headwinds of CHF4bn in 2Q08, mainly related to marks on the bank's mezzanine-backed CDO positions, and residual monoline exposure. For CREDIT SUISSE (-1.9%), Goldman estimated total marks of CHF1.1bn. Away from financials, eyes were on SWATCH (unch) and RICHEMONT (+0.25) as Swiss watch exports rose 14.6% in May to CHF1.5bn. ADECCO (-1.39%) sold its US PayWise division to ZeroChaos; terms of the deal were not disclosed. PETROPLUS's (-1.54) Ingolstadt refinery is to resume full operations within a few days after a fire occurred due to a power supply problem. ZUEBLIN's (-0.34%) FY net income rose to CHF44.2m from CHF39.7m. Said it has reduced its vacancy rate to 9.4%.
Milan ended in the red, tracking weakness in the Dow and S&P500. The Philly Fed survey was weaker than expected at -17.1. Locally, Italy's cabinet has approved a three-year plan to cut public spending and reduce the budget deficit. The measures include a tax rise on oil company profits - ERG (-0.76%), ENI (-0.66%) and SARAS (-5.37%) were eyed. Meanwhile, Goldman Sachs removes Eni from its conviction buy list and downgrades it to neutral while lifts Erg's target price to EUR 13.20. However, fellow oil-related plays TENARIS (+9.15%) and SAIPEM (+2.48%) gained sharply amid press reports that President Bush could overturn the ban on drilling for oil off the US coast and in Alaska. In M&A news, Vodafone has pulled out of TISCALI's (-3.96%) bidding auction, according to the FT. In further M&A news, Telefonica's chairman, Cesar Alierta, has said that the Spanish telco has no immediate plans to mount a takeover of TELECOM ITALIA (-2.31%). Separately, the telco holds a board meeting today in which CFO Parazzini could resign. PIRELLI RE (-3.06%) reportedly said it would be interested in joining partners in the purchase of property held by Metro's Kaufhof department store chain in Germany. On the broker front, UBS cut targets of ESPRESSO (-2.61%) and MONDADORI (-1.36%).