A roundup of Monday's action in European stock markets
The suggestion that the worst of the subprime issue was over reinvigorated investors and led the FTSE 100 to settle 0.61% higher on Monday. Wall Street was trading in the black, supported by homebuilders. The market also looked beyond Citigroup's warning that third quarter would show a c.60% q/q decline in net income, focusing on its statement that fourth quarter would be back to normal. Amongst London's top gainers were KAZAKHYMS (+7.12%) and VEDANTA (+4.78%) after Credit Suisse upped price targets on both stocks, citing prospects in China for the former and India for the latter. TATE & LYLE (+9.38%) took the top spot after Barron's wrote that the group looks vulnerable to a bid. In a hard place remained NORTHERN ROCK (-26.28%) as uncertainty continued to surround the troubled mortgage lender. In other developments, HAYS (+2.82%) was carried higher by talk that Switzerland's Adecco may be eyeing up its UK peer. BT GROUP (+1.06%) bought Lynx Technology in order to enhance its solutions offering for SMEs in the UK. HOLIDAYBREAK (+3.36%) acquired educational tour organiser NST for £47.2 million. TRINITY MIRROR (+0.79%) sold Racing Post for £170 million in cash. BIFFA (+8.58%) continued to see encouraging performances from the Resource Recovery and Landfill and Power Generation divisions into the second quarter. COOKSON (+1.44%) announced three new Ceramics expansion projects in China.
The CAC 40 (+1.01%) closed the session in fine fettle, shrugging off a gloomy start this morning. Wall Street traded in the black at European close. Both Citigroup and UBS have issued profit warnings due to credit woes - but Citi's insistence that fourth quarter will see a return to form and the fact that banks are now publicly unveiling the reality of their losses gave more visibility to the markets. Locally, Goldman Sachs added AIR France-KLM (+6.48%) to its conviction buy list. In other news, The Sunday Telegraph reported that the TPG/BA consortium is a step closer to acquiring Iberia as the Spanish government would not look favorably on a bid from the French company. Credit Suisse initiated RENAULT (+4.39%) with outperform. EDF (+1.17%) reportedly plans to hire 10,000 people over five years. This morning, Les Echos reported that EDF will cut between 5,000 and 6,000 jobs over the next three years by not replacing retiring workers. The FDA okayed SANOFI's (+0.29%) Taxotere drug for head and neck cancer use. Arnaud Lagardere vetoed a proposed acquisition by EADS (+0.19%) in the US worth around US$1 billion, according to La Lettre de L'Expansion. On the downside, ALCATEL-LUCENT (-2.50%) is mulling whether to replace CEO Patricia Russo and Chairman Serge Tchuruk, La Tribune wrote. In the broader market, traders noted rumours of interest for THEOLIA (+5.88%) from GE.
Xetra-Dax (+0.63%) closed firmly higher as Wall Street traded in positive territory despite Citigroup saying its quarterly earnings will slide some 60% q/q. In macro news, ISM manufacturing index for September came in at 52, slightly below forecasts of 52.6. This morning, UBS disclosed a hefty write-down due to the global credit crunch. Of local note, CELESIO (-13.01%) declined after it announced that unexpected cost cutting measures of the UK's Department of Health will burden its results by up to €30 million. Meanwhile, Guy Wyser-Pratte wants to raise his stake in TUI (+5.72%), with the US activist investor telling Handelsblatt that he aims to break up the conglomerate. THYSSENKRUPP (+0.92%) reaffirmed its pretax profit forecast of €3.6 billion for the fiscal year to 30 September. BAYER (+1.20%) disclosed positive results for VEGF Trap Eye in a Phase II study. GRAMMER's (+2.70%) CFO told Euro am Sonntag that the group is aiming for annual revenues of more than €1 billion by 2009, which compares to the €881 million achieved last year. Finally, WINCOR NIXDORF (+2.48%) said it will buy back further shares to service its share option plan. On the broker front, UBS upgraded POSTBANK (+4.45%) to buy from neutral.
Nordic markets ended mostly higher, as Wall Street climbed, supported by financials after Citigroup said it expected a normal fourth quarter after its third quarter earnings dropped by 60%. A lower than expected ISM manufacturing survey failed to dent the US market rally. Back in the Nordics, Helsinki underperformed, dragged down by heavyweight NOKIA (-1.84%), which announced that it would buy navigation-software maker Navteq Corp for US$78/share in cash. Meanwhile, Cheuvreux upgraded the stock to its selected list with a raised target. Also in M&A, LINDEX (+7.28%) jumped after it accepted STOCKMANN's (-3.52%) SEK116/share takeover offer and will recommend it to its shareholders. In other news, Statoil and Norsk Hydro's Oil & Gas business started trading as STATOILHYDRO (-0.95%) today. Morgan Stanley resumed coverage with an overweight rating. In broker action, S&P Eq Res downgraded HOLMEN (-1.62%) to sell, while Carnegie cut its rating on SWEDISH MATCH (-0.37%) to underperform and SAS (-1.73%) saw its recommendation cut to sell at Goldman Sachs. Meanwhile, on a stronger note, ACERGY (+0.94%) benefited from a raised target at UBS.
The SLI (+1.08%) ended solidly higher on Monday with UBS doing an about-turn to end the session as top points gainer. UBS (+3.04%) said it will write down CHF4 billion amid the global credit crunch, resulting in a pretax third quarter loss in the range of CHF600 million and CHF800 million. UBS added that the vast majority of business outside of fixed income performed 'well or very well'. The group also disclosed that it is reorganising its senior management and that it is slashing jobs. Following the profit warning, Dresdner reiterated its buy recommendation on UBS and said now is the time to focus on the bank's good fundamentals. CS GROUP (+1.81%) said its results will be 'adversely impacted' by market turmoil, but that it will remain profitable in third quarter. Meanwhile, JULIUS BAER (+3.04%) enjoyed a target hike at M. Stanley. In other news: Daniel Vasella sees himself keeping both the title of CEO and chairman of NOVARTIS (+0.23%) for the foreseeable future. Key broker action included Merrill Lynch starting coverage of GURIT (+3.01%) with a buy rating, BELIMO (-0.14%) with neutral and SCHULTHESS (-6.16%) with sell. ADECCO (+0.65%) was downgraded at Cr. Suisse to neutral. There were also rumours circulating in the market that Adecco could be interested in UK-based Hays.
The AEX (+0.85%) moved higher to close solidly in the black, with Wall Street also trading in positive territory. A Citigroup profit warning had seemed to dampen bulls, but the bank's insistence that fourth quarter will be in fine form appears to have settled the market. UBS rebounded after itself warning on profits - the market gaining confidence the situation is not a worst-case-scenario. Back home, banks performed well in late session: ING (+1.54%), FORTIS (+0.63%) and ABN AMRO (+1.11%). The latter completed its sale of LaSalle to Bank of America today. DSM (+3.49%) felt the benefit of its transformation plan unveiled last week. Its €750 million buyback program began today. RANDSTAD (+4.19%) was upgraded to outperform by Credit Suisse. AKZO NOBEL (+3.79%) said it has made a formal bid for ICI, with completion of the action expected on 2 January 2008. Nokia has made an agreed US$8.1 billion bid for TOMTOM's (+4.2%) rival Navteq, a US navigation-software producer. Exane believes this deal will weaken other US peer Garmin - positive for the Dutch firm. HAGEMEYER (+0.93%) continued to gain on bid speculation. Among losers, CORPORATE EXPRESS (-1.31%) ruled out supporting a takeover, preferring a stand-alone strategy, according to the conclusions of a review. CEO Frans Koffrie has stepped down as CEO, to be 'immediately' replaced by Peter Ventress.