Markets Tuesday were buoyed by a rebound in banking shares as investors awaited the U.S. central bank's interest-rate decision
The FTSE 100 ended solidly higher Tuesday, along with other European markets, as banking stocks rebounded and Wall Street traded higher on the back of Lehman Brothers' results. Moreover, US producer prices fell by more than expected, although the core rate edged up. The FOMC is due to set US interest rates after European markets close, with estimates of a cut of up to 50bp. On the UK
economic front, inflation rose by a lower-than-expected 1.8% in the year to August, fanning hopes that the BoE may have room to cut rates. On the trading floor, NORTHERN ROCK (+8.22%), gained after the UK
govt moved to guarantee all deposits, while ALLIANCE & LEICESTER (+32.17%) and HBOS (+3.14%) also climbed. Strong commodity prices helped lift miners, while a telecom sector downgrade from Morgan Stanley to in-line from attractive, put pressure on BT (-0.39%) and on VODAFONE (-0.06%). Additional support came from oil majors, as crude prices hovered just below the record US$81 level. LONMIN (-3.62%) dropped after an estimate downgrade from Credit Suisse, while RESOLUTION (+3.07%) climbed after reporting in-line first half. DEBENHAMS (-3.79%) weakened after a 5% fall in fiscal like-for-like sales and expectations of a 0.9% drop in gross margin. Elsewhere, buy-to-let lender PARAGON (-4.99%) said underlying profitability for September remained on track. VENTURE PRODUCTION (-1.01%) cut its fiscal production guidance by 4%.
The CAC 40 (+1.96%) closed the session in fine fettle with 7-1 positive breadth as Wall Street trades in the black. After the European close, the FOMC is due to announce its interest rate decision, with estimates suggesting a 25bp cut, although some are even pencilling in a 50bp cut. Better-than-expected third quarter results from Lehman Brothers before the US open boosted the markets. Locally, BNP PARIBAS (+3.11%) and SOCGEN (+2.36%) added 17 index points. TOTAL (+1.85%) climbed, with WTI trading near US$81/bbl. ARCELOR MITTAL (+2.96%) was also strong. According to reports citing an Egyptian government official, ten companies, including Arcelor-Mittal, have made offers to construct four steel plants in Egypt. SANOFI (+1.40%) said its H5N1 vaccine program is showing promise. France
TELECOM's (+1.48%) Orange unit has won the contract to sell the Apple iPhone in France, La Tribune reported. However, Morgan Stanley downgraded the European Telecoms sector to in-line from attractive. Elsewhere, CAP GEMINI (-1.57%) denied rumour it might issue a profit warning, while further spivvy talk did the rounds that it could buy the UK
's Sage. In the wider market, ADP (+4.14%) posted August traffic figures last night, with passengers carried at 8.3 million, up 8% year-over-year. ZODIAC (-0.50%) said fiscal 2006/07 sales were up 10.1% like-for-like. Credit Suisse upgraded TF1 (+2.48%) to outperform from neutral.
Xetra-Dax (+1.27%) closed comfortably higher, tracking gains on Wall Street, where investors were upbeat after better-than-expected results from Lehman Brothers and ahead of the Fed's rate decision. Lehman's results sent financials in Frankfurt higher, despite media reports that COMMERZBANK (+1.75) would expect higher subprime losses than the roughly €80 million first seen. Banking stocks aside, E.ON (-0.73%) was one of three losers on the Dax after yesterday's gains and as Goldman Sachs removed the utility from its Conviction Buy List as it will acquire a 70% stake in Russian generator, OGK-4, for €4.1 billion equity, marginally above broker's valuation. In other news, NORDDEUTSCHE (+2.69%) and A-Tec were in talks to reach a compromise deal regarding the takeover of Belgium's Cumerio. TUI's (unch) Hapag-Lloyd expects higher export costs due to new US security regulations for maritime freight. Among pharma stocks, STADA (-2.14%) fell as its new deal with AOK, the public German health insurance group gives STADA a lower-market-share than their average. MORPHOSYS (+6.34%) announced a clinical milestone in its antibody program.
Nordic bourses ended higher, in line with European markets, as Wall Street advanced ahead of the Federal Reserve's interest rate decision, along with better-than-anticipated results from Lehman, Best Buy and Adobe Systems. Noteworthy performers included banks SWEDBANK (+3.74%), NORDEA (+1.49%), SEB (+4.52%) and DNB NOR (unch). VESTAS WIND (+2.51%) outperformed in Copenhagen as Dresdner Kleinwort upped its target.
In Spain, he Ibex 35 (+2.52%) ended the session comfortably higher, having made bold advances in late session. Leqading the way: BBVA (+3.33%) and SANTANDER (+3.11%), and ACCIONA (+7.98%).