News Column

UK MORNING BRIEFING: Deutsche Bank Raises Shell View, Cuts BP

July 9, 2014

Tom Waite



LONDON (Alliance News) - UK shares have opened lower Wednesday following another down day in New York and a weak reading on the Chinese economy overnight.



AbbVie Inc retracted any statements that suggested it had the support of Shire shareholders in its bid to acquire the UK-listed company for GBP30.1 billio. In a pre-market statement, AbbVie said it wished to clarify some press and newswire reports about its latest takeover bid for pharmaceuticals rival Shire. It said it had not received any written commitments of support from Shire's shareholders and "accordingly retracts the statements".



Deutsche Bank has raisedRoyal Dutch Shell A and B shares to Buy from Hold. It cutBP to Hold from Buy, while Barclays raised BP to Equal Weight from Underweight.



Here is what you need to know at the UK market open:

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MARKETS

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FTSE 100: down 0.3% at 6,720.67

FTSE 250: down 0.3% at 15,608.08

AIM ALL-SHARE: flat at 782.27

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Hang Seng: down 1.7% at 23,132.54

Nikkei 225: closed down 0.1% at 15,302.65

DJIA: closed down 0.7% at 16,906.62

S&P 500: closed down 0.7% at 1,963.71

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GBP-USD: flat at USD1.7130

EUR-USD: up at USD1.3617



GOLD: up at USD1,323.65 per ounce

OIL (Brent): down at USD108.57 a barrel



(changes since end of previous GMT day)

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ECONOMICS AND GENERAL

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Wednesday's Key Economic Events still to come

(all times British Summer Time)



12:00 US MBA Mortgage Applications

13:15 Canada Housing Starts

15:30 US EIA Crude Oil Stocks change

18:00 US 10-Year Note Auction

19:00 US FOMC Minutes

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UKHALIFAX JUNE HOUSE PRICES DOWN 0.6% M/M UP 8.8% Y/Y

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Shop prices in the UK tumbled 1.8% on year in June, the British Retail Consortium said - falling for the 14th straight month. The headline figure follows the 1.4% contraction in May, and marks the sharpest rate of decline in eight years, the BRC said. Among the individual components of the survey, food prices were up 0.6% - also an eight-year low - while non-food prices fell 3.4%.

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The UK economy is estimated to expand at a faster pace in the second quarter, the National Institute of Economic and Social Research said late Tuesday. Gross domestic product is estimated to expand 0.9% in the second quarter, faster than the 0.8% growth seen in the first quarter. The institute projected 2.9% growth in 2014 and 2.4% in 2015. The think tank said the month-on-month fall in industrial production would weigh only marginally on the wider economy. Moreover, it expects manufacturing to rebound in June. The UK Office for National Statistics is slated to publish preliminary GDP data for the second quarter on July 25.

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Chinese consumer prices inflation slowed in June from an 4-month high, as food prices increased at a slower rate, a report from the National Bureau of Statistics showed. The increase was slightly below the consensus estimate. Consumer prices increased 2.3% year-on-year in June following the 2.5% increase in May. Economists had expected prices to rise 2.4%.

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In a separate report, the statistics bureau said that producer prices in China fell 1.1% year-over-year in June. This was a faster rate of decline than the 1% drop expected by economists. In May, prices had decreased 1.4%. Producer prices for means of production dropped 1.5% while prices for means of subsistence rose 0.2% in June.

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Israel launched an air offensive in response to increasing rocket attacks by Palestinian militants, conducting repeated strikes that killed at least 25 Palestinians Tuesday in the Gaza Strip. Among the dead were eight children and two women. The fatalities included several militants from Hamas and the Islamic Jihad group, Gaza emergency services chief Ashraf al-Qedra said. Israel's cabinet, meanwhile, authorized the army to call up 40,000 reservists should it decide to expand the operation, possibly into a ground offensive. So far, only thousands of reserve soldiers have received orders.

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Brazil was in a state of shock at least similar to the trauma of 1950 after its football team suffered its worst-ever defeat, ending the dream of lifting the World Cup at last on home soil. Tuesday's 7-1 thrashing of a hapless Selecao by a rampant Germany team was a stunning end to a World Cup campaign following the tournament-ending injury to talismanic playmaker Neymar. "I want to tell the Brazilian people, please excuse this defeat," coach Luiz Felipe Scolari said. "Maybe it will down in history that I was responsible for Brazil's worst defeat." Brazilian President Dilma Rousseff tweeted: "As all Brazilians, very, very sad about the defeat ... I am tremendously sorry for us all, for the fans and our players. But we won't be broken. Brazil, brush the dust off and stand up again."

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BROKER RATING CHANGES

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DEUTSCHE BANK RAISES SHELL (B) TO 'BUY' ('HOLD') - PRICE TARGET 2850 (2400) PENCE

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DEUTSCHE BANK RAISES SHELL (A) TO 'BUY' ('HOLD') - PRICE TARGET 2850 (2550) PENCE

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DEUTSCHE BANK CUTS BP TO 'HOLD' ('BUY') - PRICE TARGET 550 (540) PENCE

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BARCLAYS RAISES BP TO 'EQUAL WEIGHT' ('UNDERWEIGHT') - PRICE TARGET600 PENCE

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TRADERS: NOMURA CUTS UNILEVER TO 'REDUCE' ('NEUTRAL')

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HSBC CUTS INTERNATIONAL AIRLINES GROUP (IAG) TO 'NEUTRAL' ('OVERWEIGHT'); PRICE TARGET TO 400 (480) PENCE

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GOLDMAN CUTS DOMINO PRINTING PRICE TARGET TO 700 (810) PENCE - 'NEUTRAL'

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BARCLAYS RAISES LONDON MINING TO 'EQUAL WEIGHT' ('UNDERWEIGHT') - TARGET 80 (75) PENCE

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COMPANIES - FTSE 100

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AbbVie Inc retracted any statements that suggested it had the support of Shire shareholders in its bid to acquire the UK-listed company for GBP30.1 billion, after potentially over-stepping the mark when it comes to UK takeover rules. In a pre-market statement Wednesday, AbbVie said it wished to clarify some press and newswire reports about its latest takeover bid for pharmaceuticals rival Shire. It said it had not received any written commitments of support from Shire's shareholders and "accordingly retracts the statements".

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Insurer Aviva PLC said out new cashflow targets for the next couple of years, continuing a turnaround aimed at driving up its profitability and simplifying its balance sheet. In a statement ahead of a capital markets day, the company said it now wants to double the annual excess cashflow booked by the holding company to GBP800 million by the end of 2016, from GBP400 million in 2013, and reduce the operating expense ratio to below 50% by the same time, from 54% in 2013.

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Admiral Group PLC said car insurance turnover in the UK decreased in its first-half, despite customer numbers increasing, as the insurer was hit by declining in premiums, prompting it to lower its margin expectations. In a trading statement for the six months to June 30, 2014 the FTSE 100-listed company said UK car insurance turnover decreased to GBP0.85 billion, compared to GBP0.92 billion in the first-half 2013. Group turnover also decreased during the period, coming in at GBP1.0 billion, compared to GBP1.1 billion last year.

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HSBC Holdings PLC said its Cayman Islands subsidiary will sell most of its corporate and retail banking business to Butterfield Bank (Cayman) Ltd, and will also start to prepare to wind itself down. The bank didn't give any financial details for the asset sale, but said the wind-down preparation will include stopping taking any new business immediately and looking to minimise the impact on any remaining customers.

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COMPANIES - FTSE 250

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UK food wholesaler BookerGroup PLC said it has started its new financial year well, with sales in the first quarter in line with expectations, and its turnaround plans for recent acquisition Makro on track. Total sales in the 12 weeks to June 20 were up 3.8% including sales from Makro. Non-tobacco sales were up 5.4%, while tobacco sales rose 0.7%. Makro is a Netherlands-based wholesale business which Booker acquired in July 2012.

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Construction group Interserve PLC said it has continued to perform strongly since it published its interim management statement in May, and is encouraged by the further development of its "future workload". FTSE 250-listed Interserve said the integration of its expanded UK support services arm is also progressing well and as planned. The company also said that following the successful completion of a USD350 million issue of US private placement loan notes in June, it remains well placed to continue to invest in its growth strategy.

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Centamin PLC said its gold production rates fell in its second quarter compared to the previous year, as underground ore grades remained below forecast and open-pit ore production dropped.

Despite its recent difficulties, the FTSE 250 miner reaffirmed its production forecast for the full-year and said it continues to move towards its long-term target of 450,000 to 500,000 ounces per year from 2015 onwards. Centamin said its gold production fell 13% to 81,281 ounces for the three months ended June 30 from 93,624 ounces in the same period the previous year, stating that grades realised from development ore were lower than the forecast annual average and open-pit ore production rates fell 39% to 1.8 million tonnes from 3.0 million tonnes.

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TeleCityGroup PLC said it has appointed Eric Hageman to its board as chief financial officer, effective September 1, 2014. Hageman most recently served as a member of the board of management and CFO of Netherlands-based telecoms company, Royal KPN NV.

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Housebuilding and construction business Galliford Try PLC said it has continued to make progress since publishing its interim management statement in May and expects pretax profit to be at the upper end of analysts' current range of GBP92.8 million to GBP95.2 million. On May 14, the company said it made a strong start to 2014 and expected to report pretax profit for its full-year to June 30 above analysts' consensus of GBP89.7 million and not less than GBP92.0 million.

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British pub chain JD Wetherspoon PLC said sales have slowed since the third quarter of its financial year, but said it remains on track with its pub opening programme and is still confident of achieving a "reasonable outcome" for the year as a whole. The UK-based pub operator said sales were up just over 10% in the 10 weeks to July 6, while like-for-like sales rose 4.9%. But that represented a slowdown in sales growth, as like-for-like sales increased by 6.2% in the third quarter ended April 27, while total sales were up almost 11%.

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COMPANIES - MAIN MARKET AND AIM

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UK MailGroup PLC said its overall first quarter performance was in line with management expectations as its Parcels division continued to benefit from strong growth in online shopping. In an interim management statement for the period April 1, 2014 to June 30, 2014, the company said reported revenues for the first quarter role 2.5% on the same period in 2013. Underlying revenue was up 4.5%, although this was adjusted for there being one less working day in the period compared to the same period last year, said the company.

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Online gaming company 888 Holdings PLC said it expects earnings for the first half of the year to be significantly ahead of last year. In a short statement Wednesday, the company said trading has been strong in the first half, and its expects earnings before interest, taxes, depreciation and amortisation for the six months to June 30, to be "significantly ahead" of the first-half of last year.

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UniteGroup PLC said the Unite UK Student Accommodation Fund has acquired a 2,904 bed student accommodation portfolio for GBP137 million, which will increase USAF's property portfolio value by 10% to GBP1.51 billion from GBP1.38 billion. USAF is an open-ended non-listed real estate fund that focuses on acquiring and operating student accommodation in the UK.

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Providence Resources PLC noted that the operator on its part owned Spanish Point appraisal/exploration well off the coast of Ireland has postponed the well until 2015 due to rig refurbishment delays. The Irish oil and gas exploration and appraisal company said the operator Capricorn Ireland Ltd, a subsidiary of Cairn Energy PLC, said the Porcupine Basin site will not be drilled in 2014 as planned. Capricorn holds 38% of the site while Providence holds 32%.

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Summit Corp Says SMT19969 Antibiotic Gets US QIDP Designation; Designation Allows Fast Priority Review, Fast Track Status

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Thorntons Expect FY Profit To Be In Line With Market Expectations; Q4 Sales Of GBP25M, Up 0.6%; Q4 Retail Division Sales Down 11%, FMCG Division Up 17%; Pre-Exceptional Pretax Profit Expectations Between GBP7.0M And GBP7.2M

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Alliance Pharma Expects H2 Trading To Be In Line With Plans

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Cohort Buys Marlborough Communications For GBP8M Cash From Marlborough Management

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COMPANIES - OTHER

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Alcoa, In, the largest US aluminium producer, said Tuesday after the markets closed that it swung to a second quarter profit, as all its four business segments were profitable during the quarter.

The company's quarterly earnings per share, excluding items, also came in above analysts' expectations as did its quarterly sales. "Our second quarter results prove Alcoa's transformation is in high gear," said Klaus Kleinfeld, Alcoa Chairman and Chief Executive Officer.

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Wednesday's Scheduled AGMs/EGMs



MITIE Group

Booker Group

J Sainsbury

UK Mail Group

Ecofin Water & Power Opportunities

e-Therapeutics

Lombard Risk Management

Stratmin Global Resources

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Source: Alliance News


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