UK MARKET TALK ROUNDUP: BROKERS COMMENTS -2-

19th Jul 2010 13:30

0940 GMT [Dow Jones] BP's (BP) new deal to develop natural gas discoveries in deep water offshore Egypt is positive for the company as it struggles to rebuild its reputation after the Gulf of Mexico oil spill, says NCB Stockbrokers analyst Peter Hutton. "It shows it's business as normal elsewhere in the world and other areas are still signing them to do deep water," he says. However, there was never much real danger that countries like Egypt or Libya would abandon long-standing relations with BP, he adds. Gives hold rating, 420 pence target. Shares -2.4% at 397p. ([email protected]) 0858 GMT [Dow Jones] A deal between GDF Suez (GSZ.FR) and International Power (IPR.LN) would makes sense for GDF Suez assuming the price was not exorbitant, says UBS analyst Per Lekander. The deal would mainly involve operating power plants in emerging markets, which is one of the few areas of real growth, Lekander says. He says a deal would clearly be earnings-accretive for GDF Suez, so long as the price were within reason. International Power rated neutral, 320p target; GDF Suez rated buy, EUR28.5 target. GDF Suez shares +1.3% at EUR24.64, International Power +8.6% at 344p. ([email protected]) Contact us in London. +44-20-7842-9464 [email protected] 0840 GMT [Dow Jones] BP shares -2.9% to 395p, after US authorities expressed concerns that hydrocarbons could seep from the newly sealed Macondo oil well. "BP seems to have hit another road bump so that's not going to do the space any favors," says one trader. Another says there is also some trepidation ahead of the 2Q results, July 27. UBS says while underlying earnings and cashflows are expected to be good, accounting for the spill is likely to be complex. "The release should allow for a much needed insight into the balance sheet...its liquidity resources and the commitments it faces. The relief well is critical in defining these commitments." ([email protected]) 0838 GMT [Dow Jones] USD/INR higher despite rising EUR as demand from oil companies, NDF players support, says trader with private bank. Pair last at 47.02 vs 46.78 late Friday. "You can see Asian currencies are underperforming against the dollar. But some importer and NDF buying is hurting the rupee," trader says. Adds, unwinding of long-EUR/Asia positions in NDF market also driving pair higher. Trader tips key resistance at 47.10, 46.60-47.35 band this week. ([email protected]) 0837 GMT [Dow Jones] The latest CFTC positiong data as at July 13 shows euro short positions were trimmed once again, and seeing that since then EUR/USD has added almost 3 cents the net short position should have been reduced even further. EUR/USD trades at 1.2974 against Friday's 2-month high of 1.3008 and a high of 1.2739 on July 13. ([email protected]) 0837 GMT [Dow Jones] In Sweden, the market's rate expectations are well below those of the Riksbank, SEB says. "The market is slightly below the Riksbank's repo rate path in 2010, discounting a repo rate at 1.00% vs. the Riksbank's 1.25% while deviating substantially in 2011, expecting a repo rate at 1.85% end-2011 (Riksbank forecasts 2.50%)," SEB says. Sweden's two-year bond yield trades flat at 1.445% while the 10-year bond yield trades down 1.7bps at 2.685%. ([email protected]) 0833 GMT [Dow Jones] USD/PHP higher late, tracking broad USD strength following Wall Street's sharp losses Friday, while investors turn risk averse as Moody's cuts Ireland's sovereign debt rating to Aa2. Pair last at 46.42 vs 46.27 late Friday in heavy volume. Local bank trader tips pair to stay within 46.20-46.80 range Tuesday. ([email protected]) 0824 GMT [Dow Jones] EUR/CZK trades slightly higher at 25.448-25.478 from 25.44 late Friday as regional currencies correct in early trade for recent gains, but the koruna is supported at 25.5 and no further weakening is expected despite forint and zloty losses, a trader says. Hungary refusing new austerity measures over the weekend attracted sellers at the open, but now trade is calm and currencies are gaining. "If EUR/USD reaches 1.30 it would be koruna supportive and EUR/CZK would move lower," the trader adds. ([email protected]) 0824 GMT [Dow Jones] USD/JPY had its lowest weekly close since 1995 and one of the lowest ever notes Mizuho Corporate Bank's Nicole Elliott, underlining the ultra-long term trend for a stronger JPY. She says the dollar is only slightly oversold and all elements of the Ichimoku cloud chart suggests a short position. The pair's at 86.86. Elliott favors shorts at market, adding at 87.00 with a stop above 87.65 for a first downside target of 86.30 followed by 85.00. ([email protected]) 0823 GMT [Dow Jones] USD/TWD turns higher to 32.155 late vs 32.140 intraday low, 32.143 Friday on weak stocks (Taiex off 0.2%), suspected central bank buying, 2 local bank traders say. Both estimate central bank may have bought around US$20 million late. "The central bank wants to keep the pair in a tight range so that investors will not gain by speculating in the market," says one trader. Volume shrinks to over 5-month low of US$459 million. Tips pair in 32.050-32.200 band Tuesday, tight 32.000-32.300 band in near term. ([email protected]) 0821 GMT [Dow Jones] Despite Belarus's "exemplary" fiscal discipline, yields on its Eurobonds should have a "hefty premium" of perhaps 200bps over Ukraine's, since Ukraine has a better chance of securing capital inflows, depending on commodity prices, Renaissance Capital says. Standard & Poor's "got it wrong" in ranking Belarus's debt a notch above Ukraine, since Belarus faces continued current-account deficits because it pays increasingly higher energy prices to Russia and has a uncompetitive state-run economy, broker says. RenCap sees the "9% area as a realistic target" for a five-year Belarus Eurobond. The presence of Russian state-controlled bank Sberbank a a part of the Belarus bond issue may ensure it's placement, RenCap says. ([email protected]) 0819 GMT [Dow Jones] Treasurys are slightly down in London as the market consolidates after sharp gains made last week that pushed the 2-year yield to a record low. The EUR is also resilient Monday despite Moody's downgrading Ireland and talks between the IMF/EU over a funding deal being suspended over the weekend. Still the economic outlook for the U.S. remains cloudy while Fed Chairman Bernanke is also expected to give a cautious assessment at his testimony later this week, underpinning demand for safe havens. On Monday, the NAHB housing market index is out at 1700 GMT while Fed Governor Duke speaks at 1300 GMT. The 2-year note is tad down at 100-02/32 to yield 0.593%, the 10-year note is down at 104-26/32 to yield 2.932%, the 30-year bond is lower at 107-15+/32, yielding 3.945%. September bunds are 0.09 higher at 129.25 and September gilts are 0.12 higher at 121.43. ([email protected]) 0814 GMT [Dow Jones] The Hungarian central bank could decide Monday on a "preventive rate hike" at its scheduled rate meeting at 1200 GMT "as the shock has now come from within" after the IMF/EU suspended talks with the government Saturday, says BNP Paribas. Other analysts only see a rate hike as possible coming later. BNPP sees HUF remaining under significant pressure Monday morning as investors are afraid of getting their fingers burnt by policy tightening. Adds it's hard to see why Hungarian markets would strengthen from this point in the coming days. EUR/HUF is 288.18 from 289.03 earlier this morning. Policy rate is at 5.25%, other analysts see it remaining unchanged Monday. ([email protected]) 0811 GMT [Dow Jones] BNP Paribas says Hungarian government rhetoric on refusing to launch austerity measures in Hungary despite IMF/EU requirements is "obviously" aimed at the autumn elections. But, says BNPP, the ruling Fidesz party's policy is even more likely to lose public support because it will drive the CHF/HUF higher. The IMF/EU suspended talks with Hungary Saturday because of the government's reluctance to cut spending. CHF/HUF is 214.42 from 207.67 late Friday. ([email protected]) 0840 GMT [Dow Jones] BP shares -2.9% to 395p, after US authorities expressed concerns that hydrocarbons could seep from the newly sealed Macondo oil well. "BP seems to have hit another road bump so that's not going to do the space any favors," says one trader. Another says there is also some trepidation ahead of the 2Q results, July 27. UBS says while underlying earnings and cashflows are expected to be good, accounting for the spill is likely to be complex. "The release should allow for a much needed insight into the balance sheet...its liquidity resources and the commitments it faces. The relief well is critical in defining these commitments." ([email protected]) 0746 GMT [Dow Jones] International Power (IPR.LN) shares soar 8.9% to 345p after it announces it is in talks with GDF Suez (GSZ.FR) regarding a possible combination of some assets. The publication of the GDF accounts suggests the potential deal is being taken seriously by both parties, says a trader. The trader says the combination would not appear to result in cash to IPR shareholders and as GDF would own a majority there would be a loss of a control premium. But credit cost and IPR's WACC, would perhaps benefit the most in the deal, the trader says. ([email protected]) (MORE TO FOLLOW) Dow Jones Newswires July 19, 2010 08:30 ET (12:30 GMT)