UK MARKET TALK ROUNDUP: BROKERS COMMENTS

15th Jun 2010 08:10

Broker comments in the UK today. Compiled by Dow Jones Newswires Markets Desk, [email protected] Contact us in London. +44-20-7842-9464 [email protected] 0710 GMT [Dow Jones] The retirement of HSBC Holdings' (HBC) North American CEO Brendan McDonagh sends a "very strong signal" that the US consumer finance business is now firmly under control, says Oriel Securities analyst Mike Trippitt. Trippitt says McDonagh's replacement, Niall Booker, is a strong, logical choice, who will likely focus on growing the core US banking business. Keeps buy rating and 730p target. Shares -0.9% at 645p. ([email protected]) 0659 GMT [Dow Jones] Tesco's (TSCO.LN) 1Q like-for-like sales growth of 0.1% ex-VAT are a tad disappointing, but expectations were pretty low, given the moves in petrol and food prices, says Arden Partners analyst Nick Bubb. Notes international sales are solid enough, and says "the detailed and honest statement should get a few brownie points." Adds he will need to see Sainsbury's (SBRY.LN) 1Q tomorrow to put things in context, but in principle would be a buyer of Tesco at these levels. Shares closed Monday at 392p. ([email protected]) 0654 GMT [Dow Jones] Tesco's (TSCO.LN) 1Q update is broadly in line with expectations, if anything a little toward the top end of expectations, says Shore Capital. It notes like-for-like sales are broadly flat, a result Shore is relaxed about, with Europe slightly positive and Asia slightly negative. Shore says the one market it is concerned about internationally is Hungary, but it notes overall the outlook appears to be brightening. With strong sustainable growth anticipated, succession sorted out, debt falling and returns rising. Buy rating. Shares closed Monday at 392p. ([email protected]) 0653 GMT [Dow Jones] Tesco's (TSCO.LN) trading update is very much in line with expectations, says an analyst, noting sales growth in the UK is slowing, which suggests a challenging market outlook. Still, "the international impact on trade has been at the top end of our expectations, with total sales increasing by 11.9%. Sales in Asia and US markets are encouraging," he adds. Says the company has made a solid start to the year and believes it is well positioned for the future. "I expect this trading performance to be at the low point at Tesco's overall performance for the year ahead, with comparatives set to ease," the analyst adds. Shares closed at 392p. ([email protected]) 0652 GMT [Dow Jones] Morgan Stanley raises InterContinental Hotels Group (IHG.LN) price target to 1320p from 950p. "We remain equalweight InterContinental as the outlook is uncertain, although we want to turn more positive as stronger-than-expected recent hotel demand suggests this should be a 'normal' hotel cycle, and we upgrade our 2010 revenue per available room estimate from -2% to +5%." If this cycle mirrors the last one, RevPAR could grow by over 40% over the next five years, driving 20%+ EPS growth. Shares closed Monday at 1197p. ([email protected]) 0641 GMT [Dow Jones] Whilst Tesco's 1Q international like-for-like sales are broadly flat, encouragingly, there is high single-digit, like-for-like growth in the US, says Execution Noble. "Still, investors in the 'wait-and-see' camp might not be convinced by the flat LFL sales in the international business as these are unlikely to drive an improvement in returns in the short-term," says Execution. It notes that since the announcement of the departure date of Terry Leahy, the shares have been trading near historic lows in terms of valuation. Execution Noble says shares trading below 400p are at an excellent entry point. They closed Monday at 392p. ([email protected]) 0631 GMT [Dow Jones] Deutsche Bank downgrades Home Retail (HOME.LN) to hold from buy and cuts target price to 250p from 350p. This follows the company's disappointing 1Q trading update. It notes sales were below the brokerage's expectations, with the performance at Argos particularly disappointing. "We continue to see opportunities at Homebase, the dividend yield is healthy and the company is buying back shares. However, key metrics at Argos...have deteriorated and we believe a near-term recovery is unlikely." While management continues to control costs tightly, DB now sees risk as being to the downside. Shares closed Monday at 231p. ([email protected]) 0628 GMT [Dow Jones] Bellway's (BWY.LN) trading update shows overall sales rates broadly comparable to last year in the 18 weeks under review, a trader says. Notes a slight reduction in site visitors and weekly sales rates post the election. Also notes the management is slightly more cautious on the outlook since the election. Expects FY '10 pretax profit to come in at GBP41.7M, and EPS at 24.9p. Shares closed Monday at 635p. ([email protected]) Contact us in London. +44-20-7842-9464 [email protected] 0627 GMT [Dow Jones] UBS raises Weir Group (WEIR.LN) price target to 1200p from 1150p. "While Weir has already delivered four decent-sized upgrades to '10 estimates this year we believe the momentum will keep on going, albeit probably not at the same pace that has seen '10 estimates," says UBS. It adds that the acquisition of Linatex provides further earnings accretion into '11. It raises '10 EPS estimate to 88p from 74p and '11 EPS estimate to 94.3p from 76.8p. Keeps the stock at buy. Shares closed Monday at 1066p. ([email protected]) 0619 GMT [Dow Jones] September bunds have opened higher Tuesday from Monday's settlement price after Moody's overnight downgraded Greece to junk, prompting a move back to assets perceived to be safer. While a rating downgrade was not entirely unexpected, the action again reinforces worries over sovereign finances in Europe. Equities in Europe are also expected to open lower, and that should also support safe havens. In the primary market, Ireland offers bonds for up to EUR1.5B after debt sales by other peripherals met a strong response last week. On the data front, ZEW indicator of economic sentiment and euro zone 1Q employment data are both out at 0900 GMT. September bunds are up 0.40 at 128.93. ([email protected]) 0612 GMT [Dow Jones] EUR/CHF held above 1.39 in late Asian trade Tuesday, boosted by advances in most European stocks markets, says UBS. "While Swiss fundamentals continue to favour a lower EUR/CHF, the existence of marked CHF longs and the increased attractiveness of riskier assets hinted at by higher equities on Monday supported EUR/CHF," says economist Reto Huenerwadel. EUR/CHF was at 1.3924 by 0515 GMT. ([email protected]) 0611 GMT [Dow Jones] Credit Agricole CIB looks for "smooth sailing" at Ireland's EUR1 billion to EUR1.5 billion auction Tuesday, as Ireland is under no liquidity threat and the European Central Bank has been seen buying Irish bonds. Ireland will auction 4.6% April 2016 and 4.5% October 2018 bonds, with the results due at 0900 GMT. ([email protected]) 0606 GMT [Dow Jones] ASIAN SUMMARY: Regional markets mostly higher; Nikkei +0.1%, HSI +0.4%, S&P/ASX 200 +0.1%, STI +0.2%, Kospi flat, Taiex +0.9%, Sensex off 0.3%, SET +0.1%, NZX-50 flat. China markets closed for holiday. In FX markets, EUR halts rally vs USD, JPY on Japanese exporters' selling. EUR/USD at 1.2212 vs 1.2225 late NY trade Monday, EUR/JPY at 111.75 vs 111.81. USD/JPY at 91.50 vs 91.47. Bank of Japan's policy board decides to make Y3 trillion available to private banks at 0.1% to lend to companies, encourage firms to make long-term business investment, strengthen nation's economic foundation; votes unanimously to maintain policy interest-rate target at 0.1%. Australia's RBA says in minutes of June 1 policy meeting it has flexibility to keep rates on hold for now, time to assess global impact of European debt crisis, await domestic 2Q inflation data at end-July. Country's April value of personal finance issued down 0.6% seasonally-adjusted from March to A$6.81 billion. South Korea May trade surplus revised to $4.13 billion vs $4.37 billion earlier. Philippines April jobless rate hits 4-year high at 8.0% vs 7.3% January. New Zealand May median home price at NZ$350,000 vs NZ$356,000 in April. U.K.'s RICS home price balance +22 in May vs upward revised +19 in April, +15 forecast; highest level since January. Spot gold at $1,220.60/oz, down 80 cents vs NY close. July Nymex crude oil futures up 1 cent at $75.22/bbl. ([email protected]) 0602 GMT [Dow Jones] S&P/ASX 200 should test higher levels in the short term, says Cityindex dealer James Persson. "While the U.S. equities market did pull back fairly sharply from its highs last night, the currency market is still indicating that there's a fairly bullish view out there...I think we'll see a bullish lead headed into Europe and I think we'll see that translated into a bit more conviction for the bulls in the U.S. tonight. Obviously we're still very close to the 200 day moving average on the S&P 500 and it's not going to take too much to break above it." He sees the intraday bounce in resources and today's strong showing by Australian small caps as positive signs for equities. Rio Tinto (RIO.AU) up 0.4% at A$69.35 after hitting A$68.48. S&P/ASX 200 Small Ordinaries index up 0.7%. Index last up 3.3 points, or 0.1%, at 4508.8. ([email protected]) (MORE TO FOLLOW) Dow Jones Newswires June 15, 2010 03:10 ET (07:10 GMT)