UK MARKET TALK ROUNDUP: BROKERS COMMENTS

7th Jul 2010 12:17

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] 1117 GMT [Dow Jones] Marks & Spencer's (MKS.LN) 1Q update is better-than-expected, says Charles Stanley. Brokerage is encouraged by the improving sales trends and market share gains in both general merchandise and food, which it attributes at least in part to internal action. "Whilst acknowledging risks surrounding the UK consumer outlook and some uncertainty ahead of Marc Bolland's strategic update, we consider the current valuation undemanding and the 4.5% dividend yield attractive." Maintains accumulate rating on the stock. Shares -2.5% at 344p. ([email protected]) 1028 GMT [Dow Jones] CRH's (CRH.DB) first-half interim management statement makes "poor reading" says Collins Stewart. CRH notes budget deficit concerns across Europe have added to uncertainty and recent US data indicate some softening in the pace of recovery. Also, on the negative side, Collins Stewart says the US materials segment, for which expectations are high in anticipation of stimulus spend, saw Ebitda drop 45% in 1H amid an 8-10% drop in volumes. Collins Stewart notes the group is a big play on the US where there is uncertainty and the brokerage expects little from M&A in '10. Hold rating, EUR17.05 target. Shares -9.3% at EUR15.54.([email protected]) Contact us in London. +44-20-7842-9464 [email protected] 1022 GMT [Dow Jones] 2H'10 is likely to be a bumper six months for the E&P sector, given the relative dearth in 1H, says UBS. All European E&Ps in its coverage universe are drilling important prospects in 2H, UBS notes. It says M&A is showing signs of returning with vigour, noting Afren's (AFR.LN) all-share takeover of Black Marlin Energy (BLM.V) and KNOC's recently announced preliminary approach to Dana Petroleum (DNX.LN). UBS says the E&P sector outperformed wider oils and the market in June. Tullow (TLW.LN) remains top pick, with a buy rating and 1450p target. UBS also likes Premier Oil (PMO.LN) and Afren, which it rates buy with 1560p and 125p targets, respectively. ([email protected]) 1012 GMT [Dow Jones] EUR/USD slips some 15 ticks to the day's low of 1.2553 in the wake of German May manufacturing orders which disappointed at -0.5% on the month. Next support for the spot comes in around 1.2540. ([email protected]) 1010 GMT [Dow Jones] The expected terms for bondholders in International Industrial Bank's default, believed to include another year of 9% interest with the principal being repaid only at the end, "cannot be seen in the current environment as particularly friendly," said broker Troika Dialog, which recommended that bondholders "seek more favorable terms for settlement of the debt." ([email protected]) 1005 GMT [Dow Jones] Thai government bonds extend losses amid mounting expectations of near-term rate hike. Incoming BOT Governor Prasarn Trairatvorakul says central bank likely to start raising interest rates in August, hike by total 75 bps by year-end. His remark echoed yesterday's comment by incumbent Tarisa Watanagase that any rate hike will take place within this year. "Those in the front-end of the curve, especially less than two-year tenors, have suffered the most from the latest series of hawkish comments. However, I don't see much room for yields to rise further as the market has already priced in the tightening move," says trader. Most market participants expect rate hike either next week or at August meeting. Yields expected to rise by no more than 3-5 bps tomorrow. Bid/offer yields of issue due May 2015 quoted at 2.975%/2.965% vs 2.96%/2.93% late yesterday, November 2016 at 3.03%/2.98% vs 3.02%/2.96%, June 2019 at 3.15%/3.05% vs 3.10%/3.00%. ([email protected]) 1003 GMT [Dow Jones] Hours after Russia's International Industrial Bank defaulted on EUR200 million in Eurobonds, the Russian market is "rightfully looking at this story in broad isolation from the general market," UralSib Capital chief strategist Chris Weafer said. The state-controlled banks that dominate the Russian banking sector have recently boosted liquidity through deposits, while only slowly increasing their loan portfolios. ([email protected]) 1001 GMT [Dow Jones] India government bonds near intraday highs as Rural Electrification Corp (532955.BY) bond issue leads to buying by market players, says two traders with private bank. Benchmark 7.80% 2020 bond at 101.42 vs 101.28 last close. "REC is issuing bonds with a coupon of 8.70% for a 9-year tenor and receiving against it on the integrated swap in the issue. So the market is paid in swaps and therefore buying bonds," says dealer. Adds, "even if REC garners INR20 billion via the issue, there may be bond buying to the tune of INR10 billion." Also, two state-run lenders also heavily buying bonds, state-run banks bought INR8.49 billion worth of government bonds Tuesday, central bank data shows. Tips benchmark 2020 bond in 101.35-101.50 range during session. ([email protected]) 0958 GMT [Dow Jones] Pakistan shares up sharply, led by gains in oil and cement stocks. Benchmark KSE-100 index +2.0% at 9766.94. "Data on strong buying by foreign funds in the previous session has boosted overall sentiment," says local dealer; notes foreign investment in domestic equities Tuesday amounted to $2.4 million. Moreover, another dealer adds, "there has been a great deal of unconfirmed market chatter that the government may relax some rules related to the submission of new tax on capital gains. People have been speculating that the condition which requires investors to declare the sources of funds they invest in the stock market may be scrapped." Oil and Gas Development (OGDC.KA) +1.3% at PKR141.80, Lucky Cement (LUCK.KA) +1.1% at PKR62.60. ([email protected]) 0952 GMT [Dow Jones] Thai shares turn lower to close down 0.1% at 814.68 on late selling, tracking sharp losses in major European bourses, Dow Jones Futures. Still, hopes of better 2Q corporate earnings offer support. "The Thai stock market will likely move sideways for a while due to the absence of fresh leads to drive the market in either direction," says SCB Securities Senior VP Sukit Udomsirikul. Support at 810, resistance at 820 Thursday. Among top actives, TMB Bank (TMB.TH) +6.4% at THB1.66, BTS Group Holdings (BTS.TH) +4.7% at THB0.89, Banpu (BANPU.TH) +0.3% at THB632, Berli Jucker (BJC.TH) +8.9% at THB14.70 - though off day's high of THB17.50 - on speculation company to compete with others bidding to buy Carrefour's assets in Thailand, Charoen Pokphand Foods (CPF.TH) flat at THB21.50.([email protected]) 0935 GMT [Dow Jones] Below-expectations French trade in May suggests growth in the second quarter will be worse than expected, says Natixis economist Jean-Christophe Caffet. "It's not a collapse in trade as there is a lot of volatility of big ticket purchases. But it's a figure that suggests the contribution to 2Q growth from trade will be nothing or negative," Caffet says. Natixis +0.3% forecast for 2Q GDP was already optimistic and the bank will probably lower it, says Caffet. "It's very difficult to see what could be the factors that will support growth in the second quarter," he says, noting consumer spending isn't strong and there are risks to investment. ([email protected]) 0935 GMT [Dow Jones] USD/PKR hits all-time high of 85.68 vs 85.61 Tuesday as oil importers buy. "Banks arranged $100 million for some oil-related and interest repayments," says dealer. Another dealer says pair may rise to 85.75 as another $90 million in purchases expected by oil importers. Analyst says PKR may remain under pressure as inflows likely to remain subdued. "Only pumping of funds from the central bank can halt the dollar's rally for now." Tips pair in 85.65-85.70 band Thursday. ([email protected]) 0933 GMT [Dow Jones] EUR/CHF may well have made a temporary low however recent stability is not the same as strength says Barclays Capital. While capped below 1.3445-60 downside risks persist and provided resistance at 1.3630 limits the topside the chances of a run at 1.2995 are as great as ever says the bank. EUR/CHF now at the day's low of 1.3312. ([email protected]) 0933 GMT [Dow Jones] Poland's budget deficit will be high at 6% of GDP next year despite the government's plan to slash the deficit to PLN40B from PLN52.2B originally planned and PLN42B expected for this year, says Citi economist Piotr Kalisz. Kalisz adds that there's no progress in reforming the public finance sector, so most of the decline will come as a result of faster economic growth and not savings on the expenditure side. He notes the structural deficit will likely remain very high. EUR/PLN is at EUR/PLN4.1207 from 4.1005 late Tuesday, USD/PLN at 3.2777 from 3.2625. ([email protected]) 1022 GMT [Dow Jones] 2H'10 is likely to be a bumper six months for the E&P sector, given the relative dearth in 1H, says UBS. All European E&Ps in its coverage universe are drilling important prospects in 2H, UBS notes. It says M&A is showing signs of returning with vigour, noting Afren's (AFR.LN) all-share takeover of Black Marlin Energy (BLM.V) and KNOC's recently announced preliminary approach to Dana Petroleum (DNX.LN). UBS says the E&P sector outperformed wider oils and the market in June. Tullow (TLW.LN) remains top pick, with a buy rating and 1450p target. UBS also likes Premier Oil (PMO.LN) and Afren, which it rates buy with 1560p and 125p targets, respectively. ([email protected]) (MORE TO FOLLOW) Dow Jones Newswires July 07, 2010 07:17 ET (11:17 GMT)