Friday January 11, 09:59 AM
Euroshares turn lower as broker downgrades weigh on L'Oreal, Unilever UPDATE
(updates with full report)
LONDON (Thomson Financial) - Leading European exchanges were lower in morning trading with broker downgrades weighing on consumer staple Blue Chips Unilever, L'Oreal (Paris: FR0000120321
- news) and Danone (Paris: FR0000120644 - news) .
At 9.37 am, the DJ STOXX 50 was 6.87 points or 0.19 pct lower at 3,547.36, while the STOXX 600 fell 1.24 points or 0.36 pct to 344.14.
'It is hard to assess the market today. The rally in the US overnight was again unconvincing and we're not following the direction given,' a trader in Frankfurt said.
'Personally, I am taking a wait-and-see position ahead of the weekend,' he added.
'Company specific news is thin on the ground otherwise, most attention focused on the US banks reporting next week, and extent of further writedowns,' another trader noted.
Broker action was dominating market movements with Unilever (LSE: ULVR.L - news) under pressure, down 5.04 pct, after Morgan Stanley (SPU - news) cut its stance on the shares to 'underweight' from 'equal-weight'.
In a note to clients, the broker noted that short-term concerns include potential volume impact from recent price increases and input-cost-related margin pressure, particularly in the first half of 2008.
L'Oreal was cut to 'sell' from 'hold' at Deutsche Bank (Xetra: 514000 - news) and to 'sell' from 'hold' at ABN Amro (Amsterdam: AABA.AS - news) . Shares fell 3.39 pct.
Danone was down 2.64 pct after it was also cut to 'sell' from 'hold' in the ABN Amro HPC and food producers note.
Elsewhere, Infineon (Xetra: 623100 - news) was in the spotlight, down 4.58 pct, following a downgrade of the sector by Credit Suisse to 'marketweight' from 'overweight'.
The broker said monthly IC (integrated circuit) unit growth is expected to peak in the first quarter of 2008 and noted that the sector has historically not performed well when IC unit growth peaks.
In addition, analysts expect Infineon rival Samsung (000830.KS - news) to disappoint when presenting its figures next Tuesday as chip prices remain under pressure.
A sharper-than-expected drop in memory chip prices in December forced some analysts to revise their operating profit forecasts for the South Korean chip maker down to 1.4-1.5 trillion won.
And engineering group Alstom (Paris: FR0010220475 - news) outperformed this morning, up 2.72 pct, buoyed by a recommendation upgrade from Goldman Sachs (NYSE: GS - news) to 'neutral' from 'sell' and a report of a major contract win to sell next generation high-speed trains to Italy.
Rolls-Royce shed 2.38 pct as the jet engine maker said it plans to cut up to 2,300 jobs at its plants in the UK, Germany, US and elsewhere as part of ongoing efforts to improve efficiency and competitiveness.
Merrill Lynch (NYSE: MER - news) said this was good news for the company but would cost it about 115 mln stg.
Staying in the UK, Northern Rock (LSE: NRK.L - news) gained 4.99 pct after it said it has raised 2.25 bln stg by selling part of its mortgage book to US investment bank JP Morgan, with the proceeds to go towards repaying its 25 bln stg emergency loan from the Bank of England.
German midcaps were in good form today with Premiere in focus as rumours resurfaced this morning that Vivendi (Paris: FR0000127771 - news) will decide over this weekend whether or not to enter a bid for the German group. Shares rose 4.45 pct.
SGL Carbon (Xetra: 723530 - news) gained 9.16 pct after CEO Robert Koehler upgraded his full-year 2008 sales growth target to 10-15 pct from above 5 pct.
The company also said earlier it will invest about 200 mln eur in the expansion of its Malaysian graphite electrode plant, which is currently under construction.
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