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** TRADING HEADLINES **

- Oil Falls as OPEC Maintains Production Policy, Letting Stockpiles Increase
- Gold Prices Climb to 25-Year High Amid Concerns About Iran, Middle East
- Soybean Prices Fall; Rain in Argentina, Brazil May Ease Crop-Yield Concern
- Copper Rises Close to a Record in London as World Demand Outpaces Supply
- Zinc Rises to Record in London; Mining Disruptions May Deepen Shortage
- Sugar May Be in a `Bubble’ After Reaching Multi-Year Highs, Sucden Says

- Google Profit Rises 82 Percent on Holiday Ads Linked to Web-Search Results
- Fed Raises Rates, Drops View for `Measured’ Increases to Cap Greenspan Era
- U.S. Stocks Trim January Advance After Fed Raises Rates; Google Declines
- Allstate’s Net Income Falls 8.8 Percent on Claims After Hurricane Wilma
- Merck, Wyeth Sales Stagnate as Competition Erodes Demand for Leading Drugs
- Altria’s Profit Rises 18 Percent on Overseas Sales, Higher Marlboro Prices

** FED STATEMENT **

The Fed hiked to 4.5% as was widely expected and suggested the run of increases is still not finished. Going over the statement, the Fed dropped ‘measured’ from the statement which was in there since May 2004. Further the Fed substituted ‘is likely to be needed’ by ‘may be needed’ with regards to further rate increases. The bond market hardly reacted on the move, with ten year yields dropping about 1bp. What got less media attention though was that the yield curve (10-2 yr) moved near the point of inversion again.

** AFTER HOURS **

- Google dropped 15% after the company announced Q4 net income excluding one-time items was $1.54 p/s, short of the $1.76 consensus number.

- Symantec dropped 5% after hours following an inline Q3 report but disappointing forecast.

** IN PLAY WEDNESDAY **

On the macro calendar Wednesday are Mortgage applications (13:00 CET) followed by Construction Spending and ISM Manufacturing (16:00 CET). Among the companies reporting before the market open are Time Warner, Devon Energy and Boeing. After the market close we’ll see reports of amongst others JDS Uniphase, Starbucks, Anheuser Busch and Boston Scientific.

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** HEADLINES **

• European bourses are flat. Energy is the best performing sector in sympathy with the positive action in the U.S. yesterday following strong figures from Exxon Mobil. Telecoms are the worst category today after Cable & Wireless fell more than 15% saying that profit won’t rise in its home market.
• On a stock specific note, shares of Abn Amro are trading slightly higher following better than expected headline Q4 earnings. Ericsson is flat after posting above consenus Q4 earnings & sales but tampering optimism due to falling margins and a vague outlook. Paper maker UPM Keymenne is trading higher after reporting that Q4 pre-tax profit doubled. Shares of Arcelor are under pressure after the company said it will extend its offer for Dofasco. Ciba Specialty Chemicals is trading down after the company said it sees a tough year after its 2005 net loss. Shares of dutch food retailer Laurus jumped 15% after the plagued company said it plans to sell two underpeforming chains.
• Oil reversed from early morning strength after OPEC signaled it will keep a policy of pumping almost at capacity in order to boost stockpiles and meet rising demand.

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+ FIAT PRICE ESTIMATE RAISED TO EU8.4 FROM EU7 AT ING
+ LUFTHANSA PRICE EST. RAISED 41% TO EU15.8 AT CITIGROUP
+ AIR FRANCE PRICE EST. RAISED 13% TO EU21.8 AT CITIGROUP
+ MITTAL PRICE ESTIMATE RAISED TO EU34 FROM EU31 AT ING
+ ARCELOR PRICE EST RAISED TO EU33.8 FROM EU25 AT ING
+ LUFTHANSA RAISED TO `BUY’ FROM `HOLD’ AT CITIGROUP
+ BUHRMANN RAISED TO `NEUTRAL’ FROM `REDUCE’ AT UBS
+ RIO TINTO PRICE ESTIMATE RAISED TO 3500P FROM 3350P AT UBS
+ BHP BILLITON SHARE-PRICE ESTIMATE RAISED 16% TO 1300P AT UBS
+ ANGLO AMERICAN PRICE ESTIMATE RAISED 18% TO 2600P AT UBS
+ REED ELSEVIER PRICE ESTIMATE RAISED TO EU14 AT SNS
+ SYNGENTA RAISED TO `OUTPERFORM’ FROM `IN-LINE’ AT GOLDMAN
+ CIBA RAISED TO `OUTPERFORM’ FROM `IN-LINE’ AT GOLDMAN SACHS
+ DEUTSCHE POSTBANK PRICE EST. RAISED 9.8% TO EU48.91 AT HSBC
+ HYPO REAL ESTATE PRICE ESTIMATE RAISED 15% TO EU60.17 AT HSBC
+ COMMERZBANK PRICE ESTIMATE RAISED 15% TO EU30.7 AT HSBC

- TECHNIP CUT TO `NEUTRAL’ FROM `BUY’ AT UBS
- CENTRICA CUT TO `UNDERWEIGHT’ FROM `EQUAL WEIGHT’ AT LEHMAN
- RANDSTAD CUT TO `NEUTRAL’ FROM `BUY’ AT MERRILL LYNCH
- GOODYEAR TIRE CUT TO `SELL’ FROM `HOLD’ AT DEUTSCHE BAN
- JC DECAUX CUT TO `HOLD’ FROM `BUY’ AT DEUTSCHE BANK
- EASYJET CUT TO `HOLD’ FROM `BUY’ AT CITIGROUP

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** IN PLAY TODAY **

- Noteworthy earnings reports today: Arm Holdings, Ciba Specialty Chemicals, Abn Amro, UPM-Kymmene, Jyske Bank, Elan Corporation & Ericsson.

- Morgan Stanley (Teun Draaisma & Ben Funnell) cut its recommendation yesterday on European stocks from ‘overweight’ to ‘neutral’ as ”People are way too bullish” according to the strategists.

- Abn Amro said Q4 profit was EUR 1296m ahead of the consensus number of EUR
908m but including one-off items of EUR 201m. Private equity & wholesale performing better than expected.

- Ericsson reported a jump in Q4 net profit of 52% to SEK 8.5bn, better than the SEK 7.1bn consensus. Sales rose 16% to SEK 45.7bn (43.9bn expected). Margins were however light and guidance remains pretty vague (moderate growth in 2006).

- Carrefour said it bought four Spanish hypermarkets and two gas stations from
Spanish supermarket operator Caprabo SA for undisclosed terms.

- Gazprom said nine-month profit climbed 66 percent from a year
earlier to 232.1 billion rubles ($8.2 billion), benefiting from
an increase in gas prices.

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** ASIAN MARKETS **

Nikkei 0,6%; Kospi 1,1%; HSI 1,5%; Taiwan 1,24%; China 0,48%; India 0,49%;
Thailand 0,66%; Australia -0,25%

** TRADING HEADLINES **

- Honda’s Third-Quarter Profit Drops 12% After Yen Falls More Than Expected
- Fuji Photo to Cut 5,000 Jobs, Shift Production to China in Camera Overhaul
- Japan Has Jobs for Everyone for First Time in 13 Years; Spending Increases
- Asian Stocks Rise for Sixth Day to Near Decade High; Toyota, Samsung Gain
- Mizuho Profit Declines on Trading Error, Masks Rise in Lending, Fee Income
- Dollar Near Four-Week High on Speculation Fed to Flag More Rate Increases
- Toshiba Raises Profit Forecast After Flash Memory Boosts Third Quarter
- Fairfax’s Walker Rules Out Television Purchase, Says Focus Is on Internet
- Nippon Steel’s Third-Quarter Profit Rises 13 Percent on Increased Prices
- OPEC Plan to Maintain Production May Not Lower Oil Prices as Demand Rises

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** TRADING HEADLINES **

- Exxon Net Soars to $10.7 Billion; 2005 Profit Most Ever for U.S. Company
- Natural Gas Futures Gain Amid Forecasts for Cold Weather in Eastern U.S.
- Personal Spending in the U.S. Rises More Than Forecast as Incomes Increase
- S&P 500 Gains on Record Profit at Exxon; Rise Limited Before Fed Meeting
- Kraft Foods Earnings Increase 23 Percent; 8,000 Additional Jobs to Be Cut
- Gilead’s Profit More Than Doubles on Sales of Once-a-Day Truvada HIV Pill
- GM Bonds, Shares Rise After Citigroup Joins Bidding for GMAC Finance Unit
- Gold, Silver Gain on Investor Demand for Haven Amid Concerns About Iran
- Copper Falls From Records on Signs of Inventory Headed for LME Warehouses
- Crude Oil Rises on Signs OPEC Unable to Cover Potential Loss of Supplies
- Coffee Rises to 7-Month High in London as Demand Grows, Supplies Dwindle
- Soybean Prices Rise as Dry Weather in Brazil, Argentina May Reduce Yields
- Cattle Prices Fall on Concern Consumers Will Buy Cheaper Chicken and Pork

** AFTER HOURS **

- Kraft Foods +3% beating Reuters estimates by 2 cents.

- U.S Steel -0.5% reports in line Q4 EPS of $1.18.

- Good Year Tire -7.5% on escalating raw materials cost.

- Nasdaq -7% after beating Q4 consensus

** IN PLAY TODAY **

Top focus today will be the FOMC rate decision (20:15 CET) preluded by the employment cost idnex (14:30 CET) and Consumer Confidence and Chicago Purchasing (16:00 CET). Today are earnings reports scheduled before the U.S. open of Phelps Dodge, Archer Daniels, Merck , Altria, Hilton and Valero Energy. After the close Symantec is on the roll.

Technorati : us wrap

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** HEADLINES **

• European equities are range bound with most of the gains coming from the energy sector on the back of strong oil prices. Healthcare is slightly under pressure after Sanofi-Aventis posted quarterly sales which were slightly below consensus.
• On a stock specific note shares of PPR are gaining sharply on report the company has hired advisors to help it sell its department stores. HMV mushroomed after reports that private equity group Pemira might be bidding for the company. Following the rejection Mittal’s bid by Arcelor, both companies are trading higher. Cable & Wireless jumped after reports that Icelandic investor Bjorgolosson is building a stake in the group. Vivendi shares lost after reporting worse than expected Q4 sales.
• Crude Oil opened strong this morning (we saw a high of $68.40 in Globex-Crude) but has since then reversed course after OPEC said it would keep pumping near capacity, easing concern shortages would develop if supplies from Nigeria & Irans were disrupted.

Technorati : europe middag wrap

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- MANPOWER CUT TO `HOLD’ FROM `BUY’ AT DEUTSCHE BANK
- NOKIA REMOVED FROM LEHMAN’S `EUROPEAN RECOMMENDED PORTFOLIO’
- EIFFAGE CUT TO `HOLD’ FROM `BUY’ AT DEUTSCHE BANK
- BSKYB CUT TO `NEUTRAL’ FROM `OUTPERFORM’ AT CREDIT SUISSE
- STMICROELECTRONICS CUT TO `HOLD’ FROM `BUY’ AT CITIGROUP
- REPSOL YPF PRICE ESTIMATE CUT TO EU21 FROM EU23.5 AT CITIGROUP

+ ACCOR PRICE ESTIMATE RAISED 14% TO EU57 AT LEHMAN BROTHERS
+ UNILEVER RAISED TO `NEUTRAL’ VS `UNDERPERFORM’ AT C. SUISSE
+ CONTINENTAL AG PRICE EST. RAISED 20% TO EU90 AT CITIGROUP
+ INBEV TARGET PRICE RAISED TO EU40 FROM EU30 AT FORTIS
+ ROBERT HALF RAISED TO `BUY’ FROM `HOLD’ AT DEUTSCHE BANK
+ HALLIBURTON PRICE EST. RAISED 19% TO $100 AT MORGAN STANLEY
+ COCA-COLA ENTERPRISES RAISED TO `BUY’ AT DEUTSCHE BANK
+ REYNOLDS AMERICAN RAISED TO `BUY’ FROM `HOLD’ AT CITIGROUP
+ CREDIT AGRICOLE RAISED TO `BUY’ FROM `NEUTRAL’ AT UBS
+ LAM RESEARCH PRICE ESTIMATE RAISED 20% TO $54 AT JPMORGAN
+ ERICSSON ADDED TO LEHMAN’S `EUROPEAN RECOMMENDED PORTFOLIO’
+ DEUTSCHE BANK PRICE EST. RAISED 8.8% TO EU99 AT MORGAN STANLEY
+ ALLIANZ PRICE ESTIMATE RAISED 8.5% TO EU153 AT MORGAN STANLEY

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** TRADING HEADLINES **

- Holcim Offers $1 Billion for Control of Gujarat Ambuja to Expand in India
- Mittal Surprises Dad With Arcelor Bid, Leaves Chinese Market Unconquered
- Deutsche Bank Leads Private Equity Advisers as Deals Soar to $246 Billion
- UPM, Stora May Report Fourth-Quarter Loss on Price Drop, Costs to Cut Jobs
- ECB May Keep Benchmark Rate Unchanged Next Month, Economists’ Survey Shows
- ABN Amro May Say Its Fourth-Quarter Profit Declined as U.S. Earnings Drop
- Dollar May Rise on Expectations Reports Will Signal Expansion, Higher Rate
- Gold May Rise for Second Week as Higher Oil Prices Spur Inflation Concerns
- Ericsson May Report Record Earnings on Network Demand in Russia, China
- European Growth Stocks May Start Beating Market as Profit Outlook Worsens

** IN PLAY TODAY **

- Arcelor rejected the hostile takeover bid by rival Mittal Steel, Le Monde reports Arcelor is turning to politicians and labor unions to help it fend off the bid. The state of Luxembourg owns a 5.6% stake in Arcelor. EU Commissionar Kroes said in Davos that the transaction is unlikely to be of concern to competition regulators. Both companies will hold press conferences today.

- According to The Independent, GlaxoSmithKline has emerged as thet favourite to buy Serono (Europe’s largest biotech firm) for $12bn as Novartis CEO signaled that he would be cautious about acquisitions.

- The Sunday Times said that private equity group Pemrira Advisors is planning a GBP 800m taekover bid for HMV (retailer of books, music & videos).

- ENI, Italy’s largest gas company, said that it was getting less natural gas than requested from Russian Gazprom for a 12th consecutive day amid freezing temperatures in Eastern Europe.

- The CEO of BOC Group said Germany’s Linde must raise its $13.4bn bid, guarantee funding and overcome regulation uncertainties, the CEO told The Observer stating that he has no idea if Linde would renew its bid.

- Deutsche Postbank beat its target of winning at least 600,000 new customers in 2005 the bank’s chief executive officer told German weekly magazine Euro am Sonntag in an interview.

- SBM Offshore is scheduled to report fourth- quarter and full-year 2005 earnings figures.

- Fiat may report fourth-quarter net income today of 124 million euros ($152.4 million), which compares with a loss of 374 million euros a year earlier, according to the median estimates of six analysts surveyed by Bloomberg News.

- Sales updates today from Vivendi (expected to increase to EUR 5.52bn in 4Q2005) and Sanofi-Aventis (expected 4Q sales increase to EUR 7.12bn )

Technorati : morning notes europe

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