European markets update

European equity markets ended the week on a positive note, buoyed by assurances that the US Federal Reserve will intervene to ensure the orderly functioning of markets and limit any economic fallout from the subprime crisis.

Latest data added to evidence that Eurozone economies have not been directly affected by subprime troubles: unemployment in Germany fell for a 19th consecutive month in August; while the Spanish government reaffirmed its 3.8% growth forecast for the year, after the economy expanded by 4% year-on-year in the second quarter.

Business confidence in the Eurozone remained firm in August, reflecting improved order books and production trends. Consumer confidence, however, weakened.

UK house price inflation slowed in August, suggesting that the Bank of England's tightening measures may be cooling demand.

Sector News

Commodities: First-half earnings of UK oilfield services provider John Wood Group came in ahead of expectations, aided by buoyant end-markets. Elsewhere, Venture Production intends to use the proceeds of its new debt facility to acquire further North Sea assets.

Consumer: Greek jewellery maker Folli-Follie saw pre-tax profits rise 20% in the first half from a year earlier on strong sales across geographic regions. French supermarket owner Casino also released positive results, buoyed by solid growth domestically and abroad, notably in Latin America. Danish brewer Royal Unibrew raised its full-year earnings forecast on the back of strong second-quarter results. UK-based alcohol and beverage producer Diageo posted a fall in full-year profits due to asset sales and a tax credit, but remains optimistic on its outlook in Asia and the US. Cigarette producer Philip Morris' first-half earnings were weighed down by higher tobacco taxes.

Financials: In a week containing little by way of company announcements, bank stocks fell on widespread rumours of growing credit losses. Danish insurer Alm Brand reported strong interim results, helped by a benign claims environment. Borse Dubai continued to battle for support in its takeover bid for Swedish stock exchange OMX, while rival bidder Nasdaq is seeking to sell its 31% stake in the London Stock Exchange.

Services: Interim results were broadly positive: UK flight-support services company BBA Aviation benefited from buoyant market conditions and operational improvements, although this was partially offset by the weaker US dollar; Davis Service Group was aided by accelerated growth in Europe and improved market conditions in the UK.

Utilities: EVN, Austria's second largest utility, reported a 7% year-on-year increase in nine-month profits on increased investment.

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