UK/Euro Financial Market Daily Morning Briefing 01-03-2006

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London shares open higher as Vodafone, oil offset HBOS profit-taking

Leading shares moved higher in opening deals as profit taking in HBOS was offset by a rebound in Vodafone and by strength in oil heavyweights on the back of a spike in crude prices overnight, dealers said.
   
At 9.02 am, the FTSE 100 index was 18.2 pence higher at 5809.7, with the wider market mixed.
   
Meanwhile in New York, US stocks closed sharply lower as a series of weak economic reports renewed fears over US growth.
   
Sentiment was further knocked after search engine Google warned of slowing growth, sending its shares tumbling.
   
The DJIA closed 104.14 points lower at 10,993.41, while the Nasdaq was off 25.79 points at 2,281.39 and the S&P 500 dropped 13.46 points to 1,280.66.
   
And the sombre mood spilled over into Asia, as the Nikkei 225 closed 240.97 lower at 15,964.46, while the Hang Seng began the afternoon session down 47.65 at 15,870.83.
   
Still in Asia, oil prices rebounded higher on continued supply concerns linked to developments in the Middle East and Nigeria.
   
Earlier this morning, New York's main contract, light sweet crude for delivery in April, was up 22 cents at 61.63 usd.
   
Back in London, HBOS was the top blue chip faller, down almost 4 pct or 42-1/2 pence at 1019, as investors took profits after the bank posted a better than expected 17 pct rise in annual profits.
   
The UK's fourth-biggest bank said pretax profit for 2005 came in at 4.8 bln stg, up from 4.1 bln stg the previous year, and slightly ahead of the consensus analyst forecast of 4.7 bln stg.
   
In response, Dresdner downgraded the group to 'hold' from 'add' and said although this morning's results were good the shares are now trading at fair value.

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Fellow faller Gallaher was hit as in-line full year figures were offset by a cautious outlook statement.
   
The maker of Benson & Hedges and Silk Cut cigarettes posted pretax profit before exceptionals of 570 mln stg against 534 mln last time.
   
But it warned that profits from the Western European tobacco production unit are likely to be under previous expectations following aggressive pricing actions in Austria and Spain and stiff competition.
   
In response, UBS stuck to is 'reduce' advice and said it continues to believe that given the lower EPS and dividend growth the stock should be valued at a discount to its UK peers.
   
In broker comment, Royal & Sun Alliance was knocked 2 at 128 after the insurer was downgraded to 'underperform' from 'in-line' on valuation by Goldman Sachs.
   
The US broker argued that the shares have outperformed strongly over the past year and are now looking expensive.
   
Elsewhere, utilities remained under pressure as investors continued to take profits after recent speculative gains - International Power lost 1-3/4 at 284, Scottish Power eased 1 at 583, and Scottish & Southern was off 3 at 1146.
   
Ex-dividend factors also weighed with Barclays down 13 at 655-1/2 and Reckitt Benckiser off 4-1/2 at 500-1/2.
   
In contrast, Vodafone was the top performer as investors used recent weakness in the stock as a buying opportunity.
   
Shares in the mobile phone giant have been hit hard since it announced a hit of up to 28 bln stg to its book value.
   
Shares took on 1-1/2 at 110-1/2, while telecom peer Cable & Wireless firmed 1 at 107-3/4 following restructuring news yesterday.
   
Oil stocks also were in demand on the back of the crude price spike, with BP 5-1/2 higher at 635-1/2, BG took on 4-1/2 at 672, and Shell added 14 at 1809.

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In earnings news, Xstrata firmed 21 at 1686 after the mining giant posted a 60 pct hike in full year profits, increased its final dividend by 56 pct and said the outlook for 2006 was strong.
   
The company also announced the proposed acquisition of a one-third stake in Cerrejon Thermal coal operations for 1.7 bln usd from Glencore International.
   
In response, JP Morgan reiterated its 'overweight' stance.
   
But BOC was the top blue chip performer, 32 higher at 1542, on ongoing bid hopes and good results from peer Air Liquide yesterday.
   
On the second line, Vedanta gained 39-1/2 at 1025 after Merrill Lynch added the miner to its 'Europe 1' list, with a raised target of 1500 pence and hiked estimates.
   
The US broker reiterated its 'buy' recommendation, telling clients that it raised its 2007 and 2008 EPS estimates by 39 pct and 41 pct respectively on the back of higher assumed metal prices, in particular Zinc.
   
A reassuring trading statement provide the spur to Whitbread, 26 higher at 1085-1/2, as the leisure group said sales from continuing businesses were up 7.4
pct overall, and the full year should be in-line.
   
On the downside, a drop in profits at housebuilder Wilson Bowden cast a shadow over the whole sector.
   
The group revealed a fall in annual pretax profits to 216.4 mln stg against 252.4 mln stg previously, but said current trading in its David Wilson Homes South unit was showing signs of a marked improvement.
   
Wilson Bowden fell 12 at 1480, George Wimpey was down 15-1/2 at 537-1/2, Taylor Woodrow lost 4 at 412 and McCarthy & Stone eased 11 at 745-1/2.
   
Finally, EMAP was down 17 at 933-1/2 after a downgrade in stance to 'sell' from 'hold' by Citigroup following yesterday's French disposal news.
   
The US broker noted that although the market reacted positively to the group's plans to sell its French consumer magazine division and return any "surplus" cash to shareholders, it feels it may be better to travel than to arrive.

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For a summary of US stocks at the close of trade, click here 

Diary of Events

For a list of key UK financial and corporate events today, click here

Frankfurt

FRANKFURT - market data at 09.04 GMT

Major indices:
   
DAX 30 - 5,814.89, up 18.85 points or 0.33 pct
MDAX - 8,362.54, up 5.50 points or 0.07 pct
TecDAX - 741.94, down 1.49 points or 0.20 pct
DAX future - 5,821.50, up 15.00 points or 0.26 pct

Major risers:
   
Schering, up 1.71 eur or 2.83 pct at 62.03
   
MAN, up 1.05 eur or 1.99 pct at 53.93, as Societe Generale apparently initiated coverage of the stock with a 'buy' rating, dealers said   
   
Continental, up 1.30 eur or 1.51 pct at 87.16, recovering from losses yesterday
   
Infineon, up 0.06 eur or 0.78 pct at 7.80, as Inotera Memories, a joint venture between Taiwan's Nanya Technology Corp and Infineon, said it is in the process of completing its initial public offering of shares at 33.00 twd each, following which it will list on the Taiwan Stock Exchange on March 17
   
BASF, up 0.49 eur or 0.77 pct at 63.75, after speciality chemicals company Degussa announced it is selling its construction chemicals operations to BASF for more than 2.8 bln eur, including debt
    
Major losers:
   
Volkswagen, down 0.40 eur or 0.68 pct at 58.26, amid news it is in exclusive talks to sell its car rental business Europcar International to France's Eurazeo
   
Henkel, down 0.61 eur or 0.66 pct at 91.82
   
Altana, down 0.26 eur or 0.58 pct at 44.81
   
Metro, down 0.21 eur or 0.47 pct at 44.40
   
Fresenius Medical Care, down 0.22 eur or 0.24 pct at 89.98

Amsterdam

Amsterdam shares at a glance outlook

Forthcoming Events
   
Today
   
Wolters Kluwer FY results (0700 GMT). News conference (0900 GMT)             

CSM FY results (0800 GMT)
   
LogicaCMG FY results, conference call (0730 GMT)
   
Versatel FY results

Today's Press
   
Permira quits VNU bid consortium (FT)
   
Philips could be interested in medical aesthetic market (Financieele
Dagblad)
 
Market Sentiment
   
Aalberts target upped to 58.0 eur from 50.0 by ING
   
Unit 4 Agresso upgraded to 'buy', target lifted to 17.0 eur by Rabo
Securities

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