UK/Euro Financial Market Daily Morning Briefing 01-03-2007

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London shares up in early deals; upbeat results counter fresh Asian slide

Leading shares climbed in early deals, as a clutch of upbeat blue-chip results helped restore a sense of calm to the UK market, countering further heavy losses across Asia and an unconvincing rally by Wall Street last night.
   
By 9.15 am, FTSE 100 was up 28.8 points to 6,200.3, while the broader indices were also higher.
   
Across Asia overnight, the FTSE/Xinhua China 25 index finished the day 423.24 points lower at 14,686.94.
   
Meanwhile, Japan's Nikkei 225 closed 150.61 points lower at 17,453.51, while the Hang Seng ended 304.91 points lower at 19,346.6.
   
Wall Street staged a slight and unconvincing recovery last night, rebounding fitfully from the previous session's 416-point plunge by the DJIA as investors took comfort from comments by Fed chairman Ben Bernanke but still showed signs of unease about the economy, dealers said.
   
Bernanke's remarks to Congress that he still expects moderate economic growth gave some investors confidence to look for bargains, although the advance lacked conviction. The DJIA rose 52.39 points to 12,268.63, while the Nasdaq rose 8.27 points to 2,416.13.
   
In the UK today, the earnings season continues apace, with another clutch of blue chips reporting results.
   
British American Tobacco shares topped the FTSE 100 risers in early deals, up 50 pence at 1,599, as the group accompanied its in-line FY results with news of a dividend hike and increased share buyback.
   
The dividend for 2006 was hiked by 19 pct to 55.90 pence per share, higher than expected, while its current 500 mln stg per year buy back programme will rise to 750 mln from this year. In reaction, UBS repeated its 'buy' recommendation and 1,775 pence target.
   
Shares in Royal Bank of Scotland Group were also higher, adding 57 pence to 2,066, after the bank turned in better than expected full-year profit and hiked its dividend by 25 pct.
   
The UK's second-biggest bank said group operating profit for the year to Dec 31 2006 came in at 9.414 bln stg, up 14 pct from 8.251 bln stg the previous year. In response, Merrill Lynch and Goldman Sachs both repeated their 'buy' advice.

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Full-year numbers from Reuters also pleased the market as the financial news and information provider accompanied its in-line results with an upbeat outlook for 2007.
   
Looking ahead, Chief executive Tom Glocer said he expects underlying revenues, which exclude currency fluctuations, to grow by 6 pct or better during 2007 after rising by 4.8 pct last year.
   
Turnover for the 12 months to the end of December grew 6.5 pct to 2.566 bln stg, or 6.2 pct excluding the effects of a weak US dollar, of which 1.3 percentage points came from Core Plus.
   
However, trading profit fell 8 pct to 308 mln stg following a 77 mln stg investment in the growth initiative.
   
Reacting to the numbers, joint house broker Citigroup reiterated its 'buy' stance on the stock, noting the results had 'restored' comfort with the investment case, and pointing out that it expects an early relief bounce in the share price.
   
Elsewhere on the upside, AB foods gained 17 pence to 842 after being upgraded to 'buy' from 'hold' by Citigroup with a raised target of 900 pence from 860 following the group's recent trading update.
   
In a note to clients, the broker argued that with fewer problems ahead AB Foods now looks set to average 10 pct per annum EPS growth over the next four years. "We would suggest that calmer waters lie ahead." It said.
   
Aviva was the worst blue-chip faller this morning, down 10-1/2 pence at 807-1/2 after the UK's largest insurer reported a lower-than-expected pretax operating profit result on a European embedded value (EEV) basis.
   
Analysts at WestLB said the results were sound but that one negative point was that Aviva did not reach its growth target for its international operations. The broker repeated its 'add' rating.
   
HBOS also remained under pressure, down 10 pence at 1,071, after Lehman Brothers downgraded its rating on the bank to 'equal weight' from 'overweight' following yesterday's results.
   
Also lowering its target to 1,240 pence from 1,314, the broker pointed out that HBOS shares are likely to tread water at best in the short-term, and the message appears to be of slowing momentum and narrowing operating leverage.

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BSkyB was another loser, its shares falling 4 pence to 553, as the deadline for a resolution of its channel battle with Virgin Media passed.
   
BSkyB has threatened to pull channels such as Sky One and Sky Sports News from the cable network from midnight last night unless a new agreement over carriage fees is reached.
   
On the second line, IG Group climbed 16 pence to 278 after being upgraded to 'buy' from 'hold' by Citigroup with a maintained price target of 310 pence. The broker argued long-term growth prospects for IG Group are attractive and that the weak share price performance offers an attractive valuation entry point.
   
Hunting shares were also higher, up 28 pence to 648, after the energy services company announced full-year pretax profit almost doubled to a consensus-beating 80.8 mln stg and that it expects a continued strong market will provide excellent growth opportunities in the future.
   
PartyGaming was a notable faller, sliding 1-1/2 pence to 35 after it reported a 5.7 pct fall in underlying full-year profit.
   
The online gamer, however, revealed a pick-up in poker revenues as it recovers from last year's US crackdown on internet gambling.
   
Dresdner Kleinwort reiterated its 'buy' recommendation and raised its target to 57 pence from 50.
   
On the economic front, US February ISM data, January construction spending and weekly jobless claims are all due this afternoon.

UK Diary of Events

For a diary of key financial and corporate events in the UK today, click here

US Summary

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PARIS - Market data at 10.00 am:

Major indices:
   
CAC-40 up 26.30 points or 0.48 pct at 5,542.62
SBF-80 up 9.54 or 0.14 pct at 6,828.71
SBF-120 up 16.93 or 0.42 pct at 4,057.90

35 CAC-40 stocks up
5 CAC-40 stocks down

Major gainers:
   
Remy Cointreau, up 0.97 eur or 1.94 pct at 51.08
   
Bouygues, up 1.07 or 2.03 pct at 53.77 after unveiling a 50 pct leap in net profit in full year 2006 results yesterday, ahead of analyst consensus,
   
Accor 1.46 or 2.19 pct higher at 68.19
   
Arcelor-Mittal up 0.98 or 2.56 pct at 39.29. The group said yesterday it will appeal an order by the Brazilian market regulator demanding it raise its offer price for Arcelor Brasil minorities

Major losers:
   
Business Objects, down 0.86 or 3.12 pct at 26.73. Yesterday, rival Atos Origin disappointed the market with a FY net loss of 264 mln eur
   
EADS, off 0.49 or 1.89 pct at 25.42. CM-CIC analysts have expressed concerns over the group's ability to cut costs.

Most active stocks:
   
Total, in 147.47 mln eur, up 0.24 or 0.47 pct at 51.26
   
BNP Paribas, in 107.51 mln eur, up 0.45 or 0.57 pct at 79.39

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AMSTERDAM  - Market data at 10.26 am

Major indices
   
AEX                 492.23, up 2.02 points
AMX Midcap          698.99, up 4.64 points
Government bonds    narrowly mixed

      
Major gainers:
   
Wolters Kluwer was up 1.66 pct at 23.25 as Rabo Securities and Kempen & Co both raised the stock to 'buy' after the publisher's well-received full-year earnings published yesterday. Peer Reed Elsevier put on 1.05 pct at 13.50
   
ABN Amro added 2.19 pct at 27.08 amid a newspaper report it is willing to talk to shareholder TCI on the activist hedge fund's demand ABN Amro be broken up into parts to create more shareholder value
   
Hagemeyer gained 2.51 pct at 3.67
   
USG People advanced 2.48 pct at 31.37, Randstad put on 2.38 pct at 54.21 while Vedior was 1.09 pct higher at 16.67
   
Tele Atlas climbed 3.69 pct at 16.59 after the digital map maker posted a strong set of full-year 2006 results
   
Major decliners:
   
ASML slipped 1.5 pct at 18.33 after Credit Suisse downgraded the stock to 'underperform' from 'neutral'
   
Getronics, down 1.23 pct at 6.40, extended its sharp decline that began yesterday after the IT services group late Tuesday unveiled a large and unexpected loss for the full year 2006
   
Aegon eased 0.47 pct at 14.88, Fortis was 0.37 pct lower 

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