UK/Euro Financial Market Daily Morning Briefing 01-06-2006

London shares dragged lower in early deals by miners as metal prices ease

Leading shares lost momentum in early deals with miners dragging the markets lower as metal prices retreated and after a raft of profit taking following market pleasing results, dealers said.
   
At 9.14 am the FTSE 100 index was down 25.6 points at 5,698.2, off a daily high of 5,754.8 while the FTSE 250 was lighter by 76.5 points at 9,222.9. The wider market followed suit.
   
Volume was light with 302.3 mln shares moving hands in  57,442 deals.
    
Wall Street ended higher Wednesday, wrapping up a weak month on a positive note, but the S&P 500 put in its worst May in 22 years in a market plagued by worries over inflation, slowing economic growth and uncertainty over the outlook for interest rates.
   
The Dow Jones Industrial Average rose 73.88 points on Wednesday to 11,168.31.
   
The Nasdaq Composite rose 14.14 points to 2,178.88. For May, the tech-rich index tumbled 6.2 pct, its worst May performance since May 2000, when it shed 11.9 pct.
   
The Nasdaq Composite Index suffered its worst May performance in six years.
   
Meanwhile, the minutes from the May 10 FOMC meeting showed inflationary pressures in the US economy were worse than anticipated and core inflation was rising to what some members saw as an unacceptable rate.
   
Overnight in Asia, Japan's Nikkei closed up 36.41 points at 15,503.74 recovering slightly from yesterdays downturn, while Hong Kong's Hang Seng ended early trade down 16.69 points at 15,841.20.
   
In London, the miners dragged the FTSE 100 lower, off of a daily high of 5,754.8, as metal prices retreated, BHP Billiton dropped 23-1/2 pence to 1,026-1/2, Rio Tinto was lighter by 49 at 2,914, Anglo American ditched 40 to 2,114 while Antofagasta, the world's largest copper producer, was down 29 at 2,056.

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Investors seemed to make the most of United Utilities by taking profit, lowering the stock's price by 8 to 652-1/2 after it said a strong performance from its utility operations had helped it report a 12 pct rise in annual operating profit on continuing operations to 766 mln stg.
   
Johnson Matthey was another victim of profit taking, down 17 at 1,332, as it gave an upbeat view of its outlook for the next few years after it delivered an 8 pct rise in earnings, driven by strong platinum prices and orders from Asia.
   
In the year to March 2006, Johnson Matthey's profit before tax, impairment and restructuring costs rose to 219.8 mln stg from 204.1 mln, well in line with the forecast range of 215-224 mln stg and a touch ahead of the consensus figure of 218.5 mln.
   
On the upside, Man Group was the FTSE 100 index top riser, up 53 pence.
   
The financial group turned in profits for the year to end-March at the top of market forecasts, and Credit Suisse subsequently raised its price target to 2,800 pence from 2,670.
   
The financial sector remained firm following yesterday's gains, Barclays improved 5 pence to 623, Lloyds put on 6 at 509-1/2 while RBOS firmed 14 at 1,738.
   
Although the oil price eased slightly, oil heavyweights appeared unfazed with BP stronger by 1 at 626 and BG Group up 0-1/2 at 710-1/2.
   
Among the FTSE 250 losers miner Vedanta u-turned on earlier strong gains, shedding 23 pence at 1,424, as investors lapped up profit.
   
The miner bolstered its chances of being upgraded to the 100 index, after it said its underlying profits have broken through the 1 bln usd level for the first time, beating expectations, thanks to increased production and rocketing metals prices, and it expects beneficial market conditions to continue in the future.
   
Homeserve was another casualty, lighter by 32 pence at 1,575, having been downgraded to 'neutral' from 'buy' by UBS as the stock has risen by around 13 pct over the last month, and by 21 pct relative to the FTSE 250 index.

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In a note published this morning, the Swiss broker said that it thinks the momentum in Homeserve's shares is upwards at the current share price.
   
On the upside, Body Shop was a clear market pleaser, gaining 3 pence to 298-1/2, on news that L'Oreal has received valid acceptances for its offer to acquire 94.4 pct of the animal-friendly cosmetics chain, and that the offer has now become unconditional.
   
With shares already held and otherwise acquired, it has around 95 pct of Body Shop's capital.
   
Wood Group, gained 4-3/4, after it said its Engineering and Production Facilities unit had bought 55 pct of SOMIAS, an Algerian petrochemicals support firm.
   
The price was not disclosed.
   
Finally, punters were impressed with PZ Cussons, up 23 pence at 1,473 as it said it expects profits for the year that ended on May 31 will be in line with expectations.
   
However, the group said efforts to improve margins continue to counter further cost increases arising from oil price increases and the weakening of the dollar.

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PARIS - Market data at 9.46 am:

Major indices:
   
CAC-40 down 16.29 points or 0.33 pct at 4,913.89
SBF-80 down 19.30 points or 0.34 pct at 5,591.88
SBF-120 down 11.44 points or 0.43 pct at 3,559.54

Volume: 426 mln eur
8 CAC-40 stocks up
29 CAC-40 stocks down
3 CAC-40 stock unchanged

Major gainers:
   
Clarins, up 1.20 eur or 2.40 pct at 51.20
   
Arcelor, up 0.40 eur or 1.20 pct at 33.70, after raising its stake in Moroccan steelmaker Sonasid through a holding company amid ongoing manoueuvres to avoid a takeover by Mittal Steel.
   
Vivendi, up 0.33 eur or 1.18 pct at 28.32, after settling a tax dispute with US authorities.

Major losers:
   
Vallourec, down 17.00 eur or 1.74 pct at 961.00
   
Axa, down 0.30 eur or 1.11 pct at 26.80. It agreed with Schneider Electric yesterday to retain their reciprocal stakes in each other. Axa also has a minority stake in the Moroccan holding company for Sonasid, in which Arcelor raised its stake.
   
Alcatel, down 0.11 eur or 1.06 pct at 10.27

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FRANKFURT - Market data at 9.37 am
   
Major indices:
   
DAX 30 - 5,641.31, down 51.55 points or 0.91 pct
MDAX - 8,107.46, down 27.75 points or 0.34 pct
TecDAX - 659.45, up 0.33 point or 0.05 pct
DAX future - 5,647.00, down 52.00 points or 0.91 pct

Major gainers:
   
Deutsche Boerse, up 2.37 eur or 2.34 pct at 103.79, bouncing back from recent sharp losses, as Cheuvreux reiterated its 'outperform' rating and 130 eur price target on the stock, arguing that a record number of contracts were traded on its derivatives platform Eurex in May.
   
The stock was also in focus as it said it has signed a 'Memorandum of Understanding' with the China Foreign Exchange Trade System & National Interbank Funding Center (CFETS) in order to enhance cooperation between the two parties regarding financial market development in China
   
Hypo Real Estate, up 0.44 eur or 0.89 pct at 49.75
   
Fresenius Medical Care, up 0.77 eur or 0.88 pct at 88.19
   
Infineon, up 0.05 eur or 0.57 pct at 8.86
   
TUI, up 0.06 eur or 0.38 pct at 15.88

Major losers:
   
RWE and E.ON, down 1.32 eur or 1.98 pct at 65.32 and 1.36 eur or 1.51 pct at 88.64 respectively, amid a report that E.ON's offices were searched by officials from the European Commission and Germany's cartel office as part of an investigation into an anti-competitive agreement with RWE
   
ThyssenKrupp, down 0.44 eur or 1.64 pct at 26.31
   
Siemens, down 1.03 eur or 1.53 pct at 66.09
   
Linde, down 0.79 eur or 1.22 pct at 63.74

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