UK/Euro Financial Market Daily Morning Briefing 02-03-2007

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London shares firm, off highs in early deals; miners recovery short-lived

UK blue chips were firmer but off opening highs in early deals this morning as a recovery by heavyweight mining stocks proved short-lived, with Wall Street ending off lows but still weaker overnight and the mood mixed today in Asia, dealers said.
   
At 9.12 am, the FTSE 100 index was 19.3 points firmer at 6,135.3, well below an early peak of 6,164.4. All the broader FTSE indices were higher. Early volume was solid, with 342 mln shares changing hands in 71,036 deals.
   
Overnight on Wall Street, the DJIA closed 34.20 points lower at 12,234.30, albeit having clawed its way back from an early session plunge to a low of 12,060.30 after an upbeat ISM manufacturing data allayed some fears about a flagging US economy.
   
The tech-laden Nasdaq index also ended well off its worst levels, down 11.94 points at 2,404.21 in nervous trade ahead of results released after the close from Dell.
   
The PC maker saw its Q4 EPS drop to 30 cents per share down from 43 cents per share a year earlier, while revenue fell 4 pct to 14.4 bln usd. Analysts had expected Dell to earn 29 cents per share in the quarter.
   
In Asia today, however, the mood was mixed and volatile, with the Nikkei 225 index closing 235.58 points lower at 17,217.93 impacted again by yen appreciation concerns. But the Hang Seng index ended 95.41 points higher at 19,442.01 on bargain-hunting.
   
In London, BAT was the best performing blue chip stock in early deals, adding 32 pence at 1,605 as a number of brokers hiked their targets for the tobacco group following yesterday's well-received full year results.
    
Royal Bank of Scotland was also in demand again, adding another 10 pence to 2,079 following yesterday's post-results advance helped by an upgrade to 'buy' from 'hold' by ABN Amro.
   
Elsewhere, positive broker comment was a spur to gains in broadcaster ITV, up 1-1/4 pence to 109-3/4 with Goldman Sachs raising estimates and repeating its 'buy' rating with a 130 pence price target ahead of results on march 7.
   
And Tesco took on 5-1/4 pence at 428-1/4 as Morgan Stanley raised its price target to 490 pence from 380 and repeated its 'overweight' stance.
   
Tesco also found support from confirmation that Warren Buffett holds a 2.9 pct stake in the UK food retailer, with the holding mentioned in the results statement from the investment guru's company, Berkshire Holdings. 
   
On the downside, a recovery by heavyweight miners today proved short-lived as mixed performances from commodity prices failed to offer support amid ongoing concerns over growth prospects in China and the US.

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Xstrata from being a good gainer, topped the FTSE 100 fallers list, losing 29 pence at 2,311, while Rio Tinto shed 24 pence at 2,667, Lonmin dropped 18 pence at 3,045, and BHP Billiton slipped 4-1/2 pence lower to 1,002-1/2.
   
Sage Group was also a blue chip faller, down 2-1/4 pence at 256-1/4 as investors assessed the implications of US business software giant Oracle's move to buy Hyperion Solutions for 3.3 bln usd in cash.
   
And Gallaher lost a penny at 1,129 pence at 1,128-1/2 as investors mulled the firm's full-year results.
   
Britain's third-biggest tobacco group, posted a 4.9 pct rise in full-year pretax profit, beating market expectations, on the back of a strong performance from the CIS region. However, with the firm's takeover by Japan Tobacco pending there was little incentive to buy the stock, according to dealers.
   
On the second line, Schroders -- which could rejoin the FTSE 100 index after next week's FTSE indices reshuffle -- was the top performer, up 57 pence to 1,136 after unveiling forecast-beating full-year results.
   
The company said its full-year pretax profit rose 16 pct to 290 mln stg, beating a consensus of analysts' forecasts of 264.7 mln stg. Net fund outflows for the year fell to 3.8 bln stg from 5.3 bln stg in 2005, although thanks to stronger stock markets, funds under management at Dec 31 grew to 128.5 bln stg from 122.5 bln stg last year.
   
Bridgewell Securities said the results were ahead of its expectations and plans to upgrade its forecasts. It reiterated its 'overweight' recommendation.
   
Well-received numbers also supported United Business Media shares, up 35-1/2 pence at 742 after the publishing and exhibition group posted a 5.5 pct rise in pretax pre-exceptional profit for 2006 and said it will pay a special dividend of 72 pence per share this month.
   
UBM reported pretax profit before amortisation and exceptional items of 160.5 mln stg, up from 152.1 mln stg in 2005, slightly ahead of consensus expectations. In response, Merrill Lynch noted that 2006 EPS rose 20 pct to 43.8 pence, 6 pct ahead of the broker's forecast. Merrill maintained its 'buy' advice with 765 pence price target on UBM.
   
And shares in Rightmove took on 10-1/2 pence at 482 after reporting solid full-year results and an upbeat outlook. The online property advertising group today posted full-year pretax profit of 17.7 mln stg, up 101 pct on the 8.8 mln seen last year. In reaction, Bridgewell reiterated its 'overweight' stance and noted that the results were in line with its expectations.
   
But among the mid cap fallers, pub operator JD Wetherspoon was the biggest casualty, losing 37-1/2 pence at 670 as a cautious outlook statement offset better than expected first half numbers.
   
Wetherspoon saw its pretax profit rise to 32.9 mln stg for the six months to Jan 28, 2007 from 27.4 mln in the same period last year.

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Analysts had expected the company to post a pretax profit of 32 mln stg for the first half of 2006-07.
   
But the group said that while it remains confident of future prospects it is cautious about the second half.
   
In an initial reaction, Merrill Lynch felt Wetherspoon's outlook statement was unsurprisingly cautious but retained its 'neutral' rating as it believes the stock remains relatively expensive.
   
Other pub operators fell back in sympathy, with blue chip Enterprise Inns down 4 pence at 616, while mid cap Marston's lost 8 pence at 433, Mitchells & Butlers dropped 7-1/2 pence lower to 697, Greene King shed 16 pence at 1,045, and Punch Taverns fell back 7 pence to 1,120.
   
And Rank Group shares lost 2-3/4 pence lower at 215-1/4 after the entertainments operator posted lacklustre full year figures and said it expects the impending smoking ban to hit business. Rank saw its group operating profit before exceptional items from continuing operations fell to 77.4 mln stg from 90.5 mln stg year ago.
   
At the same time, it cut its final dividend to 4.0 pence a share compared with 10.3 pence a share year ago, with the full year dividend reduced to 6.0 pence from 15.3 pence a year ago.
  
In response, Merrill Lynch reiterated its 'sell' advice and said continuing results were broadly in-line with expectations at the operating level though some way behind forecasts at the EPS level.
   
On the economic front, UK February construction PMI figures, due at 9.30 am, are unlikely to have too much impact.
   
The main US focus will be on the final reading of the key University of Michigan consumer sentiment survey, although this is expected to be unrevised at 93.3.

UK Diary of Events

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

US Summary

For a summary of US stocks at yesterday's close of trade, click here

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PARIS - Market data at 10.13 am:

Major indices:
   
CAC-40 up 10.03 points or 0.18 pct at 5,468.43
SBF-80 up 27.52 or 0.41 pct at 6,767.22
SBF-120 up 9.87 or 0.25 pct at 4,007.06

Volume: mln eur
28 CAC-40 stocks up
11 CAC-40 stocks down
1 CAC-40 stock unchanged

Major gainers:
   
Vallourec up 6.35 eur or 3.48 pct at 189.00, recovering some of yesterday's 5.22 pct drop.
   
Air Liquide up 4.30 or 2.55 pct at 173.01 after UBS raised its target to 187 eur from 180, maintaining its 'neutral' rating.
   
Capgemini up 1.38 or 2.7 pct at 52.40, recouping some of its heavy losses it has made since Monday.

Major losers:
   
Lagardere down 3.13 or 5.05 pct at 58.85 as investors corrected yesterday's spike in the stock when it closed up 6.7 pct amid volatility in share prices.
  
Arcelor Mittal down 1.31 or 3.2 pct at 39.69 in a correction to the stock's 7.02 pct jump yesterday, plus in reaction to a conversion of class B shares to class A.
   
EADS down 0.26 or 1.06 pct at 24.36, continuing yesterday's losses amid concerns about the chances of success for its Power8 restructuring programme and following the announcement the company has suspended development of the freight version of its A380 super-jumbo in response to cancellations by clients.

Most active stocks:
   
Arcelor Mittal, 114 mln eur
   
Total, up 0.11 or 0.22 pct at 50.36, on 104 mln

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Amsterdam market data at 10.41 am

 Major indices
  
AEX                 480.18, down 1.78 point
AMX Midcap          688.26, down 0.32 point
Government bonds    narrowly mixed      

Major gainers:
   
Philips rose 2.49 pct to 27.57.
   
Getronics put on 2.50 pct to 6.15 after sustaining losses earlier this week after Tuesday unveiling a large and unexpected loss for the full year 2006 and as it moved from the AEX-index to the midcap today.
   
KPN lifted 2.36 pct to 11.29.
   
Rodamco Europe was up 2.13 pct at 103.52.
   
Midcapper USG People lifted 1.35 pct to 30.81 in the wake of peer Adecco's mixed full year results.
   
ABN Amro added 1.21 pct to 26.66 following reports in the Financial Times the bank has hired four investment banks to advise against activist hedge fund TCI calling for a break-up of the banking group.
   
Wessanen was up 1.10 pct at 10.11.
   
SBM Offshore advanced 0.53 pct to 26.79.
   
Hunter Douglas put on 0.45 pct to 60.57 after the issue moved to the small cap index from the midcap, in the annual reweighting of indexes.
   
Corio went 0.32 pct higher to 68.38 after the property developer bought a shopping centre in Turkey for 65 mln usd, and acquired a 7 pct stake in another project near Istanbul.
  
Laurus rose 0.36 pct to 2.75 after the company reported a narrowed net loss for 2006 ans said it reorganisation should be completed in 2007.

Major decliners:
   
Royal Dutch Shell fell 1.88 pct to 24.59.
   
Boskalis traded 1.84 pct lower at 66.60.
   
ING slid 1.19 pct to 31.51 and Aegon lost 0.79 pct to 45.13.
   
Randstad shed 1.19 pct to 54.0 and Vedior fell 0.37 pct to 16.26 after Adecco reported mixed full year results and as the issue moved today the the AEX index.
   
Pharming was down 0.58 pct at 3.43 after the stock moved the small cap index today.
   
ASML was off 0.44 pct at 17.97 as investors shrugged off ABN Amro upgrading the European semiconductor sector to 'overweight' form 'neutral'.
   
Vopak fell 0.08 pct to 37.70 after opening higher analysts said the company is unlikely to be liable for the UK defective petrol scare.

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German shares AFX at a glance outlook

Forthcoming Events

Today
   
German Jan retail sales (0700)

Today's Press
   
Pemex, Deutsche Bank indirectly invest in China's Yantai Wanhua - report (China Business News)
   
SAP founders deny intention to sell stakes in company (Financial Times Deutschland)
   
German health insurer's to sue Merck & Co over recall of pain reliever Vioxx (Financial Times Deutschland)
   
Tognum IPO could have volume of more than 1.4 bln eur (Financial Times Deutschland)
   
Pharmaceutical wholesaler Celesio arms itself against competition (Sueddeutsche Zeitung)
   
Up to 1,800 jobs threatened at Bayer Schering Pharma (Tagesspiegel)
   
Deutsche Bank plans to invest in Chinese Yantai Wanhua Polyurethane (China Business News) 
   
Macroeconomic News
   
German Jan retail sales down 5.1 pct vs Dec, down 1.4 pct yr-on-yr

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