UK/Euro Financial Market Daily Morning Briefing 02-04-2007

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London shares turn higher in early deals on telecom consolidation hopes

Leading shares turned higher in opening deals as sector consolidation hopes across telecoms helped to offset weakness in heavyweight miners and oil stocks, dealers said.
   
At 9.11 am, the FTSE 100 was 30.03 points firmer at 6,338.3, reversing initial losses, with the broader indices mixed.
   
M&A hopes helped BT Group ring up early gains on news Pirelli is in talks to sell two thirds of its controlling shareholding in Telecom Italia to AT&T from the US and Mexican mobile phone operator America Movil.
   
The Pirelli stake is held via its Olimpia unit, which controls Telecom Italia SpA via an 18 pct holding. The negotiations are based on a price per Telecom Italia share of 2.82 eur minus the net debt of Olimpia, it said.
   
BT Group took on 3-1/2 at 307-1/4, Cable & Wireless rose 1.8 at 168.4 and sector peer Vodafone also gained, 1.5 higher at 137, clawing back some of Friday's investor day losses.
   
M&A news also provided a lift to Experian, up 6-1/2 at 776-1/2, amid talk US credit checking peer First Data Corp is in discussions with private equity group KKR about a possible 25 bln usd bid. Reports suggest a deal could be announced as early as today.
   
ITV was also courted, 0.7 stronger at 109.8 as the commercial broadcaster was  reiterated a 'buy' at Goldman Sachs following last week's FA Cup rights news, which it says makes the group a more attractive takeover target.
   
In a note to clients, the broker said the rights win potentially makes ITV more attractive to Virgin Media, which is reported to be working on a second takeover bid should BSkyB be forced to divest its 17.8 pct stake.
   
Meanwhile, Persimmon firmed 11 at 1417 after the Sunday Times said the housebuilder is expected to raise up to 1 bln stg in a rights issue to help fund a takeover bid for Taylor Woodrow, if it decides to break up the Birmingham-based group's 5 bln stg nil-premium merger with rival George Wimpey.
   
Property groups were also courted on the back of broker comment after British Land and Land Securities were upgraded to overweight' from 'neutral' at HSBC and 'neutral' from 'underweight' respectively.
   
The broker said the stocks have both been oversold, but it downgraded peer Slough Estates to 'neutral' from 'overweight' as shares have enjoyed a sharp upturn since early March.
   
British Land firmed 20 at 1,548, Land Securities rose 20 at 2,160, with Slough reversing initial losses to trade 1-1/2 higher at 785-1/2.
   
In corporate news, Northern Rock rose 3 at 1,148 after the mortgage bank  said it is on course for an 18 pct increase in full-year profit, crediting sustained lending growth amid generally benign economic conditions.

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In a trading statement, Northern Rock said it is "comfortable" with the current consensus analyst forecast for a 2007 post-tax underlying attributable profit of 434 mln stg, up from 367 mln stg last year.
   
In response, Merrill Lynch reiterated its 'buy' advice and said the trading update provided evidence of accelerating volumes, tight control over costs and stable credit quality.  
   
SABMiller was also in focus, on a report in the Sunday Express the group is looking to table an approach of between 705-715 pence per share for peer Scottish & Newcastle, valuing its rival brewer at 6.5 bln stg.
   
Shares in S&N jumped 13 pct last week, amid speculation of a bid from Dutch brewing giant Heineken. A rumour of a break-up bid involving Carlsberg was also suggested.
   
SABMiller gained 7 at 1,122 while Scottish & Newcastle gave up recent gains to trade 5-1/2 lower at 596 as investors shrugged aside an upgrade to 'neutral' from 'underweight' at JP Morgan with potential bid speculation expected to limit downside.
   
Still on the downside, oil stocks weighed as the recent crude price spike took a breather in Asian trade. Oil prices were steady in Asian trading hours as a stalemate between the UK and Iran over UK naval personnel captured by the Iranians and a kidnapping in Nigeria kept the benchmark contract at seven-month highs, dealers said.
   
Earlier this morning, the New York Mercantile Exchange's main oil futures contract, light sweet crude for delivery in May, was down 0.02 usd at 65.85 usd a barrel from 65.87 usd in late trading in the US Friday.
   
BP lost 2 at 550, BG was off 1/2 at 732-1/2 and Royal Dutch Shell eased 8 at 1,683. 
   
Miners also fell in sympathy, with Lonmin down 13 at 3,307, BHP was off 4 at 1,129, Rio Tinto was down 10 at 2,892 and Antofagasta fell 3/4 at 517.
   
Elsewhere, Imperial Tobacco was also under the cosh, down 1 at 2,274 , after Saturday's FT said the UK group is about to raise its bid for rival Altadis to 48 eur a share. But the Sunday Telegraph said the board of the Spanish group is preparing to reject the revised bid, which could come as early as this week.
   
On the second-line, Southern Cross Healthcare rose 17-1/2 at 453-1/4 after  the UK's largest care home operator said its first-half operating performance beat original expectations, driven by an expansion in bed numbers and cost controls.
   
And media company Euromoney rose 14 at 614 after the media group said it has sold its unit Atalink Ltd to Ten Alps for up to 2.98 mln stg.

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In contrast, Carphone Warehouse Group eased 3-1/4 at 273-1/4 after the phone retailer said it would spend an extra 10-15 mln stg on its broadband service in the current financial year following delays in switching subscribers over to its own network.
   
In an unscheduled trading statement, the mobile phone retailer revealed it is still "a little behind [its] original business plan" after failing to migrate customers quickly enough onto the 'local loop' network it is rolling out across the UK.
   
Turning to economics, the coming week will be dominated by the Bank of England's interest rate verdict Thursday, with the MPC expected to keep its key repo rate unchanged at the near six-year high of 5.25 pct.
   
But most commentators said a hike would not come as too much of a surprise, with much depending on today's UK manufacturing sector purchasing managers index.
   
Analysts polled by AFX News predict a headline reading of 55.0 in March, a touch lower than the 55.4 recorded in February.
   
Meanwhile, Wall Street endured a volatile last day of the quarter as investors weighed up rising inflation and dollar weakness against resilient consumer spending data.
   
Sentiment was further shaken by news the US Commerce Department will begin to impose tariffs on some goods from China, fuelling fears of a trade war.
   
The DJIA ended the day 5.0 points higher at 12,354.35, having swung from between a gain of 67 points to a loss of over 100, with the S&P down 1.67 to 1,420.86, and the Nasdaq up 3.76 to 2,421.64.
   
In Asia, the mood was mixed as Japan's Nikkei gave up earlier gains to finish down 259.24 at 17,028.41 225, while the Hang Seng ended the morning up 82.79 at 19,883.72. 

UK Diary of Events

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US Summary

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PARIS - Market data at 9.57 am:

Major indices:
   
CAC-40 down 3.74 points or 0.07 pct at 5,630.42
SBF-80 up 4.23 points or 0.06 pct at 7,192.03
SBF-120 down 1.96 points or 0.05 pct at 4,144.29

Volume: 348 mln eur
23 CAC-40 stocks up
15 CAC-40 stocks down
2 CAC-40 stocks unchanged

Major gainers:
   
France Telecom, up 0.15 eur or 0.76 pct at 19.92. It reportedly reconfirmed its guidance goals after a false rumour that they had been abandoned.
   
Michelin, up 0.62 eur or 0.75 pct at 83.29
   
Vivendi, up 0.20 eur or 0.66 pct at 30.62

Major losers:
   
Eiffage, down 5.11 eur or 4.67 pct at 104.39. An earlier price surge tied to shareholder Sacyr Vallehermoso wanting a greater involvement continued to erode as Eiffage rebuffed the move. Separately, French market regulators were reported to be probing recent Eiffage share price movements.
   
Lafarge, down 1.15 eur or 0.98 pct at 116.54
   
Total, down 0.37 eur or 0.71 pct at 52.08

Most active stocks:
   
Total, 45 mln eur
   
Sanofi-Aventis, 32 mln eur, down 0.38 eur of 0.58 pct at 64.72. It agreed with Daiichi Sankyo to jointly make and sell drugs in Japan, and to obtain the Japanese rights to sell Daiichi's blood-clotting drug Panaldine.
   
BNP Paribas, 20 mln eur, down 0.39 eur or 0.60 pct at 64.71.

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FRANKFURT - Market data at 9.57 am
   
Major indices
   
DAX - up 2.90 points, or 0.04 pct, to 6,919.93
MDAX - up 17.23 points, or 0.17 pct, to 10,218.46
TecDAX - up 2.46 points, or 0.29 pct, to 849.25
DAX futures - down 8.50 points, or 0.12 pct, to 6,952.50

Major Advancers:
   
DaimlerChrysler, up 0.91 eur or 1.53 pct at 62.34, after reports the automaker is expected to make about 6-9 bln eur from the possible sale of it ailing Chrysler unit, dealers said
   
Deutsche Telekom, up 0.16 eur or 1.29 pct at 12.54. The telecom giant has found three candidates for its Spanish Ya.com subsidiary, a media report said.
   
Hypo Real Estate, up 0.25 eur or 0.52 pct at 47.99
   
Linde, up 0.41 eur or 0.51 pct at 81.06
   
SAP, up 0.13 eur or 0.39 pct at 33.50

Major decliners:
   
EON, down 0.72 eur or 0.71 pct at 101.06, after a report in El Pais said that EON has failed to reach an agreement with rival Acciona over EON's takeover target Endesa.
   
Siemens, down 0.54 eur or 0.67 pct at 79.48, after Nokia Siemens Networks said it is cutting its 2007 outlook for the mobile and fixed networks market in euro terms from "slight" to "very slight" growth.  The Nokia/Siemens venture, which started operations yesterday, will consolidate its financial results in Nokia.
   
TUI, down 0.11 eur or 0.59 pct at 18.40
   
Deutsche Bank, down 0.50 eur or 0.50 pct at 100.34
   
Infineon, down 0.054 eur or 0.43 pct at 11.60  

Other major movers:
   
MDAX-Listed Hugo Boss, up 0.67 eur or 1.54 pct at 44.17, after UBS initiated coverage of the clothing giant with a 'buy' rating and set its price target at 49 eur per share
   
MDAX-Listed Vossloh, down 0.92 eur or 1.28 pct at 70.99, after its shares were downgraded to 'hold' from 'buy' at Deutsche Bank as the broker said the  share's upside is already priced in at current share price levels
   
MDAX-Listed MTU Aero Engines, down 1.67 eur or 3.73 pct at 43.12, after UBS cut its rating on the shares to 'neutral' while lifting price target to 47 eur per share

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Amsterdam shares AFX at a glance outlook

Forthcoming Events
   
Today
   
no items scheduled
   
Today's Press
   
Nuon, Essent merger comes under fire from Dutch consumer organisation Consumentenbond (Dutch teletext, Gelderlander)
   
Telefonica close to selling Endemol for less than original price tag of 5.5 bln eur; decision expected in May (Wall Street Journal)

Weekend Press
   
RBS asks shareholders if it should mull bid for ABN Amro (The Business)
   
Barclays eyeing 3 bln stg of cost cuts from ABN Amro move (The Sunday Telegraph)
   
Company News
   
Laurus sells 15 supermarket locations to Jumbo Supermarkets for 16 mln eur
   
Aegon completes buy of Poland's PTE Ergo Hestia SA
   
LG Philips LCD's module plant in Poland begins mass production

Market Sentiment
   
Ahold upgraded to 'buy' vs 'hold' at ABN Amro
   
Akzo Nobel initiated 'overweight' at JP Morgan; target 65 eur
   
Nutreco downgraded to 'neutral' vs 'buy' at Goldman Sachs

Forex

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