UK/Euro Financial Market Daily Morning Briefing 02-10-2006

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London shares gain in early deals, miners higher, online gamers tumble

Leading shares pushed higher in early deals, with further gains across commodity stocks and bullish trading news from Tate & Lyle countering a plunge in online gaming stocks following US moves to outlaw the industry.
   
By 09.00 am, the FTSE 100 was up 14 points at 5,974.8, while the broader indices were also higher.
   
US stocks ended a stellar third quarter with a moderate decline on Friday, with the Dow pulling back further from record high levels as a mixed batch of economic data sparked profit taking, traders noted.
   
The DJIA closed 39.38 points lower at 11,679.07. The blue-chip index briefly crossed its closing high of 11,722.98 on Thursday, then fell back.  The Nasdaq composite index fell 11.59 points to 2,258.43.
   
Overnight in Asia, the Nikkei 225 index closed up 126.71 points at 16,254.29, helped by a better-than-expected Tankan survey, which showed a pick-up in business confidence. The Hang Seng was closed for a week-long public holiday.
   
Oil prices climbed above 63 usd in early deals after moves by Venezuela and Nigeria to cut output added to concerns that OPEC as a whole could trim production.
   
New York's main contract, light sweet crude for November delivery, was up 31 cents at 63.22 usd a barrel from 62.91 in late US trades Friday.
   
In the UK, shares in online gambling companies plunged at the open, hit by concerns that their entire US operations will cease after US Congress unexpectedly passed a bill this weekend that could make the industry illegal, dealers said.
   
PartyGaming shares were down 58 pct, off 63 pence at 44, while Sportingbet tumbled 60 pct, or 112-1/4 pence to 72 and 888 Holdings lost 43 pct, down 63-1/2 pence to 83.
   
The Committee of Conference of the United States Congress attached the Unlawful Internet Gambling Enforcement Act of 2006 to the Safe Port Act, which was then duly passed, on Saturday.

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The new proposals would make it illegal for banks and credit card companies to settle payments to online gambling sites.
   
Although the bill still needs to be signed by President George Bush to become law, yesterday's Sunday Telegraph said this is likely to happen before Nov 7 congressional elections, to help garner support from the political right. The move threatens to "devastate" the business of some online gaming companies, it claimed.
   
A raft of companies issued statements this morning referring to the bill, with PartyGaming stating that the new legislation "makes it impossible" to provide a service to the US and it will suspend US activities if the President signs the act into law.
   
It warned that a US suspension would mean 2006 and 2007 results will come in below forecasts.
   
888 Holdings attempted a more upbeat tone however, saying although it is to suspend participation by US-based customers, it is confident it remains a "viable, profitable business" and has significant cash resources to continue operations.
   
It also warned however, that the US suspension will have a "material adverse impact" on full-year results.In reaction, Daniel Stewart told clients that "The sell-off in the sector today is expected to be deep and far-reaching."
   
Elsewhere, Hanson fell back as last week's bid speculation faded somewhat, while takeover favourite Prudential was also under pressure, down 11-1/2 pence at 652.
   
The Observer newspaper reported yesterday that the UK insurer is considering a radical slimming down of its British operations to deter circling predators. On a brighter note, commodity stocks remained in demand, with metal prices and crude futures up again this morning.
   
Anglo American added 43 pence to 2,276, while Vedanta added 19 pence to 1,182, BHP Billiton up 17 pence at 939 and Antofagasta gained 5 pence to 463.
   
Among oil stocks, BP added 1-1/2 pence to 583-1/2, BG gained 8 pence to 657 and Royal Dutch Shell moved 6 pence higher to 1,819.
   
Tate & Lyle was also higher, adding 14-1/2 pence to 734, after announcing that trading has continued in line with company expectations with five-month profit before tax and amortisation "comfortably" exceeding prior year.

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Overall, Tate & Lyle said it has started the year strongly and full-year expectations remain unchanged.
   
On the second line, Misys tumbled almost 20 pct, down 43-1/4 pence to 183, after talks to buy the software group collapsed late last Friday, and the company warned this morning that annual earnings are set to fall.
   
London Merchant Securities stood out as the biggest FTSE 250 gainer however, adding 29-3/4 pence to 270, after a bullish trading update.
   
The group said it has seen good progress in the first half across the business, with continued strong trading driven by lettings activity, further strategic acquisitions and disposals, and excellent progress on the immediate development programme.
   
Shares in FKI PLC also got off to a firm start as investors overlooked the engineering group's pre-close statement that first-half profits will decline, and instead focused on its unchanged full-year outlook.
   
The engineering group said currency conversion will cut its reported first-half profits, but also announced that the second half should be stronger and full-year expectations remain unchanged.
   
FKI shares added 7-3/4 pence to 98.

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 Friday's close of trade, click here

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PARIS - Market data at 9.39 am:

Major indices:
   
CAC-40 up 14.34 points at 5,264.35
SBF-80 up 9.66 at 5,996.80
SBF-120 up 9.78 at 3,810.56

Volume: 318 mln eur
28 CAC-40 stocks up
12 CAC-40 stocks down

Major gainers:
   
Pernod Ricard, up 0.10 eur at 164.20 after announcing sale of two mid-range whiskey brands to the Sazerac Company, the latest move in its efforts to focus on premium drinks.
   
Suez, up 0.20 at 34.88 and GDF, 0.10 higher at 31.50; investors shrugged off a French press report that said Suez may have to divest part of its nuclear production operations in order to secure approval of their merger plan, with several analysts saying the divestments would not undermine the deal's industrial logic.
   
Major losers:
   
Altran Technologies, down 0.13 or 2 pct at 6.35 after posting first half results below expectations, even though the operating margin managed to reach 6.55 pct, just ahead of the company's recently lowered guidance. Plans for new restructuring measures were also keeping investors cautious, analysts said.
   
EADS, down 0.04 at 22.64 as investors await a new cost-cutting plan that should help offset the impact of fresh Airbus A380 delays. French press reports claimed the plan will be approved at a new board meeting this week.
   
L'Oreal, down 0.40 at 79.70 after Lehman Brothers cut the stock to 'underweight' from 'equal-weight'.

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FRANKFURT - Market data at 10.10 am

Major indices:
  
DAX 30 - up 19.95 points or 0.33 pct at 6,024.28
MDAX - up 11.30 points or 0.13 pct at 8,558.15
TecDAX - down 1.40 points or 0.21 pct at 661.88
DAX future - up 23.5 points or 0.39 pct at 6,068.00

Major risers:
   
MAN, up 1.36 eur or 2.04 pct to 68.10, after a weekend report appeared saying it has reached an agreement with VW on the Scania merger
   
Altana, up 0.52 eur or 1.19 pct to 44.08
  
Infineon Technologies, up 0.11 eur or 1.18 pct to 9.46
   
RWE, up 0.68 eur or 0.93 pct to 73.43
   
Henkel, up 1.52 eur or 1.25 pct to 42.26 after Lehman Brothers upgraded the shares to 'equal-weight' from 'underweight'

Major decliners:
   
Deutsche Boerse, down 0.50 eur or 0.42 pct to 118.10 after a report appeared saying the Borsa Italiana supervisory board will meet next week to discuss a merger with the German exchange
   
E.ON, down 0.26 eur or 0.28 pct to 93.22
   
Continental, down 0.16 eur 0.17 pct to 91.28, after oil prices rose above 63 usd per barrel
   
Linde, down 0.09 eur or 0.12 pct to 74.20
   
Siemens, down 0.05 eur or 0.07 pct to 68.75

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AMSTERDAM - Market data at 9.46 am

Major indices
  
AEX 484.84, up 1.22 point
AMX Midcap 588.07, up 0.77 point
Government bonds - flat to lower

Major gainers
   
CSM was up 1.35 pct to 25.44 on Friday's news the company will start a share buyback programme worth up to 190 mln eur. Rabo Securities also noted the company settled its dispute with beet farmers regarding the sale of its sugar division to Cosun.
   
TomTom lifted 0.90 pct to 33.47.
   
Ahold added 0.84 pct at 8.45 on reports its US Foodservice has caught the attention of investment companies Bidvest, Kohlberg Kravis Roberts, and Cerberus Capital Management.
   
Hunter Douglas put on 0.99 pct to 55.85.
   
DSM went 0.66 pct higher to 34.82 after Petercam and Rabo Securities upped their respective price targets, analysts said.
   
Royal Dutch Shell was up 0.46 pct to 26.09.
   
Wolters Kluwer advanced 0.44 pct to 20.66 after Delta Lloyd Securities raised its price target for the issue.

Major losers
   
Laurus dropped 5.24 pct to 1.81 following reports the company may have to pay more than expected to suppliers with running contracts with supermarket chains Edah and Konmar, sold this past summer. The company announced today it will scrap 490 jobs as part of a 'slimming down' programme.
   
Oce slid 1.50 pct to 12.47, ahead of results expected tomorrow.
   
Ordina fell 1.36 pct to 14.54.
   
Vopak shed 0.66 pct to 30.27.
  
Getronics lost 0.94 pct to 5.27.

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