UK/Euro Financial Market Daily Morning Briefing 02-11-2007

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London shares open lower; caution ahead of US jobs data; BSkyB falls

Leading shares opened lower as Wall Street plunged overnight as investors fear higher inflation will see an end to interest rate cuts and on caution ahead of today's US job data figures with British Sky Broadcasting down after earnings news.
   
At 8.50 am, the FTSE 100 index was 51.8 points lower at 6,533.8 having closed last night down 135.5 points or 2 pct, at 6,586.1, while the FTSE 250 index was down 95.1 points at 11,431.2.
   
Volume was below average with 191.4 mln shares changing hands in 53,417 deals.
   
"The poor performance of the UK is on the back of what happened in the US yesterday. Investors are sitting on their hands after getting their fingers burnt yesterday and are awaiting for the outcome of the non-farm payrolls later today," said Manoj Ladwa, derivatives broker at Tradindex.
   
Overnight in Wall Street, stocks plunged on concerns about a slowing US economy and the Federal Reserve may be done with cutting interest rates.   

The Dow Jones Industrial Average index fell back 362.14 to 13,567.87, while the Standard & Poor's 500 index was 40.94 lower at 1,508.44 and the Nasdaq Composite index fell 64.29 to 2,794.83.
   
In US economic news, investors today will be focused on October non-farm payrolls to see if there is any further evidence the economy is slowing.
  
The market is expecting that 85,000 jobs were added to the US economy in October, down from 110,000 in September.
   
On Asian markets, the Hang Seng index finished the morning session sharply lower, down 836.80 points at 30,656.08 led by banks and property companies as investors locked in recent gains following the sell off on Wall Street.
   
Meanwhile the  Nikkei 225 Stock Average closes down 352.92 points or 2.1 pct at 16,517.48.
   
In Asian trading hours, oil prices traded higher but was below record peaks of more than 96 dollars as investors took profit and global stock markets weakened on concerns over the US economy.

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New York's main futures contract, light sweet crude for delivery in December, was trading at 93.96 usd a barrel, up 47 cents from its close of 93.49 usd in US trade Thursday. Brent North Sea crude for December traded at 90.70 usd, up 98 cents.
   
Turning to the UK markets, British Sky Broadcasting lost 20-1/2 at 669-1/2 after first quarter results failed to impress investors.
   
The company reported that first quarter revenues of 1.185 bln stg, up from 1.074 bln last time, while operating profit slumped 21 pct to 143 mln, which includes 51 mln stg investment in Sky Broadband and Sky Talk, from 180 mln last time.
   
And, British Airways fell back 16-1/4 at 413-3/4 after the group saw its first half pretax profit rise by 26 pct on steady growth in premium traffic and a strong cost performance, helped by the weak US dollar.
   
However, BA said fuel costs "remain a major challenge" and said the carrier's fuel bill for the year was expected to top 2 bln for the first time.  BA said it had revised its revenue guidance to 3-3.5 pct because of the continued weakness of the US dollar but said it sees "every possibility" of achieving its 10 pct operating margin by March 2008.
   
Its midcap peer Easyjet was 4-1/2 at 650.
   
Elsewhere, the banking sector again was hard hit with yesterday's news by Citigroup that the group would possibility have to cut its dividend still weighing on the sector.
   
Barclays was off 23 at 548, Northern Rock fell back 5-1/2 at 166-1/2, Royal Bank of Scotland was off 14 at 484-3/4, Alliance & Leicester was 18-1/2 lower at 733-1/2 and Lloyds TSB was down 7 at 524.
   
The mining sector was also lower as investors worried that a slowing US economy would hit commodity prices.
   
Kazakhmys was down 45 at 1,374, Vedanta Resources fell back 65 at 2,127, Antofagasta edged 19-1/2 lower at 790-1/2, Rio Tinto edged back 103 at 4,303 and Xstrata was off 60 at 3,270.
   
Turning to the upside there were few blue chip risers with a broker upgrade helping Diageo gain 8 at 1,097 after Lehman Brothers upgraded the group to 'equal-weight' from 'underweight'. 
   

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Lehman Brothers said that with consolidation in the beer industry well underway, it believes that the realisation of Diageo's aspiration to become a leader in Total Beverage Alcohol (TBA) is getting closer.
   
Investors were also turning to defensive stocks as a safe haven with Unilever gaining 19 at 1,715 also helped by yesterdays strong Q3 numbers.
   
Other companies with defensive characteristics were also higher Imperial Tobacco Group was 8 higher at 2,431 and GlaxoSmithKline up 3 at 1,231.  
   
Turning to the mid caps, on the upside, Wellstream was the top riser, up 24 at 949 after Credit Suisse reiterated its 'outperform' rating and raised its 2008-10 EPS estimates and target to 1,100 pence from 800 pence.
   
The broker said that this was on the back of higher capacity in Brazil and slightly more bullish pricing assumptions.

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 10.40 am:

Major indices:
   
CAC-40 down 40.14 points or 0.70 pct at 5,690.55
SBF-80 down 38.63 or 0.56 pct at 6,809.54
SBF-120 down 28.60 or 0.68 pct at 4,147.25

7 CAC-40 stocks up
1 CAC-40 stock unchanged
32 CAC-40 stocks down

Major gainers:
   
France Telecom, up 0.29 eur or 1.15 pct at 25.47. Defensive stocks are outperforming as investors flee risk in today's bearish market
   
Schneider Electric, up 0.85 or 0.90 pct at 95.13. In a research note this morning, analysts at Societe Generale raised the possibility of a buyout of the French electrical equipment-maker by Switzerland's ABB
   
CGG Veritas, up 2.80 or 1.30 pct at 218.30. Morgan Stanley today initiated coverage of the group with an 'overweight' rating and price target of 290 eur

Major losers:
   
Dexia, down 0.53 or 2.57 pct at 20.08, extending yesterday's heavy losses. UBS downgraded the Franco-Belgian bank to 'sell' from 'neutral' today, citing deteriorating newsflow and fundamentals
   
PPR, 3.71 or 2.74 pct lower at 131.85. SG Securities downgraded the retail group tp 'sell' from 'hold' in a sector note this morning
   
Hermes, down 2.63 or 2.92 pct at 87.40. SG Secs also cut Hermes to 'sell' from 'hold' in the same sector note

Most active stocks:
   
Alcatel-Lucent, down 0.08 or 1.26 pct at 6.26. 3.87 mln shares traded
   
Natixis, down 0.15 or 1.05 pct at 14.07. 2.11 mln shares traded

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FRANKFURT - Market data at 10.26 am

DAX - down 66.43 points, or 0.84 pct, at 7,814.42
MDAX - down 78.54 points, or 0.75 pct, at 10,399.31
TecDAX - down 10.22 points, or 1.00 pct, at 1,007.05
DAX futures - down 2.00 points, or 0.03 pct, at 7,855.00

Major Decliners:
   
Volkswagen, down 4.12 eur, or 2.14 pct, at 188.70, on continued pressure after Commerzbank downgraded its stance on Europe's biggest automaker yesterday to 'reduce' from 'hold' while simultaneously raising its target to 170 eur  per share from 133.
   
Thyssenkrupp, down 0.88 eur, or 1.97 pct, at 43.78
   
Deutsche Bank, down 1.67 eur, or 1.88 pct, at 87.20, due to pressure on the banking sector after Citigroup was downgraded yesterday to sector underperformer from sector performer at CIBC World Markets
   
Daimler, down 1.31 eur, or 1.75 pct, at 73.65
   
MAN, down 2.14 eur, or at 173 pct, at 121.59
 
Major Advancers:
   
Metro, up 1.58 eur, or 2.56 pct, at 63.23, after a report in the Handelblatt newspaper reported that MDAX-listed Arcandor AG's Karstadt department stores aim to acquire the retail giant's Kaufhof unit and then merge it within the unit.
   
RWE, up 0.47 eur, or 0.51 pct, at 93.32, as investors turned to utility stocks' defensive qualities in a downward turning market
   
EON, up 0.55 eur, or 0.41 pct, at 133.35, also up due to increased demand for utility stocks
   
Henkel, up 0.02 eur, or 0.06 pct, at 35.30
   
Deutsche Telekom, up 0.01 eur, or 0.07 pct, at 14.00
   
Other Stocks in Focus:
   
MDAX-listed Arcandor, up 0.38 eur, or 1.75 pct, at 22.14, on report its Karstadt department stores aim to acquire Metro's Kaufhof unit. The report cited unnamed sources saying Arcandor aims to achieve 350-400 mln eur of annual savings through merging Karstadt with Kaufhof.

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AMSTERDAM - Amsterdam market data at 09.55 am

Major indices
   
AEX down 0.57 pct, or 3.06 points, at 537.86
AMX down 0.44 pct, or 3.18 points, at 724.63
Government bonds traded higher

Major decliners
   
Fortis drops 5.40 pct to 20.16 after it was slashed to 'sell' from 'buy' at UBS Securities citing Dexia's deteriorating newsflow and fundamentals. Belgian brokerage Bank Degroof was more optimistic however, saying that "Dexia's current share price weakness (share price declined by 7 pct yesterday) is a good buying opportunity" and kept 'accumulate' rating. KBC Securities' Dirk Peeters also said "we consider the drop in share price to be overdone".
   
ASML 2.34 pct lower at 23.34
   
Vedior down 1.45 pct at 14.91
   
TomTom down 1.35 pct at 53.63
   
Hagemeyer edges 0.21 pct lower to 4.69 after its Finnish subsidiary Elektroskandia Oy acquires Latvian electrical distributor Kolorits for an undisclosed amount
   
ASMI loses 0.59 pct to 18.62, ING reduces its price target to 19 eur from 21.5 eur and kept its 'hold' rating
   
Ten Cate off 0.12 pct at 24.97, ING cuts target to 27 eur from 30, Rabo lowers target to 32 eur from 35 after disappointing Q3 figures yesterday

Major gainers
   
Unilever adds 1.86 pct to 23.58, SNS Securities says the group "again surprised with better than expected results", confirms the broker's view that the extensive change programme is bearing fruit. SNS reiterates 'buy' stance
   
Philips gains 1.11 pct to 29.04, announces plans to proceed with the sale of its approximate 70 pct ownership interest in MedQuist Inc if satisfactory price and other acceptable terms can be realised.
   
Tele Atlas up 0.72 pct at 28.10
   
Macintosh up 0.43 pct at 23.10, upgraded to 'buy' from 'accumulate' at SNS Securities, broker says proposed acquisition of Belgian shoe retailer Brantano is attractive

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