UK/Euro Financial Market Daily Morning Briefing 03-08-2007

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London shares dip in early deals; US jobs data in focus, BA Q1 pleases

The FTSE 100 slid back off opening highs to trade lower amid some caution ahead of US jobs data due later and following modest gains on Wall Street Thursday with decent earnings helping propel Anglo American and BA higher.
   
At 9.00 am, the FTSE 100 was down 18.7 points at 6,282.2, having been unable to build upon opening gains which saw the index trade as high as 6,333.5. However, the broader FTSE 250 was up 41.8 points at 11,274.7. The other indices were mixed. Early volume was modest with 195.9 mln shares trading in 52,055 deals.
   
On the macro agenda today, July US non farm payrolls are expected to show 127,000 new jobs were created versus 132,000 in June. And the jobless rate is forecast to hold at 4.5 pct for a fourth month, near a six-year low.
   
Last night on Wall Street, US stocks were mostly higher after investors received some solid readings on corporate earnings and the job market, but remained nervous that a tighter credit market could impede US growth.
   
The Dow Jones industrial average rose 22.52 to 13,384.89, while the S&P 500 index fell 3.82 to 1,461.99, and the Nasdaq composite index rose 8.33 to 2,562.20.
   
Over in Asia, the Nikkei 225 index closed down 4.25 points at 16,979.86, while the Hang Seng ended its morning up 51.92 points at 22,495.17. Oil was little changed with crude futures up 33 cents to 76.86 usd a barrel.
   
Among early movers, Anglo American rose 88 pence to 2,857 after reporting a surge in first half operating profit and announced a further 4 bln usd in share buybacks on the back of continued strong cash flow. The mining giant also announced its long-awaited decision to sell industrial metals business Tarmac as part of its ongoing restructuring programme.
   
In reaction, UBS said the numbers came in above its forecast and reiterated its 'buy' rating and 3800 pence target. It also thought the decision to sell Tarmac was the right one as it did not believe the division belong in a focused mining group.
   
Fellow miners were also strong helped by some bullish comment from Citigroup who lifted its copper price forecasts. Rio Tinto added 69 to 3,405, Kazakhmys rose 23 to 1,269, Antofagasta up 9 at 705 and Xstrata gained 57 to 3121.
   
Elsewhere, BA took on 16 to 420, as investors shrugged off news of hefty fines earlier in the week and focused on Q1 numbers which showed a pre-tax profit of 289 mln stg in April-June 2007 compared with a pre-tax profit of 191 mln stg in April-June last year.
   
However, BA cut its revenue guidance by 1 pct to about 4 pct saying its ability to recover quickly from any unexpected events will be affected as Heathrow airport terminals continue to operate above capacity, and due to the continued weakness of the US dollar.

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The company added that it now expects fuel costs up 120 mln stg on last year, 20 mln stg worse than its estimate, and that its revised cost guidance year on year is now flat, excluding fuel.
   
And Royal Bank of Scotland gained 7 to 599 after delivering an 11 pct increase in first half profit, helped by cost discipline and a strong performance from its investment banking arm. RBS, the UK's second-biggest bank, said operating profit for the six months  to June 30 came in at 5.106 bln stg, up 11 pct on the same period last year.
   
The figure was in line with RBS' own estimate, issued on July 20 as part of  a regulatory filing connected with the ABN bid, that its first-half operating  profit would be "not less" than 5 bln stg.
   
Away from earnings news, Royal & Sun Alliance gained 2 to 131 after JP Morgan raised its rating to 'overweight' from 'neutral' ahead of the firm's H1 results due next week and to reflect the 19 pct upside to its 155 pence target.   

Elsewhere, Cable & Wireless rose 3.1 to 172.6 after Morgan Stanley upgraded its rating to 'overweight' from 'equal-weight' on valuation grounds.
   
The broker cut its price target for the telecommunications company's shares  to 205p from 210p but changed its rating because there is a 21 pct implied  upside to its new price target, after a market correction that had gone too far, it said.
   
Turning to the laggards, oil stocks underperformed amid sluggish crude prices with BG Group off 10 at 784, RDS down 7 at 1893 and BP off 2 at 560.
   
On the second line, Tomkins topped the mid-cap risers, up 29 at 261 following H1 results which prompted Cazenove to raise its rating to 'in-line' from 'underperform'.
   
The car parts and building products maker said first-half sales fell to 1.50 bln stg from 1.65 bln in 2006. But pretax profit rose to 148.9 mln stg from 135.7 mln stg in the same period last year.
   
Elsewhere, Inchcape rose 15 to 485 after Citigroup upgraded its stance to 'buy' from 'hold' following recent share price weakness and strong interim results, which were driven by faster-than-expected earnings growth from emerging markets.
   
On the downside among the mid-caps, Great Portland Estates slipped 8-1/2 to 633-1/2 after Credit Suisse cut its rating to 'neutral' from 'outperform' as part of a larger real estate sector review.

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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

Milan 

MILAN - market data at 10.00 am:

Main indices:
   
Mibtel at 31,164, up 0.04 pct
   
S&P/Mib at 39,717, up 0.02 pct

Main S&P/Mib gainers:  
   
Alitalia up 1.78 pct at 0.81 eur
   
Parmalat up 1.40 pct at 2.53
   
L'Espresso up 1.13 pct at 3.85
   
Italcementi up 0.84 pct at 19.61, ahead of its second-quarter results later today
   
Main S&P/Mib losers:
   
Luxottica down 1.77 pct at 25.58, after it was cut to 'equal-weight' from 'overweight' at Lehman Brothers
   
AEM down 1.01 pct at 2.48
   
Pirelli down 0.92 pct at 0.790
   
Snam RG down 0.79 pct at 4.12
   
Other stocks in the news: 
   
Fastweb up 0.81 at 37.32, after its first-half report. A broker said results were in line with its expectations, but client growth was below

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MADRID - Market data at 10.25 am:

Major indices:
   
IBEX-35 index down 51.60 points at 14,627.0

Major gainers:
   
Telefonica, up 0.10 eur at 17.61, one of a handful of gainers. Earlier, its Vivo joint venture with PT announced the purchase of controlling stakes in Telemig and Telenorte, two regional Brazilian wireless companies, for a total of 1.2 bln reals. BPI analysts said the purchase is positive in both strategic and valuation terms.
   
Selected defensives, with Cintra, up 0.02 at 10.95 and Inditex gaining 0.02 to 43.40.
   
Endesa, rising 0.04 to 39.55. The utility's board will meet today to pronounce on Acciona and Enel's joint bid.
   
Colonial, recovering from recent sharp losses to add 0.04 to 3.67.
   
BME, up 0.13 at 41.60, on ongoing global sector M&A speculation    

Selected broadcasters, with Antena 3 up 0.01 at 13.87 and Telecinco rising 0.01 to 19.91.
  
Major losers:
   
Vueling, down 2.47 or 10.89 pct at 20.22, after very disappointing second quarter results, which showed the no-frills airline is not coping well with strong competition in the domestic market.
   
Iberia, off 0.10 at 3.37, on profit-taking after yesterday's gains on first half results and a conference call with management. Analysts noted, however, that the bid situation affecting the airline remains the key stock price driver.
   
Selected builders, with Acciona down 2.50 at 187.45, FCC off 0.55 at 65.70 and Sacyr off 0.10 at 33.30.
   
Other leading blue chips, with Santander down 0.04 at 13.63 and BBVA off 0.10 at 17.81. Repsol YPF lost 0.19 to 27.38.

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AMSTERDAM - market data at 10.22 am

Major indices
   
AEX 0.23 pct down at 526.52
   
AMX Midcap 0.02 pct lower at 726.21
   
Government bonds mixed

Major gainers
   
TomTom led gainers, up 1.86 pct at 49.25 eur, as robust sales of Nokia's navigation-enabled N95 model pointed towards increased demand for navigational devices
   
ASML was 0.70 pct higher at 21.53 eur, boosted by gains made by semiconductor and chip stocks on Asian markets
   
Corporate Express added 0.40 pct to 9.99 eur, continuing gains made yesterday on vague takeover speculation, after the company posted disappointing second quarter figures
   
Numico was 0.13 pct up at 53.65 eur on strong second quarter numbers
   
Ahold added 0.33 pct to 9.15 eur, boosted by forecast-beating identical sales growth at two of its flagship units, as the company presented in-line second quarter results
   
Midcapper Nutreco gained 2.12 pct to 54.49 eur following a price target hike to 65 eur from 63 at SNS Securities

Major decliners
   
Akzo Nobel shed 1.26 pct to 59.42 eur
   
Staffing stock Randstad was 0.96 pct lower at 46.35 eur
   
ING was 0.72 pct down at 30.48 eur
   
On the midcap, USG People shed 2.53 pct to 28.07 eur

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BRUSSELS - market data at 10.18 am:

Bel 20 gainers
   
Dexia gains 0.54 eur or 2.68 pct to 20.67 after the majority of its Dutch clients accepted a court settlement on a long-standing dispute over the bank's equity lease products, also pushed up by recovery from a recent lag in share price.
   
Inbev up 0.53 eur or 0.89 pct at 59.99
   
Colruyt rises 0.99 eur or 0.65 pct to 152.94

Bel 20 fallers
   
Bekaert drops 2.03 eur or 1.89 pct to 105.31
   
Suez falls 0.44 eur or 1.14 pct to 38.20
 

Outside the Bel 20
  
Barco down 0.38 eur or 0.53 pct at 71.12, target raised to 75 eur at KBC
   
Innogenetics falls 0.30 eur or 3.49 pct to 8.30

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