UK/Euro Financial Market Daily Morning Briefing 03-10-2007

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London shares pare gains to trade flat early on, Northern Rock surges

Leading blue chips pared opening gains to trade a flat Wednesday, as a weaker tone to the mining sector following profit taking in Asian markets overnight offset a surge in sentiment at Northern Rock after hopes of a rescue bid were raised.
   
By 9.00 am, the FTSE 100 was up 3.2 points at 6,504.5 having retreated from an opening high of 6,535.2 as hopes of a bid for Northern Rock sparked some early buying interest. The broader FTSE 250 was up 10.6 at 11,242.5.
   
Early volume was reasonable with 424 mln shares changing hands in 77,308 deals.
   
Last night on Wall Street, the Dow fell 40.24 points to 14,047.3, with the broader Standard & Poor's 500 index off 0.41 to 1,546.63, while the tech-dominated Nasdaq rose 6.12 to 2,747.11.
   
In Asia, the blue-chip Nikkei 225 Stock Average closed up 153.11 points at 17,199.89, its highest close since July 31, while in Hong Kong the Hang Seng was off 818.83 at 27,380.92 amid fears some China-linked companies might be burdened by huge, hidden debts.
   
Meanwhile oil prices eased with the dollar trading higher and little other news to go on.
   
On the US economic calendar today, the ISM non-manufacturing index is expected to have slipped to 54.5 in September from 55.8.
   
Among early movers in London this morning, Northern Rock rose 10.3 pence to 133.6 following a report in this morning's FT which claimed that JC Flowers, the private equity group, had secured about 15 bln stg of funding which could be used for a takeover.
   
According to the article, Mr Flowers' team is to meet the bank's advisers for talks that could lead to due diligence.

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The paper said the private equity group is interested in keeping Northern Rock as a whole entity and is understood to have received funding commitments from blue-chip banks.
   
Alex Potter, an analyst at Collins Stewart, said that he sees a potential top price of 190 pence per share for the mortgage lender.
   
This proved a fillip for the financial sector as a whole with HSBC up 21 to 933, Royal Bank of Scotland up 11 at 549, Barclays up 12 at 632 and Lloyds TSB up 4 at 560.
   
Elsewhere, a positive note on the UK housebuilders from Merrill Lynch lifted the sector, with Barratt Developments up 23 at 804, Persimmon up 17 at 1,068 and midcap Bovis Homes gaining 17-1/2 to 710.
   
Merrill said that the mid-long term housing market fundamentals are still robust, and that critically, the under-supply of new homes in the UK will underpin both asset values and demand. Adding that it believes that the UK remains a fundamentally more resilient housing market than the USA.
   
On the downside, several stocks were trading without the right to a dividend including, Kingfisher, International Power, Tullow Oil, Wolseley and Resolution, representing around 1-1/2 points off the index.
   
Miners however provided the main drag to the index after heavy profit taking across the base and precious metal markets last night with Anglo American down 12 at 3271, Rio Tinto off 35 at 4177 and Lonmin off 18 at 3481.
   
Turning to the midcaps, Victrex rose 14 to 687 after Morgan Stanley raised its stance in the polymer manufacturer to 'equalweight' from 'underweight' ahead of its trading update tomorrow.
   
Elsewhere, M&A talk lifted Collins Stewart, up 2-1/2 at 219-1/2 after the Times suggested an overseas institution may be contemplating a bid.
   
And Cookson ticked up 33 to 809 amid positive broker reaction to its proposed bid for Foseco.

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Landsbanki said its analysis suggests that 2009 earnings could be 87p, were the deal to be successful. Adding that a sector multiple of 12.3 times 2009 earnings suggests Cookson could be a 1070 pence share.
   
In macro news this morning, UK consumer confidence rose in September despite the turmoil that hit financial markets at the end of the summer, according to a survey by Nationwide.
   
In its monthly report on consumer sentiment the building society said its confidence index rose by five points to 99 in September from 94 in August.
   
The figure suggests that the market turbulence has yet to dent consumers' economic confidence, with the present situation index, which measures how consumers feel about the current economic and employment situation, rising by six points to 102.

Diary of Events

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US Summary

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

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BRUSSELS - Market data at 9.58 am

Main index
   
Bel 20 up 1.88 points or 0.04 pct at 4,365.70.

Bel 20 gainers
   
Dexia rises 0.23 eur or 1.04 pct to 22.34
   
Umicore up 1.71 eur or 0.99 pct at 174.23; Umicore and Australian peer Zinifex plan to list shares in zinc-producing joint venture Nyrstar Brussels Stock Exchange.
   
ING keeps 'buy' rating and 194 eur price target, says "Nyrstar IPO would be, in our view, the final trigger for a rerating of Umicore".
  
KBC 0.19 eur or 0.19 pct higher at 98.14, Bank Degroof says it is "paying a fair price" for Russia's Absolut and welcomes plan to expand.

Bel 20 fallers
   
Fortis off 0.27 eur or 1.27 pct at 20.95 ,one trader said this is due to the ongoing pressure from the capital increase
   
Ackermans & van Haaren slips 0.02 eur or 0.03 pct to 71.43. ING says it is "most attractive stock for October in our view."
   
Agfa-Gevaert off 0.18 eur or 1.29 pct at 13.80.

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VIENNA - Market Data at 10.10 am

Main Indices
   
ATX up 0.22 pct or 10.09 points at 4,648.00
ATX Prime down 0.03 pct or 0.63 points at 2,237.23

Main Gainers
   
Austrian Airlines up 2.80 pct at 8.07 eur
   
Telekom Austria up 1.76 pct at 19.13 eur, on news of purchase terms for Belarus's MDC
   
RHI up 1.67 pct at 33.40 eur, on M&A activity in refractories sector
   
voestalpine up 1.02 pct at 61.27 eur
   
OMV up 0.64 pct at48.91 eur

Main Losers
   
Schoeller-Bleckmann down 2.14 pct at 61.64 eur
   
Verbund down 1.96 pct at 40.00 eur
   
BWIN down 1.36 pct at 16.69 eur
   
Boehler-Uddeholm down 0.75 pct at 73.00 eur
   
Erste Bank down 0.63 pct at 55.65 eur

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