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

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London shares slide in early deals; ex div stocks offset Home Retail Group gains

Leading shares slipped in early deals, shrugging off an overnight rally on Wall Street, as several blue-chips trading ex-dividend took 2.4 points off the index and offsetting gains in Home Retail Group following a Citigroup upgrade, dealers said.
   
At 8.40 am, the FTSE 100 index was 7.1 points weaker at 6,359.0, after closing up 50.6 points yesterday at the session peak of 6,366.1. The broader FTSE indices managed moderate gains. Early volume was fair, with 171 mln shares changing hands in 30,287 deals.
   
In the US overnight, Wall Street surged on signs of resilience in the housing market and the US consumer, with falling oil prices giving investors an extra reason to rally.
   
The Dow Jones industrials closed 128.00 points ahead at 12,510.30, the Nasdaq Composite took on 28.07 points to 2,450.33, and the S&P 500 added 13.20 points to 1,437.75.
   
The National Association of Realtors' index for pending sales of existing homes rose in February at a seasonally adjusted annual rate of 0.7 percent. The index is well below where it was a year ago but stronger than investors expected, reassuring them the housing sector, while weak, is not being pummelled by the struggling sub-prime mortgage sector.
   
Asian indices were also buoyant, as Tokyo's Nikkei 225 index closed up 300.04 points at 17,544.09, while Hong Kong's Hang Seng was 179.11 higher at 20,181.81 by midday.
   
Oil prices were slightly higher in Asian trading hours as the UK awaited Iran's response to its proposal for direct bilateral discussions over the 15 naval personnel detained by Tehran, dealers said.
   
The UK said overnight the two countries shared a desire to resolve the impasse just hours after Foreign Secretary Margaret Beckett cautioned against hope of a "swift resolution" to the stand-off.
   
Earlier this morning, New York's main oil futures contract, light sweet crude for delivery in May, was up 2 cents at 64.66 usd a barrel after sliding yesterday at settle at 64.64 usd in US trades. Brent North Sea crude for May rose 7 cents to 67.88 usd.
   
In London, Home Retail Group was the top blue-chip gainer, 8-1/2 pence higher at 457-1/2, on the back of a Citigroup upgrade to 'buy' from 'hold' with an increased price target of 500 pence, from 450, reflecting the broker's more favourable risk/reward valuation.
   
In a note out this morning, the broker said it thinks the mechanics of possible private equity activity should at the very least reduce downside in HRG's shares, while more concrete hopes of activity could galvanize valuation.
   
Similarly, Resolution was also on the up, rising 5 pence to 630 after JP Morgan upgraded the specialist life insurer to 'neutral' from 'underweight' after the group's 'good' results.

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The broker said its upgrade reflects a wider market appreciation of the difficulties in obtaining value-added closed fund transactions.
   
Among merger and acquisition news, Imperial Chemical Industries took on 4-1/2 to 544 after jumping late yesterday on rumours it could be the target of 620 pence a share bid from US peer Dow Chemical, as highlighted in the press this morning. Dutch firm Akzo Nobel was also mooted as a possible bidder.
   
A number of companies' shares were lower after going ex-dividend: Alliance & Leicester lost 35 to 1,120, Pearson fell 22-1/2 to 859-1/2, Kingfisher slipped 4-1/2 to 278 and Hanson eased 11-1/2 to 818.
   
Ex-dividend issues apart, Smith & Nephew slipped 8 pence at 641-1/2 as Citigroup placed 15 mln shares in the medical devices group at 644 pence apiece, traders said.
   
Sticking with the healthcare sector, shares in pharma groups AstraZeneca and GlaxoSmithKline were under pressure after the UK's Office of Fair Trading said it has launched an investigation into the distribution of medicines across the country.
   
The study has been prompted by recent and proposed changes by certain drug makers, the regulator said, such as Pfizer Inc, which last month began using a sole distributor for its medicines. Until recently all medicines were distributed through a number of competing wholesalers.
   
Astra shares were down 15 at 2,715 in early deals, while Glaxo fell back 8 to 1,393.
   
Returning to the M&A front, J Sainsbury dipped 4-1/2 lower at 551-1/2 following a report that talks between a private equity bidding consortium led by CVC and the supermarket's pension trustees are set to drag on through Easter.
   
A report in The Times this morning said this makes it highly unlikely that an offer for Sainsbury will be in place by the April 13 deadline.
   
Among broker comment, BAE Systems was 1-3/4 pence down at 462-3/4 after HSBC initiated coverage of the defence group with an 'underweight' rating.
   
The broker said its 450 pence target plus the expected dividend of 12 pence suggests a 12-month total return of 0.7 pct, which is 2.3 pct below HSBC's minimum required rate for a 'neutral' rating.
   
On the second line, Taylor Woodrow was almost 3 pct higher, adding 14-3/4 at 508 on the back of a Merrill Lynch upgrade to 'buy' from 'neutral' with the target set at 550 pence.

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Following recent news of a proposed merger with George Wimpey, the broker said it believes there is a strong probability that Persimmon will counter-bid at an initial price of between 525 and 550 pence. Persimmon was 12 pence higher at 1,458.
   
But the top mid-cap riser was SSL International, which surged more than 11 pct, up 44 at 443-1/4, amid vague takeover speculation. Last month the maker of Durex condoms was the subject of talk L'Oreal was mulling a bid.
   
Among the mid-cap casualties, Biffa dropped over 5.6 pct, down 19-3/4 at 331-1/2, after the waste management firm told the market that full-year profits and revenues will be at the lower end of expectations.
   
The company, which demerged from utility Severn Trent last September, said profits from its Collection Division were likely to be below those achieved last year as it raised prices only selectively instead of across the board in order to retain more customers.

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 yesterday's close of trade, click here

London - April 19th 2007

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PARIS - Market data at 10.04 am:

Major indices:
   
CAC-40 up 0.02 point or under 0.01 pct at 5,711.93
SBF-80 up 0.77 points or 0.01 pct at 7,323.46
SBF-120 down 0.23 points or 0.01 pct at 4,206.38

Volume: 597 mln eur
23 CAC-40 stocks up
16 CAC-40 stocks down
1 CAC-40 stock unchanged

Major gainers:
   
Scor, up 0.70 eur or 3.33 pct at 21.70, after full year results exceeded analysts' expectations.
   
Renault, up 1.26 eur or 1.43 pct at 89.09
   
EDF, up 0.86 eur or 1.36 pct at 64.06
   
Air France-KLM, up 0.44 eur or 1.27 pct at 35.14, after the Financial Times reported it may join the Aeroflot consortium bidding for Alitalia.

Major losers:
   
Carrefour, down 0.71 eur or 1.27 pct at 55.05
   
Danone, down 0.93 eur or 0.75 pct at 123.02
   
Air Liquide, down 1.03 eur or 0.56 pct at 182.75

Most active stocks:
   
Total, 69 mln eur, down 0.33 eur or 0.63 pct at 52.42
   
Suez, 34 mln eur, up 0.25 eur or 0.62 pct at 40.75
   
BNP Paribas, 33 mln eur, up 0.34 eur or 0.43 pct at 79.19

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FRANKFURT -  market data at 10.33 am

Major indices
   
DAX - up 16.58 points, or 0.24 pct, at 7,062.14
MDAX - up 30.43 points, or 0.29 pct, ato 10,419.56
TecDAX - up 1.87 points, or 0.22 pct, at 864.49
DAX futures - down 8.50 points, or 0.12 pct, at 7,111.00

Major advancers:
   
Deutsche Boerse, up 3.60 eur or 2.11 pct at 174.60. The exchange operator said yesterday that turnover on both its Xetra platform and on its trading floor in March was 253.7 bln eur, representing a 57 pct increase versus the same period last year
   
Deutsche Lufthansa, up 0.32 eur or 1.54 pct at 21.04
   
BMW, up 0.59 eur or 1.33 pct at 44.90, after the automaker published US unit sales last night for March that showed a 2.2 pct increase to 28,980 vehicles despite a general downturn in the US auto market
   
Hypo Real Estate, up 0.58 eur or 1.21 pct at 48.32
   
Siemens, up 0.72 or 0.89 pct at 81.72
  
Major decliners:
   
Deutsche Telekom, down 0.08 eur or 0.62 pct at 12.81
   
TUI, down 0.09 eur or 0.49 pct at 18.45
   
EON, down 0.50 eur or 0.46 pct at 107.70
   
Adidas, down 0.19 eur or 0.46 pct at 41.15
   
Deutsche Postbank, down 0.29 eur or 0.45 pct at 64.35

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