UK/Euro Financial Market Daily Morning Briefing 04-05-2006

London shares bounce higher at open as ICI, Shell pleases

Leading shares bounced higher in volatile opening deals as better-than-expected results from Royal Dutch Shell and ICI offset profit taking in miners, dealers said.
   
At 9.10 am, the FTSE 100 was up 9.2 points at 6,019.2, clawing back initial losses, with the wider market also positive.
   
ICI was the top blue chip riser, up 21 at 391 aftr the chemicals group's first quarter profits beat expectations.
   
The company reported pretax profit before exceptionals of 91 mln stg, up from 84 mln a year earlier, ahead of the market range for profits of 71-89 mln.
   
In reaction, UBS said ICI had essentially completed its transformation to focus on higher value-added sectors of the chemicals industry.
   
Shell was another winner, up 17 at 1965, reversing initial falls, as forecast-busting first quarter results offset a drop in crude prices overnight.
  
Earnings rose 12 pct, beating market expectations, as gains from sky-high oil prices more than compensated for the decline in the Anglo-Dutch group's production.
   
Net income, on an adjusted current cost-of-supply basis, rose to 6.088 bln usd from 5.455 bln usd, ahead of the consensus figure of 5.570 bln usd.
   
In response, Merrill Lynch reiterated its 'neutral' stance.
   
Peers BG gained 5 at 750-1/2 and BP also rose 5 at 682, further boosted by forecast-busting results from European peer Total.
   
The property sector was also courted after Hammerson said it will elect for REIT status from 2007 as it revealed that office letting markets improved in London and Paris.
   
Hammerson took on 30 at 1212, British Land rose 17 at 1277, Land Securities gained 23 at 1868.

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Meanwhile, M&A talk lifted Intercontinental Hotels, 30 higer at 975 amid newspaper speculation that private equity group Permira is considering an approach, dealers said.
   
According to the Times 'Rumour of the day' column, Permira may bid for the group, although added that it is still running the numbers and has yet to make an approach.
   
In financials, HBOS edged 2 higher at 961 after the mortgage bank was upgraded to 'add' from 'neutral' by WestLB following strong numbers from second-line wealth management group St James' Place Capital.
   
The broker also upgraded Lloyds TSB in response to St James' Place first-quarter new business coming in ahead of market expectations.
   
Lloyds fell 1 and St James' Place gained 6-1/4 at 370.
   
In contrast, Unilever was down 13-1/2 at 562-1/2 as the consumer goods group posted a broadly disappointing set of first quarter numbers.
   
In response WestLB cut its rating to 'hold' from 'add'.
   
"Sales were disappointing but profits appear slightly better than we had forecast," said a dealer at a major US brokerage.
   
Pharmas were also weak after AstraZeneca called an end to plans to develop its Galida diabetes product.
   
In response, WestLB said although this is not unexpected the news should have a significant negative impact on sentiment this morning and lead to a share price decline.
   
AstraZeneca fell 46 to 2,928 and GlaxoSmithkline was off 11 at 1,537.
  
Miners too were under the cosh, as a drop in commodity prices prompted investors to cash in on recent stellar gains.
   
Sentiment was further hit as Rio Tinto and BHP Billiton were downgraded by ING in a cautious note on the sector.
   
The Dutch owned broker said it believes a sharp correction in base metal prices is likely in the coming weeks and months and feels it is time to lock in profits on mining stocks.
   
It downgraded BHP Billiton to 'hold' from 'buy' and lowered its recommendation on Rio Tinto to 'sell' from 'hold'.
   
Anglo American fell 32 at 2337, Antofagasta lost 28 at 2355, BHP was down 6-1/2 at 1141 and Rio slipped 2 at 3068.
   
Capita was another casualty, down 2 at 453, after Goldman Sachs downgraded the outsourcing company to 'in-line' from 'outperform'.
   
The broker said the stock had started the year on the right footing, but was cautious that this will limit operational gearing in 2006.

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On the second-line, broker comment helped fuel gains, with BBA up 6-3/4 at 266 after the aviation and materials technology organisation were upgraded to 'buy' from 'neutral' at UBS.
   
The broker said all the bad news was now in the share price, and that now was the right time to buy.
   
Regus took on 2-1/2 at 120 after the same broker upgraded the group to 'buy' from 'neutral', saying the current strength in global office markets, relative share price underperformance and expected strong earnings growth makes it considerably more bullish on the group.
   
And no-frills carrier easyJet added 6-3/4 at 33 after UBS also turned buyer arguing cost savings were coming quicker than previously expected.
   
On the downside, Mitchells & Butlers fell 23-1/4 at 492-3/4 after the pubs group rejected a 550 pence per share cash offer from the Tchenguiz Family Trust which values the company at 4.6 bln stg.
   
M&B, whose pub brands include All Bar One and Harvester, said it believes the proposal is not in the best interests of shareholders.
   
In economics, all eyes will be on the Bank of England's rate decision, with the Monetary Policy Committee poised to keep borrowing costs unchanged for the ninth month running.
   
All 33 forecasters polled by AFX News expect the nine-member MPC to leave the key repo rate at 4.50 pct.
   
Meanwhile, on Wall Street US stocks ended slightly lower as a sharp pullback in oil prices helped offset disappointing results from Procter & Gamble and ease concern over the outlook for interest rates following strong data.
   
The DJIA was down 16.17 points at 11,400.28, with the Nasdaq off 5.87 to 2,303.97 and the S&P 500 5.36 lower at 1,307.85.
   
And today investors will scrutinise US weekly jobless data in a bid to gauge the health of the world's biggest economy ahead of tomorrow's more significant non-farm payroll numbers.
   
The downbeat mood spilled over into Asia, with the Hang Seng ending its morning session down 60.74 at 16,966.24 while the the Nikkei was closed for a public holiday.
   
Still in Asia, oil prices continued to fall after an unexpected increase in US stockpiles sparked a round of profit-taking, even though concern about Iran's nuclear program remains.
   
Earlier this morning, New York's main contract, light sweet crude for June delivery, was down 0.23 usd at 72.05 usd a barrel from its close of 72.28 in New York overnight.

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AMSTERDAM - market data at 10.07 am
   
Major Indices
   
AEX               466.14, up 1.50 points
AMX Midcap        631.05, up 1.33 points
Government bonds  Mixed 

Major Gainers
   
Buhrmann was up 2.36 pct to 14.33 eur. Investors picked up the stock after yesterday's 10 pct drop, which many analysts today called "exaggerated".
   
ASML was up 1.26 pct to 16.92 eur.
   
Second-liner Randstad gained 1.23 pct to 53.70 eur.
   
Aegon gained 1.06 pct to 14.24 eur.
   
Royal Dutch Shell lifted 1.03 pct to 27.47 eur after the company issued well-received first-quarter earnings.
   
Vedior gained 0.60 pct to 18.56 eur after it announced two small acquisitions.
   
VNU gained 0.25 pct to 27.57 eur, a day before the Valcon takeover bidding period ends.
   
Major Losers
   
Second-liner Univar was 3.92 pct lower at 42.89 eur after reporting earnings results which were slightly below expectations.
   
Unilever lost 2.10 pct to 55.85 eur after issuing first-quarter earnings.
   
Hagemeyer shed 0.91 pct to 4.36 eur.

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FRANKFURT - Market data at 10.27 am

Major indices:
   
DAX 30 - 5,999.67, up 30.71 points or 0.51 pct
MDAX - 8,832.70, up 4.12 points or 0.05 pct
TecDAX - 740.81, up 1.07 points or 0.14 pct
DAX future - 6,017.50, up 8.50 points or 0.14 pct

Major Gainers:
   
MAN, up 1.67 eur or 2.69 pct at 63.77, as the market cheered the German truckmaker's consensus-beating first-quarter results and upbeat full-year outlook
   
BASF, up 1.55 eur or 2.30 pct at 68.96, after the chemicals giant reported first-quarter results that came in well ahead of consensus and lifted its full-year 2006 pre-ex EBIT target
   
Fresenius Medical Care, up 1.35 eur or 1.44 pct at 95.05, recovering from yesterday's sharp losses
   
RWE, up 0.86 eur or 1.25 pct at 69.57
   
BMW, up 0.46 eur or 1.09 pct at 42.72

Major Losers:
   
Deutsche Telekom, down 0.66 eur or 4.58 pct at 13.74, trading ex-dividend
   
Commerzbank, down 1.06 eur or 3.34 pct at 30.65, on profit-taking after reporting strong final first-quarter results that were welcomed by analysts but that market participants said have already been priced in
   
Volkswagen, down 0.82 eur or 1.36 pct at 59.48
   
Allianz, down 0.90 eur or 0.68 pct at 130.70, trading ex-dividend
   
Siemens, down 0.30 eur or 0.41 pct at 73.32

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PARIS - Market data at 10.16 am:

Major indices:
   
CAC-40 up 23.31 points or 0.45 pct at 5,217.25
SBF-80 up 23.84 points or 0.39 pct at 6,073.16
SBF-120 up 17.77 points or 0.47 pct at 3,792.68

Volume: 848 mln eur
30 CAC-40 stocks up
10 CAC-40 stocks down
  
Major gainers:
   
Suez, up 0.82 eur or 2.57 pct at 32.74, after posting a solid rise in first quarter sales and raising its estimate of synergies from the planned merger with Gaz de France.
   
Total, up 3.80 eur or 1.74 pct at 222.50, after posting better than expected first quarter results amid high oil prices.
   
Electricite de France, up 0.67 eur or 1.47 pct at 46.12   

Major losers:
   
Publicis, down 0.72 eur or 2.20 pct at 32.05, after first quarter sales data fell short of some expectations.
   
Thales, down 0.41 eur or 1.21 pct at 33.60
   
Dassault Systemes, down 0.26 eur or 0.60 pct at 43.10, after positive first quarter results were offset by a cut in its full year EPS guidance. 

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