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

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London shares higher at open as BP update pleases

Leading shares gained in early deals, boosted by a pleasing trading update from oil major BP and on-going bid hopes with health care group Smith & Nephew the latest mooted target, dealers said.
   
At 8.59 am, the FTSE 100 was 11.4 points firmer at 6016.1, with the broader indices also positive.
   
BP helped to pull the blue chips higher after a better-than-expected first quarter trading update -- 8-1/2 to the good at 673.
    
Earlier, the oil major reported a 2 pct fall in first quarter production to 4.025 mln barrels of oil equivalent per day, below its annual guidance of 4.1-4.2 mln boepd.
   
But in response, Merrill Lynch said the update came in ahead of its expectations with a better than anticipated performance in oil products and gas and power.
   
Furthermore, a lower than expected interest charge and tax charge more than offset modest lower than anticipated E&P volumes, it added.
    
As a result, the broker said it will look to raise its first quarter 2006 estimates by around 400 mln usd or 8 pct to 5.465 bln, as it reiterated its 'buy' advice.
   
Still in oil, reports that Cairn Energy is planning to invest in the refining sector in India helped the shares add 16 at 2177.
   
The company is said to studying various options and discussions are on with domestic companies for possible tie-ups.
   
In commodities, heavyweight miners continued to be in favour, building on gains overnight in Australia on expectations of price increases following iron ore negotiations with Chinese and Japanese steel producers.
   
Xstrata was the biggest beneficiary, 37 higher at 1977, Rio Tinto took on 47 at 3091, Antofagasta added 28 at 2235 and BHP firmed 12-1/2 at 1133-1/2 and  Anglo American gained 32 at 2359 -- further buoyed by bid hopes.
   
But Smith & Nephew was the top blue chip performer, 10 firmer at 526,  on increased hopes of a bid after US peer Biomet last night hired Morgan Stanley to explore strategic alternatives. 

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Severn Trent took on 19 at 1216 after the water utility was upgraded to 'buy' from 'hold' by Citigroup and to 'equal-weight' from 'underweight' by Morgan Stanley following the Biffa demerger news yesterday.
   
Citigroup also hiked its aim price to 1,325 pence from 960 pence, saying the demerger of the UK waste business should improve visibility on valuation, with a potential share price range of between 1,209-1,404 pence per share.
   
Broker comment also lifted Reckitt Benckiser 33 firmer at 2115, as Goldman Sachs increased its aim price to 2,291 pence from 2,251 pence.
   
The broker also reiterated its 'outperform' recommendation, and said the recent purchase of the BHI Business is a key strategic move by the group.
   
In retail, Sainsbury added 3-1/2 at 337 after it reclaimed the number two spot in the UK supermarket league according to the latest data from research group ACNeilsen.
   
Peer Tesco was 2-3/4 higher at 330.
   
On the downside, ex-dividend factor took their toll, with Alliance & Leicester, Kingfisher, Friends Provident, Pearson, Hanson and PartyGaming all lower.
   
Before the open ex-dividend factors were expected to take around 2.9 points off the FTSE 100.
   
On the second-line, Pennon Group was the star performer, up 46 at 1400, after The Independent reported Spain's Grupo FCC is mulling a bid.
   
The paper said FCC has renewed talks with the group and is now considering a bid for the whole company after previous interest in its waste management operations.
   
Still in utilities, AWG and Northumbrian Water took on 5-1/4 at 242-1/4 and 23 at 117 respectively after being upgraded to 'buy' at Deutsche Bank as part of a review of the sector.
   
In a research note, Deutsche Bank said allowed regulatory returns appear attractive in the current low interest rate environment.

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Furthermore, prices have now been set for water and electricity distribution through to 2009/10, providing strong earnings visibility.
   
In contrast, Easyjet slumped 28-1/2 pence at 329-1/1 on confirmation  Icelandic investor FL Group is selling its 16.9 pct holding in the low-cost airline.
   
In response, Merrill Lynch said the news has dashed hopes FL would make a bid for the whole of the low cost carrier -- the driving force behind EasyJet's rally over the past 18 months.
    
In economic news, investors will have several indicators to digest ahead of tomorrow's Bank of England rate decision.
   
The Chartered Institute of Purchasing and Supply's services PMI is seen dipping to 58.4 in March from the 22-month high of 58.9 the previously.
   
In contrast, February industrial production is expected to rise 0.3 pct month-on-month, but drop 0.9 pct year-on-year.
   
And finally, manufacturing production, which makes up about 80 pct of overall industrial output, is expected to show a 0.2 pct month-on-month rise and a 1.0 pct year-on-year fall.
   
Meanwhile, US stocks ended higher as optimism over the upcoming first-quarter earnings season helped propel the Nasdaq to its best level since February 2006.
   
The DJIA rose 58.91 points to 11,203.85, the Nasdaq was up 8.62 to 2,345.36, and the S&P 500 added 8.12 to 1,305.93.
   
In contrast, the Nikkei 225 gave up earlier gains to end the session  down 48.93 pts at 17,243.98 while the Hang Seng was closed.
   
Still in Asia, oil prices declined further as expectations of strong US inventory data later today offset ongoing supply concerns.
   
Earlier this morning, New York's main contract, light sweet crude for delivery in May, was down 0.10 usd at 66.13 usd a barrel, having flirted with highs of 68 usd earlier in the week.

US Summary

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Diary of Events

For a diary of financial and corporate events in the UK today, click here

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AMSTERDAM - Market data at 10.01 GMT

Major indices
   
AEX               468.32, up 0.37 points
AMX Midcap        630.60, up 3.37 points
Government bonds  flat

Major gainers
   
TNT led gainers, 1.56 pct to 29.34 eur
   
Buhrmann rose 1.34 pct to 15.18 eur
   
Vedior added 0.98 pct to 16.41 eur
   
ING put on 0.40 pct to 32.26 eur
   
Akzo Nobel added 0.30 pct to 43.98 eur after it announced the acquisition of Canada's Sico paint manufacturer for 211 mln eur
   
SBM Offshore gained 0.18 pct to 83.45 eur after a price target rise to 90 eur from 85 eur at Delta Lloyd Securities
   
VastNed Retail added 1.74 pct to 67.15 eur
   
Univar gained 1.64 pct to 42.80 eur
   
Major losers

Philips shed 0.72 pct to 27.65 eur amid reports that it is to close a light bulb factory in the Netherlands
   
Hagemeyer lost 0.50 pct to 4.00 eur
   
ASML Holding dropped 0.37 pct to 16.37 eur
   
Nutreco shed 0.23 pct to 47.67 eur
   
Hunter Douglas lost 0.28 pct to 54 eur
   
Wereldhave shed 0.34 pct to 88.60 eur

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PARIS - Market data at 10.00 GMT

 Major indices:
   
CAC-40 up 14.85 or 0.29 pct at 5,220.66
SBF-80 up 11.00 or 0.18 pct at 6,114.66
SBF-120 up 9.51 or 0.25 pct at 3,795.78

Volume: 830 mln eur
26 CAC-40 stocks up
14 CAC-40 stocks down

Major gainers:
   
Lagardere ScA up 3.20 eur or 4.98 pct at 67.45 as co halves EADS stake, freeing up resources for media ops
   
Air Liquide up 2.90 or 1.67 pct at 176.40
   
Axa up 0.32 or 1.11 pct at 29.27, Les Echos reports group close to selling reinsurance arm to Stone Point Capital of the US

Major losers:
   
EADS down 1.29 or 3.77 pct at 32.96 as major shareholders Lagardere, DaimlerChrysler cut stakes, co is excluded from Alcatel/Thales satellites deal
   
Thales down 1.02 or 2.73 pct at 36.28 on 15 pct capital hike for Alcatel deal, weak synergies from satellites tie-up
   
EDF down 1.23 or 2.57 pct at 46.54, adding to losses yesterday

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