UK/Euro Financial Market Daily Morning Briefing 05-04-2007

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This is the last Morning Euro Markets Bulletin until Tuesday 10th April

London

London shares slip back in early deals; cautious ahead of UK rate decision

UK blue chips were easier in early morning trade, having slipped back from a modest opening advance as caution ahead of today's Bank of England (BoE) interest rate decision offset support from modest gains overnight on Wall Street, dealers said.
   
At 8.57 am, the FTSE 100 index was 5.0 points lower at 6,359.7, with the broader FTSE indices mixed. Early volume was fairly slow as traders wind down for the long Easter break, with 148 mln shares changing hands in 34,722 deals.
   
Overnight on Wall Street, US stocks paused for breath after Tuesday's gains, rising only slightly thanks to a slight drop in oil prices after some mixed economic data.
   
The DJIA ended 19.70 points higher at 12,530.00, while the S&P 500 index closed up 1.60 points at 1,439.37, and the Nasdaq composite index finished 8.36 points firmer at 2,458.69.
   
In Asia today, the Nikkei 225 index ended 52.67 points lower at 17,491.42, succumbing to profit-taking after two days of rallies.
   
Hong Kong markets were closed for a public holiday.
   
Oil prices declined in Asian trade after Iran decided to free 15 UK naval personnel it has been holding captive, easing fears the international dispute over the matter could escalate and disrupt crude supplies, dealers said.
   
However, the effect of this news was offset by disappointing data on oil stockpiles in the US, the world's biggest consumer of energy.
   
All eyes in London are trained on the BoE interest rates news, due at midday, although it is expected to keep interest rates unchanged at 5.25 pct. Some commentators, however, believe a hike to 5.50 pct would not be a surprise.

According to an AFX News poll, eight of 32 economists reckon the Monetary Policy Committee will lift its benchmark rate another quarter point to 5.50 pct.

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Ahead of the rate decision, the latest news on UK house prices saw the Halifax survey show an above-expectations rise in March.
   
Halifax said house prices rose by 1.0 pct on a seasonally adjusted basis in March, well above analysts' expectations of a much more modest 0.5 pct gain.

On a quarterly year-on-year basis, Halifax said house price inflation jumped to 11.1 pct. Analysts had predicted the annual rate to rise to 10.5 pct.
   
Investors will have UK February industrial production numbers to digest later.
   
In the absence of any real corporate news, broker comment provided the main corporate interest early on.
   
Old Mutual was the top FTSE 100 riser, up 3.3 pence to 169.6 after Citigroup hiked its rating to to 'buy' from 'hold' with a raised price target of 188 pence, up from 187.
   
Citigroup said it feels the company's risk/reward profile is now starting to look more attractive.
   
Meanwhile British Airways added 7 pence at 514, extending gains following yesterday's solid March traffic numbers aided by news of an upgrade to 'hold' from 'sell' by Deutsche Bank in a European airlines review.
   
Deutsche Bank also made a similar hike in rating for Ryanair -- up 0.07 eur to 5.98 - as it focused on valuations that provide some downside protection.
   
And InterContinental Hotels found support too, up 11 pence at 1,289 after JP Morgan hiked its target to 1,420 pence from 1,073 and reiterated its 'overweight' stance on the firm.
   
The broker said, in its view, InterContinentals highly attractive operating model, valuation discount to peers, strong pipeline and value release potential from the final tranche of asset sales should continue to drive outperformance in 2007.

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On the downside with blue chips, Sainsbury gave back some of yesterday's late rally, shedding 3 pence at 558 as the market awaited news on a likely bid for the food retailer from a CVC-private equity consortium, with the put-up or shout-down deadline for a bid fast approaching.

Scottish & Newcastle also fell back as recent bid speculation subsided, losing 3 pence at 603.
   
And profit-taking after broker comment-inspired gains yesterday saw Home Retail Group lose 3-1/2 pence at 848 and C&W slip 1.1 pence lower to 173.4.
   
There was little to excite on the second line as well.
   
Southern Cross Healthcare topped the FTSE 250 leaders board, adding 18-3/4 pence at 498-3/4 on news of an increase in price target by Morgan Stanley to 570 pence from 475.
   
The US broker reiterated its 'overweight' stance on Southern Cross and raised its estimates.

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

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AMSTERDAM - Market data at 10.22 am

Major indices
   
AEX                 516.86, down 0.74 point
AMX Midcap          731.05, up 0.07 point
Government bonds    unchanged to slightly lower
   
    
Major decliners:
   
SBM Offshore shed 0.84 pct at 27.31 following a downgrade to 'hold' from 'buy' at Petercam on valuation grounds
   
Ahold slipped 0.54 pct at 9.17 as a possible takeover of retail chain Hema, reported in a Dutch newspaper, is seen as coming "too soon" as Ahold is still in the middle of restructuring
   
TomTom led blue-chip fallers, off 0.99 pct at 28.86, while Akzo Nobel eased 0.85 pct at 57.31 and ING dropped 0.75 pct at 31.94
   
On the local market, office-furniture company Samas plunged 9.57 pct at 6.80 after issuing a profit warning

Major gainers:
   
ASML climbed 0.27 pct at 18.84 after a report from Gartner showed the Dutch chip-equipment manufacturer continued to gain market share in 2006 and closed in on Tokyo Electron for the world's number-two vendor position. Peer ASMI advanced 0.85 pct at 17.88
   
Other blue-chip stocks to trade higher included Royal Dutch Shell, firming 0.68 pct at 24.99, Rodamco Europe 0.86 pct higher at 105.94 and ABN Amro, up 0.21 pct at 32.75
   
Local-market listed Imtech rose 1.31 pct at 54.10 after announcing the takeover of Peek Traffic

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FRANKFURT -  Market data at 10.03 am  

Major indices
   
DAX - up 1.51 points, or 0.02 pct, at 7,075.42
MDAX - up 15.06 points, or 0.14 pct, at 10,453.75
TecDAX - down 2.81 points, or 0.32 pct, at 863.73
DAX futures - down 8.00 points, or 0.11 pct, at 7,123.50

Major advancers:
   
Siemens, up 0.79 eur or 0.96 pct at 82.68
   
EON, up 0.89 eur or 0.83 pct at 108.14, after Citigroup resumed coverage of the utility giant with a 'buy' rating
   
Bayer, up 0.37 eur or 0.76 pct at 48.92
   
SAP, up 0.16 eur or 0.46 pct at 34.84
   
Metro, up 0.23 eur or 0.43 pct at 53.24

Major decliners:
   
DaimlerChrysler, down 1.05 eur or 1.72 pct at 60.05, as the shares trade ex-dividend
   
Deutsche Postbank, down 0.79 eur or 1.23 pct at 63.46
   
Fresenius Medical Care, down 1.00 eur or 0.89 pct at 111.30
   
Deutsche Bank, down 0.84 eur or 0.82 pct at 101.86
   
Commerzbank, down 0.26 eur or 0.78 pct at 33.28
   
Other Major Movers   

MDAX-listed Vossloh, up 1.23 eur or 1.71 pct at 73.23, after HSBC raised its target to 80 eur per share from 67.5.
   
MDAX-listed Kloeckner and Co, up 1.32 eur or 3.11 pct at 43.82; UBS raised its target to 46.50 eur per share from 44.
   
Deutsche Telekom, down 0.07 eur or 0.54 pct at 12.93, on fears of a strike by its verdi labour union members and worries that it may bid for 66.6 pct of Olimpia, the Pirelli SpA unit which controls 18 pct of Telecom Italia

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