UK/Euro Financial Market Daily Morning Briefing 05-06-2006

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London shares weak, reversing opening gains in early deals on rate uncertainties

Leading shares moved lower in early deals, reversing some good opening gains as investors refocused on interest rate uncertainties amid worries over the inflationary impact of higher commodity prices, dealers said.
   
At 9.10 am, the FTSE 100 index was 11.5 points lower at 5,753.1 having dropped back from an opening peak of 5,789.8.
   
All the broader FTSE indices were also lower, with the FTSE 250 index down 74.93 points at 9,372.8.
   
Early volume was solid, with 175.7 mln shares changing hands in 27,964 deals.
   
Pre-weekend on Wall Street, US stocks ended mixed after a bigger than expected decline in non-farm jobs growth in May but a fall in the unemployment rate left investors confused about the health of the world's largest economy.
   
The DJIA closed 12.41 points lower at 11,247.87, while the Nasdaq composite index fell 0.45 points to end at 2,219.41. But the S&P 500 index edged 2.51 points higher to 1,288.22.
   
Trading in Asia was mixed as well today. The Nikkei 225 index ended 121.00 points weaker at 15,668.31, but the Hang Seng index ended 103.52 points higher at 16,016.23.
   
Back in London, interest rate uncertainties held sway ahead of this week's Bank of England Monetary Policy Committee meeting and as worries over further possible US interest rate hikes failed to be abated by Friday's jobs report.
   
Housebuilder Persimmon was the top FTSE 100 faller, down 25 pence at 1,211, due to its interest rate sensitivity.
   
Financial issues also fell back, worried too by equity market valuations, with Royal & Sun Alliance losing 2-1/2 pence at 128-1/4, Schroders down 16 pence at 1,037, and Alliance & Leicester off 18 pence at 1,203.

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Elsewhere ITV shares lost 1-1/2 pence at 106-1/2 after Lehman Brothers cut estimates for the UK broadcaster by as much as 16 pct and lowered its price target to 118 pence from 125.
   
And British Airways shares shed 6-1/4 pence at 342 amid worries over fuel costs, as crude prices rose again, and ahead of May traffic figures due this afternoon.
   
Among the diminishing number of blue chip gainers, BAA was a top riser, up 5 pence to 910 as the takeover battle for the airports operators is set to reach crunch time this week.
   
Spain's Grupo Ferrovial has to make its final offer for BAA today and the Sunday Telegraph reported speculation that it will allow shareholders to keep a 15 pence dividend, thereby increasing its current 900 pence a share offer a third time.
   
Meanwhile a consortium led by US investment bank Goldman Sachs was understood to have come back with a 950 pence a share bid for BAA this weekend, according to weekend press reports.
   
And the Sunday Telegraph reported that BAA has itself been sounding out shareholders about a possible break-up stressing the hidden value in the group that could emerge if it remained independent.
   
Elsewhere, broker comment had some positive impact, with insurer Aviva adding 11 pence at 743-1/2, after the stock was upgraded to 'buy' from 'hold' by Deutsche Bank on valuation grounds, albeit with a reduced price target of 893 pence, down from 935.
   
Meanwhile GlaxoSmithKline shares took on 3 pence at 1,486, bouncing back from Friday's falls after the drugs firm announced positive results from trials of its experimental breast cancer drug Tykerb, leading ABN Amro to upgrade its rating to 'buy' from 'hold'.
   
Over the weekend, GlaxoSmithKline told the American Society of Clinical Oncology in Atlanta that only 1.3 pct of women taking part in all its trials of Tykerb experienced cardiac events to date.
   
Fellow drugs blue chip AstraZeneca benefited in sympathy, up 2 pence to 2,898.
   
And heavyweight oil issues were also firmer as crude prices rose once more, with Royal Dutch Shell up 11 pence to 1,835, BP ahead 3-1/2 pence at 637, and BG Group gaining 2 pence at 720-1/2.
   
Oil prices were higher in Asian trade after Iran warned of disruptions to global energy supplies if it is forced to halt its controversial nuclear program.

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On the second line, weekend press speculation over possible bids provided a lift to shares in Enodis, up 3-1/4 pence at 203, and SCi Entertainment, ahead 6 pence at 558.
   
Carphone Warehouse was in demand ahead of full year results due tomorrow, up 3-1/2 pence at 330-3/4.
   
And Misys took on 1-1/4 pence at 186-1/4 after being upgraded to 'buy' from 'hold' at Deutsche Bank on valuation grounds ahead of a June 21 trading update.
   
But on the downside, shares in Croda International dropped 21-1/4 pence lower to 431 after being downgraded to 'sell' from 'hold' by Citigroup on valuation grounds.
   
The US broker also cut its price target for 400 pence per share, down from 500 previously.
   
On the economics front, the main focus this week will be on interest rate decisions from both the Bank of England and ECB, due Thursday, although no changes are expected.
   
Today's UK data is unlikely to alter that perception, with May services sector PMI due out at 9.30 am, plus the latest HBOS house price survey.
   
Similarly in the US, after Friday's weak jobs report today's May non-manufacturing ISM report should have little real impact, with all eyes this week directed towards Friday's US trade deficit figures.

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 Friday's close of trade, click here

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PARIS - Market data at 9.36 am:

Major indices:
   
CAC-40 down 25.55 points or 0.52 pct at 4,934.15
SBF-80 up 0.19 points or less than 0.01 pct at 5,693.22
SBF-120 down 15.53 points or 0.43 pct at 3,580.87

Volume: 325 mln eur
1 CAC-40 stock up
39 CAC-40 stocks down
   
Major gainers:
   
Technip, up 0.92 eur or 2.02 pct at 46.56
   
Total, up 0.10 eur or 0.20 pct at 50.80
 
Major losers:
   
Suez, down 0.39 eur or 1.30 pct at 29.65. Vice President Yves Thibault de Silguy will leave next month to become the chairman of Vinci. Meanwhile, the daily Le Figaro said Enel has renewed a bid to get the EU to deny Suez' plans to merge with Gaz de France.
   
Renault, down 1.05 eur or 1.19 pct at 87.45
   
L'Oreal, down 0.75 eur or 1.08 pct at 68.85

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FRANKFURT - Market data at 9.40 am
   
Major indices:
   
DAX 30 - 5,612.53, down 74.51 points or 1.31 pct
MDAX - 8,203.99, down 60.81 points or 0.74 pct
TecDAX - 668.04, down 2.07 points or 0.31 pct
DAX future - 5,617.50, down 81.00 points 1.42 pct

Major risers/outperformers:
   
Hypo Real Estate, up 0.01 eur or 0.02 pct at 50.73
  
Schering, down 0.01 eur or 0.01 pct at 85.39, as it said interim data from a Phase III clinical trial show its drug MabCampath to be safe and more effective compared to chlorambucil in previously untreated patients with progressive B-cell chronic lymphocytic leukemia (B-CLL)
   
Adidas, down 0.63 eur or 0.41 pct at 154.81
   
TUI, down 0.10 eur or 0.62 pct at 15.97
   
Altana, down 0.37 eur or 0.80 pct at 45.83

Major losers:
   
Fresenius Medical Care, down 1.92 eur or 2.17 pct 86.66
   
RWE, down 1.27 eur or 1.96 pct at 63.42, as the Sunday Telegraph reported that Hong Kong-based infrastructure investor Cheung Kong Infrastructure Holdings (CKI) has dropped out of the 7 bln stg race to buy RWE unit Thames Water
   
Siemens, down 1.27 eur or 1.91 pct at 65.26
   
Linde, down 1.21 eur or 1.90 pct at 62.56
   
Commerzbank, down 0.50 eur or 1.74 pct at 28.29

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AMSTERDAM - Market data at 9.27 am

Major indices

AEX 436.08, down 2.82 points

AMX 581.96, down 1.23 points

Government bonds flat

Major gainers

Second-liner Pharming added 1.89 pct to 3.78 eur

Van der Moolen gained 1.20 pct to 5.88 eur

TomTom put on 1.07 pct to 34.16 eur

Versatel lifted 1.05 pct to 0.96 eur

Royal Dutch Shell gained 0.63 pct to 25.70 eur

Major losers

KPN lost 0.44 pct to 8.96 eur

Unilever shed 0.69 pct to 17.35 eur

SBM Offshore lost 0.62 pct to 20.90 eur

Corus dropped 1.01 pct to 5.87 eur

Hagemeyer dropped 1.03 pct to 3.84 eur

ING lost 1.02 pct to 30.06 eur after the sale of Williams de Broe to UK's Evolution

Philips shed 1.46 pct to 24.31 eur

ABN Amro lost 1.48 pct to 21.37 eur

Boskalis shed 1.56 pct to 53.55 eur

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