UK/Euro Financial Market Daily Morning Briefing 05-07-2006

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London shares slide in early deals, Alliance & Leicester under pressure

Leading shares remained lower in early deals, depressed by concerns over last night's missile testing by North Korea and weakness in Alliance & Leicester, dealers said.
   
By 9.10 am, the FTSE 100 index was down 28.9 points at 5,854.6, while the broader indices were also lower. Volume was moderate, with 219.4 mln shares changing hands in 18,942 deals.
   
US markets were closed yesterday for Independence Day.
   
Across Asia overnight, the Nikkei 225 closed 114.56 points lower at 15,523.94, while the Hang Seng was down 67.13 points at 16,301.85.
   
Metal prices rose again in Asia, fuelled by worries over North Korea after it was reported to have launched at least six missiles in a test last night, including a long range one capable of reaching Alaska.
   
Gold, silver and copper prices all spiked higher, while platinum prices jumped to record highs.
   
Oil prices however, fell back following the US Independence Day holiday, with traders largely ignoring the missile launches, due to its lack of direct impact on the oil market.
   
New York's main contract, light sweet crude for delivery in August, was down 27 cents at 73.66 usd a barrel from 73.93 usd in US closing deals before the holiday break.
   
In the UK, Alliance & Leicester dropped 74 pence to 1075 after Credit Agricole announced that it does not intend to bid for the UK mortgage bank.
   

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The French bank, which had declared its interest in A&L in May, is currently embroiled in a bid battle for Greece's Emporiki.
   
In response, Keefe, Bruyette & Woods downgraded its stance on Alliance & Leicester to 'underperform' from 'market perform' with a fair value of 1,000 pence.
   
In a note to clients, the broker said while there may be other potential bidders for A&L over the long term, the current bid premium will evaporate and indeed there may be incremental concerns over the already poor operating performance.
   
Ex-dividends also weighed on the blue-chip index, with Man Group, GUS, SABmiller, Imperial Tobacco and Lonmin all trading without the right to the latest payout this morning.
   
Elsewhere, PartyGaming fell 1-3/4 pence to 114-1/4 after announcing that its chairman Michael Jackson and Finance Director Martin Weingold have sold 262,069 and 2.7 mln shares respectively, just over two weeks ahead of the group's second quarter interims and KPIs.
   
Panmure Gordon attempted to reassure clients however, saying although this may be taken negatively, it would still be buyers of the stock.
   
On the upside, WPP added 4 pence to 655-1/2 after Deutsche Bank repeated its 'buy' recommendation and increased its price target to 790 pence from 770p following last week's trading update.
   
The German broker also lifted its EPS for 2006, 2007 and 2008 by 1 pct, 3 pct and 5 pct respectively, saying the group's reported revenue was ahead of its forecasts.
   
On the second line, Topps Tiles gained 9-3/4 pence to 240-3/4 as the floor-coverings group accompanied its third quarter trading update with news of a sizeable capital return.

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The ceramic tile and wood flooring specialist said it is proposing to return 122.4 mln stg or 54 pence per share to its shareholders, financed by existing cash resources and a new 116 mln stg senior debt facility.
   
Sector peer Carpetright added 28 pence to 1288.
   
Northgate Information Solutions added 2 pence to 79 after the software group posted a solid set of full-year results.
   
Northgate IS announced pretax profit for the year to April 30 jumped 95 pct to 30.6 mln stg, helped by a booming UK public services market for information technology, and said it expected growth to accelerate over the next year.
   
Among the fallers, Wilson Bowden lost 32 pence to 1451 after an uninspiring trading statement.
   
The UK housebuilder said although its full year performance will be in line with expectations, the 2006 result will be more second half weighted than last year due to the timing of new site openings.
   
Sector peer George Wimpey also suffered, down 2-1/4 pence to 456, as it warned that the FY outlook for its US unit would be 'difficult to predict' in an otherwise in-line trading update.
   
In response to the update, Bridgewell Securities reiterated its 'underweight' rating.

Diary of Events

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PARIS - Market data at 10.05 am:

Major indices:
   
CAC-40 down 29.78 points or 0.60 pct at 4,954.10
SBF-80 down 18.70 points or 0.33 pct at 5,709.46
SBF-120 down 21.00 points or 0.58 pct at 3,594.56

Volume: 282 mln eur
6 CAC-40 stocks up
33 CAC-40 stocks down
(Arcelor temporarily suspended from CAC-40)

Major gainers:
   
Thales, up 0.12 eur or 0.39 pct at 30.73
   
Essilor International, up 0.25 eur or 0.32 pct at 78.60
   
Credit Agricole, up 0.06 eur or 0.20 pct at 30.35, after saying it won't bid for Alliance & Leicester.

Major losers:
   
EADS, down 0.82 eur or 3.83 pct at 20.58, amid reports its Airbus unit will concede that rival Boeing is beating it in aircraft orders, and that BAE Systems wants more details about the depth of industrial problems at Airbus before deciding whether it will recommend that shareholders back the sale of its 20 pct stake to EADS.
   
PPR, down 2.55 eur or 2.56 pct at 97.10. Fideuram Wargny, leaving its 'buy' recommendation unchanged, said the market is awaiting action by PPR to  boost its luxury goods activity.
   
Electricite de France, down 0.66 eur or 1.58 pct at 41.22

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FRANKFURT - Market data at 10.14 am
   
Major indices:
   
DAX 30 - 5,690.72, down 38.29 points or 0.67 pct
MDAX - 7,945.22, down 49.20 points or 0.62 pct
TecDAX - 667.96, down 4.42 points or 0.66 pct
DAX future - 5,725.50, down 28.00 points or 0.49 pct

Major gainers:
   
Infineon, up 0.09 eur or 1.02 pct at 8.91, after upbeat comments from Deutsche Bank, which argued that the chipmaker will beat consensus when reporting third quarter results and reiterated its 'buy' rating and 11.00 eur price target on the stock
   
Deutsche Boerse, up 0.69 eur or 0.64 pct at 107.96, as the CEO of the Chicago Mercantile Exchange Craig Donohue told Sueddeutsche Zeitung that the exchange is not ruling out acquisitions or mergers
   
DaimlerChrysler, up 0.12 eur or 0.31 pct at 38.62
   
TUI, up 0.03 eur or 0.19 pct at 15.55
   
Major losers:
   
Continental AG, down 2.50 eur or 3.08 pct at 78.80, after Japanese peer Sumitomo Rubber Industries became the latest company in the sector to cut its full-year guidance, though analysts at HVB dismissed the resulting concerns over Continental's profits
   
ThyssenKrupp, down 0.38 eur or 1.33 pct at 28.26
   
Commerzbank, down 0.34 eur or 1.17 pct at 28.64
   
Allianz, down 1.45 eur or 1.16 pct at 123.20
   
BASF, down 0.68 eur or 1.07 pct at 63.04

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