UK/Euro Financial Market Daily Morning Briefing 06-03-2007

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London shares rise tentatively in early deals, Xstrata leads miners

Leading shares climbed tentatively higher in early deals, with recovering Asian markets and strong result from Xstrata and International Power helping to soothe investors' nerves after recent heavy losses.

By 9.10 am, the FTSE 100 index was up 20.2 points to 6,078.9, but off its opening high of 6,108.5, while the broader indices also recovered. Volume was heavy again, with 368.4 mln shares changing hands in 71,916 deals.

Asian markets bounced overnight, with Tokyo leading the way after the dollar stabilised against the yen amid easing yen carry trades, traders said.

The Nikkei 225 closed 202.25 points higher at 16,844.50, while the Hang Seng ended 393.68 points higher at 19,058.56. The FTSE Xinhua China 25 index meanwhile jumped 443.91 points to 14,409.04.

On Wall Street last night, US stocks seesawed through an erratic session before finishing near lows for the day amid continuing concerns about the strengthening yen and tumbling stock markets abroad.

After bobbing between positive and negative territory all session, the DJIA finished 63.69 points lower at 12,050.41, while the Nasdaq fell 27.32 to 2,340.68.

In the UK, the reporting season continues apace, with another raft of companies announcing earnings today.

Xstrata led the early risers, with a solid set of FY results and an overnight recovery across commodity prices seen helping the shares recover from recent weakness.

Earlier this morning, Xstrata posted a 112 pct increase in EBIT for 2006 after the acquisition of Falconbridge last year, which created the world's fifth-largest mining company.

In reaction, Deutsche Bank reiterated its 'buy' recommendation and 2,900 pence target, telling clients that overall it was a solid result and highlighted potential for strong earnings growth in 2007.

A recovering commodities basket also provided support, with gold, silver, copper and platinum prices all moving higher this morning.

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In the sector, Vedanta bounced 13 pence higher to 1,191, Lonmin gained 32 pence to 3,268, BHP Billiton added 19-1/2 pence to 1,003 and Rio Tinto climbed 37 pence to 2,695. 

Remaining with blue chips, International Power was also in demand this morning, climbing 14 pence to 366-1/2, after the energy generator reported a full-year profit from operations and excluding exceptional items of 773 mln stg, from 536 mln last year. In reaction, Dresdner Kleinwort upgraded its recommendation to 'hold' from 'reduce'.

Slough Estates was also higher this morning, up 9 pence to 732, helped by an upgrade to 'overweight' from 'neutral' by HSBC ahead of the group's preliminary results on March 8. The broker told clients that it expects the group's figures to reaffirm the positive momentum in the business resulting from management initiatives.

On the downside, DSG International lost 2 pence to 165-1/4 after Bridgewell initiated coverage on the retailer with an underweight recommendation and voiced concerns over the threat of competition from internet retailers.

"Some of DSG's brands are highly price competitive on the internet, but wide store/web pricing differentials look unsustainable to us. The broker cautioned clients.

Imperial Tobacco shares were also under pressure, down 24 pence to 2,036, amid reports that BAT chief executive Paul Adams has ruled out an acquisition of the UK group, saying he feels both Imperial Tobacco and Altadis are too expensive to buy.

ITV shares, meanwhile, lost 0-3/4 pence to 106-1/2, after the broadcaster announced after the close last night that in light of recent concern surrounding premium interactive services in television programmes, it has appointed Deloitte as independent auditors to conduct a complete review of all premium rate interactive services in ITV programmes.

The group has temporarily suspended all premium interactive services across all channels from tomorrow whilst the review is carried out. Goldman Sachs reiterated its 'buy' stance, however, noting that the financial implications of this deal are not material.

The broker calculated that even if services were suspended for one month, the impact on its 2007 estimates would be a loss of 4  mln stg from group revenues and less than 1 mln stg from EBITA.

British Airways was again the top blue-chip faller, as investors continued to fret over the impact of a proposed Open Skies pact between the US and Europe.

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On the second line, Galiform added 11-1/4 pence to 138-1/2, after the owner of Howden Joinery reported a better-than-expected 34.5 pct increase in full-year underlying profit and a solid start to its new financial year.

For the 53 weeks to Dec 30 2006 the group, which currently trades from over 360 depots, made a profit before tax and exceptional items from continuing operations of 57.2 mln stg.

Redrow was the top midcap faller, sliding 15-1/2 pence to 596-1/2, after the UK housebuilder accompanied an in-line set of interim results with a cautious outlook.

Redrow reported a 1.7 pct increase in interim pretax profit to Dec 31 2006 to 54.3 mln stg, up from 53.4 mln stg last time, in a market it describes as stable but competitive.

Looking ahead, however, it said the housing market was "stable but competitive".

In reaction, Dresdner Kleinwort said that it was cutting its estimates by 5.6 pct for 2007 and by 4 pct for the following two years following what appears to be downward volume guidance by the company in today's results for the first half to December.

UK Diary of Events

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

US Summary

For a summary of US stocks at yesterday's close of trade, click here

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PARIS - Market data at 10.00 am:

Major indices:
   
CAC-40 up 27.50 or 0.51 pct at 5,412.53
SBF-80 up 15.89 or 0.24 pct at 6,661.21
SBF-120 up 18.51 or 0.47 pct at 3,961.63

Volume: 1 bln eur on CAC-40
32 CAC-40 stocks up
8 CAC-40 stocks down

Major gainers:
   
Vinci up 1.99 or 2.02 pct at 103.44 on market rumour Pinault's Artemis is building stake
   
M6 up 0.86 or 3.39 pct at 26.25 after FY results beats forecasts, unveils share buyback plans
   
Altran Technologies up 0.20 or 3.36 pct at 6.15 on bargain-hunting
   
Arcelor Mittal up 0.3 or 1.65 pct at 38.73

Major losers:
   
Capgemini down 0.61 or 1.16 pct at 52.00 on profit-taking
   
Euler Hermes down 0.50 at 102.00, cut to 'outperform' from 'selected list' at CA Cheuvreux
   
France Telecom down 0.10 or 0.51 pct at 19.61 after definitive FY results

Most active stocks:
   
Carrefour up 0.70 or 1.35 pct at 52.70 in 115 mln eur
   
Total up 0.18 or 0.37 pct at 49.47 in 105 mln
   
BNP Paribas up 0.41 or 0.53 pct at 77.85 in 80 mln

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AMSTERDAM - Market data at 10.07 am

Major indices
   
AEX                 477.14, up 1.55 point
AMX Midcap          675.85, down 0.67 point
Government bonds    narrowly mixed

Major gainers:
   
Fortis climbed 1.6 pct at 31.80 after WestLB upgraded its stance for the bank to 'buy' ahead of Thursday's fourth-quarter results
   
Ahold firmed 1.22 pct at 7.46, Unilever was 0.94 pct higher at 19.36 and Heineken was up 0.8 pct at 36.60
   
Hagemeyer gained 0.86 pct at 3.51 helped by strong results from UK peer Travis Perkins
   
Philips put on 1.17 pct at 27.60   
   
Wegener rose 3.33 pct at 13.36 after the publisher's full-year results came in ahead of expectations and it gave a bullish outlook for 2007. Petercam upgraded the stock
   
Plastic pipes producer Wavin advanced 1.69 pct at 15.05 after posting good full-year results and issuing a strong outlook for 2007
   
Major losers
   
Rodamco Europe dropped 1.11 pct at 99.28, Corio gave up 2.48 pct at 64.62 while Wereldhave was down 0.59 pct at 96.10
   
Ordina fell 0.97 pct at 16.34 after the IT services company reported full-year results a touch below forecasts and issued a slightly disappointing earnings outlook
   
Vedior slipped 0.43 pct at 16.10 after the staffing group announced the CEO of its French operations will step down from end-April
   
Wolters KLuwer shed 1.02 pct at 22.33, Reed Elsevier lost 0.31 pct at 12.89
   
Stork was down 1.95 pct or 75 cents at 37.26, trading ex-dividend of 1.10 eur

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