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

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London shares open lower as ex-dividend stocks weigh on FTSE

Leading shares opened lower after Wall Street closed weaker, with ex-dividend factors and weaker bank stocks weighing down the FTSE 100, dealers said.
   
At 9.00 am, the FTSE 100 index opened 29 points weaker at 6,603.8 having closed yesterday 31.3 points lower at 6,632.8 with ex-dividend factors taking 12.3 points off blue chips.
   
Ex-dividend companies weighing down the FTSE 100 include Daily Mail & General Trust, Enterprise Inns, National Grid, Punch Taverns, Vodafone, WPP.  In the mid caps Bellway, Bodycote, Burren Energy, Debenhams, and Premier Foods all turned ex-dividend today.
   
Last night on Wall Street, US stocks fell from record highs struck a day earlier following data and remarks from Federal Reserve Chairman Ben Bernanke which lowered hopes of a cut in US interest rates. Stronger-than-expected data on the US services sector only reinforced the view that the US central bank would not cut interest rates anytime soon.
   
The Dow Jones Industrial Average ended down a hefty 80.86 points, or 0.59 pct, to close at 13,595.46. The Nasdaq composite dropped 7.06 points, or 0.27 pct, to 2,611.23 and the Standard & Poor's 500 index shed 8.23 points, or 0.53 pct, to a close of 1,530.95 points.
   
In US economic news today, the spotlight will be on North American productivity data which is expected to be revised down to plus 1.5 pct for the first quarter, compared to plus 1.7 pct previously.
   
For unit labour costs, the consensus is for a revision to plus 0.9 pct, compared to 0.6 pct.
   
On Asian markets, the Nikkei 225 index closed its morning session down 16.50 points, or 0.09 pct, at 18,037.31, while the Hang Seng ended the morning up 56.323 points, or 0.27 pct, at 20,898.48.
   
Oil prices were firmer in Asian trade ahead of the release of US stockpile figures. New York's main contract, light sweet crude for July delivery, was 25 cents higher at 65.86 usd a barrel from 65.61 usd in late US trades Tuesday when it dropped 70 cents.
   
Brent North Sea crude for July rose 32 cents to 70.77 usd.

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Turning to the blue chips, banking stocks were under with pressure after JP Morgan downgraded Northern Rock to 'underweight' as part of a wider review of the effect of Independent Financial Advisors (IFA) and remortgaging on the UK banking sector.
   
Its peers were also lower Alliance & Leicester fell back 5 at 1,170 and HBOS was down 2 at 1,092.

However, Lloyds TSB bucked the trend and was 4-1/2 higher at 583-1/2 after JP Morgan upgraded the group to 'neutral' in the same review. Royal Bank of Scotland was up 8 at 648-1/2 with JP Morgan reiterating its 'overweight' stance.
   
Also helped by broker comment, Standard Chartered gained 1 at 1,691 after Merrill Lynch lifted its target to 2,077 pence from 1,705 pence and reiterated its 'buy' rating after reviewing its forecasts following a good start to the year for the bank.
   
Back on the downside, miners were lower after copper prices edged weaker with Antofagasta falling back 5-1/2 at 574 and Kazakhmys down 12 at 1,303.
   
Elsewhere, Kingfisher edged back 6 at 239 on news that Morgan Stanley is undertaking a placing of 57 mln shares in the blue chip DIY retailer at a range of 238-241 pence each via an accelerated book-build.
   
In earning news, Severn Trent fell back 22 at 1,541 after the water utility's full-year results this morning, with Merrill Lynch repeating its 'neutral' stance.
   
On the upside, GlaxoSmithKline the top riser was 23 higher at 1,304 following the group stepping up its defence of Avandia, the diabetes medicine, after the release of fresh data last night that the company claimed showed little significant difference between the drug's safety record and that of other common diabetes treatments, The Times reported.
   
And Man Group was up 8-1/2 at 591 after the group announced at close of business yesterday the net asset value of AHL Diversified Futures Ltd was 31.60 usd, up 3.44 pct from last week and up 5.3 pct over the last 12 months.
   
Turning to the mid caps, JJB Sports was one of the biggest fallers, down 9-1/4 at 264, after the group said its total revenue for the 18 weeks to June 3 fell 1.2 pct compared with the same period last year, as like-for-like revenues declined 1.8 pct.

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The sports retailer and health clubs group said, however, the combined gross margin from both the retail stores and health clubs for the 18 week period was 260 basis points higher than last year.

Broker comment helped shares in Victrex fall back 23 at 739 after Citigroup downgraded the group to 'hold' from 'buy' following interim results yesterday.
   
Elsewhere, Cobham was 3 weaker at 215-1/2 after SG Securities cut the group to 'hold' from 'buy'.
   
On the upside, broker comment helped shares in Carillion rise 10 at 429-3/4 after UBS upgraded the group to 'buy' from 'reduce', with an increased price target of 500 pence from 330 on valuation grounds.

However, the top midcap riser was SThree up 17 or 3.36 pct at 523 after the group said it continues to perform strongly in the first half with trading conditions in specialist staffing markets supporting healthy growth across the business.
   
The international specialist staffing business said permanent placements during the first half grew 31.8 pct over the same period last year while it registered a 14.7 pct growth in active contractors over the previous year. Panmure Gordon reiterating its 'buy' stance and 585 pence price target on SThree.
   
An inline trading update also helped shares in Woolworths Group gain 0-3/4 at 28-1/2, with Seymour Pierce upgrading its recommendation to 'hold' from 'underperform'.
   
Elsewhere, Carphone Warehouse was pushed 3 higher at 325 after the FT reported rumours that Best Buy was building a stake in the group. 

UK Diary of Events

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PARIS - Market data at 10.03 am:

Major indices:
   
CAC-40 down 22.83 points or 0.38 pct at 6,055.71
SBF-80 down 36.31 or 0.49 pct at 7,412.78
SBF-120 down 17.33 or 0.39 pct at 4,428.63

Volume: 696 mln eur
9 CAC-40 stocks up
29 CAC-40 stocks down
1 CAC-40 stock unchanged

Major gainers:
   
Zodiac up 1.69 eur or 2.93 pct at 59.37 after being upgraded to 'buy' from 'hold' at SG Securities, with a raised target of 64 eur from 60 eur, dealers said.
   
In a note published this morning, SG Securities said it is very encouraged by Zodiac's proposed sale of marine activities to Carlyle.
   
Electricite de France (EDF) up 0.49 or 0.72 pct at 68.15
   
Bouygues up 0.28 or 0.50 pct at 56.28 at following its first-quarter results. The conglomerate comfortably beat consensus with a 28 pct rise in net profit to 189 mln eur, as business remained strong, particularly in
construction. The company raised its full year sales guidance to 28.8 bln eur from 28.6 bln.

Major losers:
   
Renault down 1.88 or 1.66 pct at 111.50 after strong gains in recent sessions amid high expectations for new-product launches starting this month. Rival car maker Peugeot -- down 0.67 or 1.14 pct at 58.22 -- saw similar profit-taking.
   
Carrefour down 0.74 or 1.37 pct at 53.35. Spanish newspaper Expansion reported, citing unnamed sources close to the operation, that Eroski has acquired a 75 pct stake in the Caprabo supermarket chain for 1.3 bln eur, beating a rival bid from Carrefour.
   
Vallourec down 2.65 or 1.14 pct at 229.35. In an interview with Les Echos to coincide with today's AGM, management board chairman Pierre Verluca said the steel tube maker has the means to pursue a stand-alone strategy, although it would consider an offer "if we are officially approached". He was commenting on recent rumours of takeover interest from Arcelor Mittal, Gazprom and billionaire Roman Abramovitch.
   
Verluca also stated that Vallourec could "easily" make an acquisition of around 1 bln eur as part of its growth strategy.

Most active stocks:
   
Total, up 0.16 or 0.29 pct at 56.16, on 640 mln eur
   
BNP Paribas, down 0.50 or 0.56 pct at 88.60, on 559 mln

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FRANKFURT - market data at 10.07 am

Major indices

DAX - down 31.82 points, or 0.40 pct, at 7,888.01
MDAX - down 174.98 points, or 1.57 pct, at 10,983.33
TecDAX - down 7.04 points, or 0.77 pct, at 912.92
DAX futures - down 11.00 points, or 0.14 pct, at 7,899.50

Major Advancers
   
SAP, up 0.53 eur or 1.46 pct at 36.91, recovering from recent weak performance, helped by US tech stocks advances
   
Altana, up 0.11 eur or 0.58 pct at 18.96
   
Fresenius, up 0.44 eur or 0.41 pct at 108.09
   
Adidas, up 0.12 eur or 0.26 pct at 46.32
   
Metro, up 0.09 eur or 0.14 pct at 63.33

Major Decliners
   
TUI, down 0.48 eur or 2.38 pct at 19.68
   
Linde, down 1.40 eur or 1.68 pct at 82.05, trading ex-dividend of 1.50 eur
   
Thyssenkrupp, down 0.74 eur or 1.63 pct at 44.65
   
Infineon, down 0.15 eur or 1.28 pct at 11.56
   
MAN, down 1.18 eur or 1.09 pct at 106.82
   
Other Major Movers
   
Allianz, up 0.20 eur or 0.12 pct at 171.40, after WestLB raised its stance to 'buy' from 'add' and lifted its price target to 188.0 eur per share

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MADRID - Market data at 10.15 am:

IBEX-35 index down 142.80 points at 15.172.80
   
Major losers:
   
Property companies, with Colonial down 0.08 eur at 4.23, Astroc off 0.23 at 13.14, Metrovecesa off 0.95 at 82.60, and Urbis 0.33 lower at 27.39, amid continuing negative sector sentiment and ahead of Realia's market debut today.
   
Acciona down 4.75 or 2.36 pct at 196.65, on concerns that it may have to lower the price asked for its handling operations to attract more bidders.
   
Other selected constructors, with Sacyr off 0.91 or 2.23 pct at 39.74, Acciona down 4.75 or 2.36 pct at 196.65, Ferrovial down 1.35 at 77.85 and FCC down 1.40 at 71.25.
   
Iberia off 0.02 at 3.87, though outperforming the broader market on hopes that Apax Partners could be set to launch a bid for the carrier following the sale of its stake in Vueling.

Major gainers:
   
Gamesa up 0.11 at 28.37, amid ongoing M&A hopes and continuing positive sentiment surrounding the renewables sector.
   
Repsol YPF up 0.10 at 26.85, amid expectations of an imminent deal on the sale of its YPF unit, and firmer oil prices.
   
Acerinox up 0.06 at 18.86.

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