UK/Euro Financial Market Daily Morning Briefing 07-03-2006

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London shares lower in early deals, with mining stocks weak

Leading shares were sharply lower in early deals, following a dismal performance on Wall Street, with mining stocks weak following overnight declines in metal prices, while Liberty International was hit by a Merrill Lynch downgrade, dealers said.
   
At 9.04 am, the FTSE 100 was down 41.4 points at 5,856.4 with the broader indices all lower.
   
Volume was average, with 349 million shares changing hands in 29,773 deals.
   
US stocks closed sharply lower as heavy prices losses in the Treasury market
pushed the yield on the benchmark 10-year note to its strongest level since June
2004.
   
That was the month that the Federal Reserve began putting in place its programme of steady, quarter-point rate hikes.
   
The Dow Jones Industrial Average closed down 63 points at 10,958.59, while the S&P 500 fell 8.97 points to 1,278.26, and the Nasdaq Composite dropped 16.57 points to 2,286.03.
   
Across Asia overnight, the Nikkei 225 index closed down 175.14 points at 15,726.02, while the Hang Seng closed 209.47 points lower at 15,602.36.
   
Back in London, the fall in metal prices hit Antofagasta, down 57 at 2,046, Xstrata 34 lower at 1,706, BHP Billiton losing 25 at 939, Kazakhmys dropping 15-1/2 at 873-1/2, Anglo American losing 49 at 2,081 and Rio Tinto down 53 at 2,636.
   
Elsewhere, Liberty International was 20 lower at 1,113 after Merrill Lynch downgraded the stock to 'hold' from 'buy' on valuation grounds.
   

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Ex-dividend factors hit Arriva, down 10 at 820.
   
Among only a handful of blue chip stocks bucking the downward trend, Cadbury Schweppes, Kelda, and Reuters all gained as bid rumours persisted.
   
Cadbury was up 4-1/2 at 589-1/2, Kelda added 2-1/2 at 803, while Reuters was up a penny at 380-1/2.
   
Insurance broker Jardine Lloyd Thompson led the mid-cap fallers, down 41-1/2 at 403-1/2, after reporting a decline in 1005 earnings, and warning it can't see any more than a modest improvement in performance in the current year. KBC, subsequently, downgraded the stock to 'reduce' from 'hold'.
   
HMV dropped 3-3/4 to 186 after the Financial Times reported that Permira may withdraw its offer for the company due to disagreements over valuation.
   
Great Portland Estates and Unite both fell on Merrill Lynch downgrades to 'hold' from 'buy' on valuation. Great Portland shares were 9-1/4 lower at 466-1/2, with Unite down 12-3/4 at 437-3/4.
   
easyJet gave up 9-1/2 at 382-3/4 as February traffic stats disappointed. The load factor of 83.7 pct came in below Credit Suisse's estimate of 84.9 pct, while passenger traffic growth of 9.4 pct was below the same broker's forecast of 11 pct.
   
Premier Food dropped 6 to 293 after the company warned that the trading environment remains "highly competitive" with energy-related inflationary pressures a concern.
   
That overshadowed an 18 pct rise in 2005 earnings, boosted by healthy demand for new products such as Ambrosia custard snack pots and Branston-pickle flavoured baked beans.

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N Brown fell back on profit-taking following bid rumours yesterday. The shares dropped 7 to 207.
   
On the upside, Tullow Oil gained 8-1/2 at 312 following a bullish update from the Block 2 Waraga-1 exploration well in Uganda, in which it holds a 50 pct stake.
   
Hydrocarbons found at the well indicate the presence of oil on the site.
   
Hardman Resources, which owns the other 50 pct stake, gained 2-1/2 at 82.
   
Equipment rental group Ashtead rose 4-3/4 to 225 after revealing third quarter pretax profit moved into the black. In the third quarter, sales shot up to 162.5 mln stg from 123.4 while pretax profit came in at 24.2 mln from a loss of 0.1 mln.
   
UBS and Investec reiterated 'buy' recommendations on the stock following the
numbers.
   
Admiral Group added 10-3/4 at 588-3/4 as Merrill Lynch reiterated its 'buy' recommendation after the motor insurance company reported a better-than expected 21 pct increase in annual profits.
   
Finally, Aegis were up 1-1/4 at 132-3/4 after full-year numbers beat expectations. Merrill Lynch reiterated its 'buy' stance.
    
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PARIS - Market data at 08.31

   
Major indices:
   
CAC-40 down 32.75 points at 4,977.97
SBF-80 down 28.00 at 5,754.45
SBF-120 down 23.13 at 3,613.36

Volume: 571 mln eur
7 CAC-40 stocks up
33 CAC-40 stocks down

Major gainers:
   
Zodiac, up 1.40 eur or 2.7 pct at 53.35 after UBS upgraded to 'buy' from 'neutral.'
   
Infogrames Entertainment, up 0.01 at 0.80 and continuing to bounce from the steep declines seen recently, due to weakness at its Atari unit.
   
Accor, up 0.25 at 52.10 and leading gains among CAC-40 names, as the stock continues to benefit from recent restructuring announcements aimed at refocusing the company on core hotel operations and improving its balance sheet, dealers said.

Major losers:
   
EDF, down 0.67 at 43.05 as investors take profits from yesterday's surge, seen after a newsletter report said Prime Minister Dominique de Villepin favors a tie-up of EDF with Veolia.
   
STMicroelectronics, down 0.21 at 14.34, as technology stocks hit by overnight losses on Nasdaq.
   
Lafarge, down 1.35 at 87.90 after the company said it needed to extend its 75 usd per share offer for the minority stakes in its Lafarge North America unit.

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FRANKFURT - market data at 08.52 GMT

   
Major indices:
   
DAX 30 - 5,718.73, down 35.33 points or 0.61 pct
MDAX - 8,378.46, down 21.17 points or 0.25 pct
TecDAX - 733.27, down 7.26 points or 0.98 pct
DAX future - 5,722.50, down 4.50 points or 0.08 pct

Major risers:
   
Altana, up 0.21 eur or 0.47 pct at 44.58, as it said it has submitted a new drug application (NDA) for its respiratory drug Ciclesonide (Alvesco) nasal spray to the US Food and Drug Administration as well as to Canadian health authorities
   
Continental, up 0.36 eur or 0.42 pct at 86.61
   
Deutsche Telekom, up 0.05 eur or 0.36 pct at 14.01, as Portugal Telecom announced a 35.7 pct hike to its full year dividend to 47.5 eurocents last night as it rushed out stronger-than-expected fourth quarter results and rejected SonaeCom's 9.5 eur per share bid.
   
BASF, up 0.07 eur or 0.11 pct at 61.72

Major losers:
   
Metro, down 1.18 eur or 2.60 pct at 44.25 following recent solid gains
   
TUI, down 0.24 eur or 1.43 pct at 16.54, after UBS downgraded the issue to 'reduce' from 'neutral' and cut its price target to 14 eur versus 18, citing a more cautious stance on the outlook for container shipping    

Commerzbank, down 0.33 eur or 1.09 pct at 30.01
   
E.ON, down 0.99 eur or 1.08 pct at 90.29

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