UK/Euro Financial Market Daily Morning Briefing 07-06-2006

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London shares turn lower at open as miners offset Cadbury gains

Leading shares turned lower in opening deals, reversing initial gains, as jitters across the mining sector and a host of blue chips going ex-dividend helped to offset a positive update from Cadbury Schweppes, dealers said.
   
At 9.00 am, the FTSE 100 was 11.8 points lower at 5,658, off an opening high of 5,701.2, with the broader indices all positive.
   
Bucking the weak market trend, Cadbury was an early winner, 9 higher at 512, after an in-line trading update from the confectionary giant.
   
The soft drinks and chocolate maker said it expects to deliver good revenue growth in 2006, towards the upper end of its target of 3-5 pct.
   
But gains were capped as it cautioned it is unlikely to deliver margin growth within its 'goal range' this year because of the continuing rises in oil prices.
   
In response, Merrill Lynch reiterated its 'buy' advice and said the stock represents good value after the 15 pct sell off in the last couple of months.
   
But Centrica was the top riser, gaining 6-1/4 at 276-1/2 on renewed bid hopes.
   
The FT reported that long time mooted suitor Gazprom, Russia's state-controlled gas monopoly, has reaffirmed its strong interest in entering the UK market through strategic partnerships and acquisitions.
   
Financial stocks also fought back from recent losses with Amvescap 7-1/2 firmer at 494, Friends Provident up 2 at 176-1/4, Legal & General 1-1/4 firmer at 125 and Royal & Sun rose 1 at 128.
   
William Morrison found favour, up 3-1/4 at 196-1/4 amid press reports Ken Morrison, executive chairman of the supermarket chain, is to relinquish his executive responsibilities and step back from the day-to-day operations.
   
The FT says the move is part of a deal to secure Marc Bolland, chief operating officer of Heineken NV as new chief executive.

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Broker comment meanwhile gave some cheer to Diageo, up 10-1/2 at 904-1/2 after the drinks giant was upgraded to 'buy' from 'hold' at Deutsche Bank.
   
The broker urged investors to switch out of Pernod Ricard and into the industry leader due to increased momentum across Diageo's key brands.
   
Rentokil also found support as traders breathed a sigh of relief the support services group looks like it will manage to avoid relegation from the blue chip index in the latest FTSE reshuffle.
   
Shares took on 3 at 145-1/2, but Daily Mail & General Trust and Cable & Wireless, which are set to be dropped to the FTSE 250, were off 1 at 622 and 1/2 at 102-1/4 respectively.
   
Still on the downside, mining stocks gave up much of their opening gains as commodity prices continued to slump with copper adding to yesterday's 3 pct falls on the back of rising inflation fears.
   
Xstrata fell 21 at 1,918, Kazakhmys was down 21-1/2 at 1,066-1/2, BHP was off 6-1/2 at 987 and Rio Tinto eased 29 at 2,731.
   
PartyGaming though was the top faller, down 4-1/4 at 118 amid news Dresdner Kleinwort Wasserstein is to place 350 mln shares in the on-line gaming firm on behalf of two of its founders.
   
The placing, representing around 8.5 pct of the company's share capital, is to be made via an accelerated book-build.
   
Traders mentioned a possible price level of 120 pence a share, above the 116 pence IPO price when PartyGaming floated last year.
   
Ex-dividend factors also weighed, dragging the index by as much as 12 points, with Vodafone, National Grid, Johnson Matthey and Enterprise Inns and BAA all hit.
   
BAA, down 15 at 933, was shaken further amid continued uncertainty over its future.
   
The FT reported that Goldman Sachs is insisting it is not out of the takeover battle yet.
   
Meanwhile, The Telegraph claims Ferrovial wanted to buy more than 14 pct in BAA yesterday but could not do so until it receives approval from the Australian regulators.

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Yesterday, BAA confirmed it has agreed to be taken over by a consortium led by the Spanish infrastructure group for 10.11 bln stg, after rebuffing a slightly higher proposal from a rival consortium led by Goldman Sachs.
   
On the second-line, Resolution was 29 higher at 705 after agreeing to buy the life insurance businesses of Banco Santander Central Hispano unit Abbey National.
   
In reaction, Merrill Lynch retained its 'neutral' stance on the stock, adding that it thought the deal would receive a modestly positive reaction from investors today.
   
And easyJet also moved higher, up 5 at 351 after the no-frills carrier's monthly traffic report showed the revenue environment continues to look robust.
   
easyJet revealed it carried 2.94 mln passengers in May, an increase of 15.2 pct on the same month last year, reflecting a capacity rise of 15.5 pct.
   
On the downside, ex-dividend factors accounted for the bulk of the losers with Premier Foods, Punch Taverns, Alliance Trust and Bellway among the casualties.
   
Meanwhile on Wall Street, stocks continued to be hit by inflation fears and concerns the Fed may raise interest rates further.
   
The DJIA fell a further 46.58 points to 11,002.14, its lowest level since the start of March, but still managed to bounce back from 110-point losses seen in midday trade.
   
And overnight in Asia, the Nikkei 225 closed 288.85 points lower at 15,096.01, while the Hang Seng was down 104.25 at 15,868.86 by midday.
   
Still in Asia, oil prices fell further after Iran indicated it would at least consider a package of incentives offered by world powers for it to halt its controversial nuclear program.
   
Earlier this morning, New York's main contract, light sweet crude for July delivery, was down 0.24 usd at 72.26 usd a barrel from its close of 72.50 usd in the US overnight.

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 yesterday's close of trade, click here

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AMSTERDAM - Market data at 10.08 am
   
Major indices
   
AEX               426.97, down 0.91 points
AMX Midcap        557.01, down 3.36 points
Government bonds  flat to higher 

Major gainers
   
TomTom was up 1.17 pct to 33.79 eur
   
Reed Elsevier gained 0.70 pct to 11.45 eur
   
Numico lifted 0.15 pct to 33.12 eur
   
Second-liner Corio added 0.64 pct to 45.93 eur
   
Ordina added 0.37 pct to 16.48 eur

Major losers
   
Versatel led decliners, losing 2.13 pct to 0.92 eur
   
Philips was down 1.70 pct to 23.14 eur after brokerages voiced concern over the LCD consumer electronics market after disappointing sales at market peers
   
Buhrmann was down 1.29 pct to 11.46 eur
   
Crucell fell 3.74 pct to 15.68 eur, extending yesterday's deep losses
   
Hunter Douglas was 1.80 pct to 51.70 lower
   
Pharming lost 3.77 pct to 3.32 eur

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FRANKFURT - Market data at 9.34 am
   
Major indices:
   
DAX 30 - 5,495.35, down 7.46 points or 0.14 pct
MDAX - 7,848.42, down 18.16 points or 0.23 pct
TecDAX - 644.45, up 2.45 points or 0.38 pct
DAX future - 5,499.50, down 38.00 points 0.69 pct

Major gainers:
   
Deutsche Boerse, up 1.34 eur or 1.36 pct at 99.60, recovering from yesterday's solid losses, as Handelsblatt newspaper reported that the SWX Swiss Exchange may be interested in cooperation talks with the German exchange operator
   
Deutsche Post, up 0.21 eur or 1.00 pct at 21.27, after Deutsche Bank upgraded its stance on the stock to 'buy' from 'hold' and hiked its price target to 26 eur versus 21
   
Bayer, up 0.22 eur or 0.65 pct at 34.25
   
RWE, up 0.39 eur or 0.61 pct at 64.60
   
Siemens, up 0.30 eur or 0.47 pct at 64.33
   
Major losers:
   
DaimlerChrysler, down 0.69 eur or 1.80 pct at 37.64, extending yesterday's losses, which came on the back of oil price concerns and as Credit Suisse cut its price target on the issue to 44 eur from 46, reiterating its 'underperform' recommendation
   
Commerzbank, down 0.38 eur or 1.39 pct at 26.89
   
BMW, down 0.43 eur or 1.14 pct at 37.45
   
Adidas, down 0.38 eur or 1.01 pct at 37.36
   
Allianz, down 1.14 eur or 0.97 pct at 115.87

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PARIS - Market data at 9.32 am:

Major indices:
   
CAC-40 down 2.96 points or 0.06 pct at 4,794.96
SBF-80 up 16.22 points or 0.30 pct at 5,513.73
SBF-120 down 0.32 points or 0.01 pct at 3,478.40

Volume: 407 mln eur
22 CAC-40 stocks up
17 CAC-40 stocks down
1 CAC-40 stock unchanged

Major gainers:
   
Suez, up 0.45 eur or 1.54 pct at 29.62, as further developments are awaited in its planned merger with Gaz de France.
   
Bouygues, up 0.53 eur or 1.27 pct at 42.19
   
Arcelor, up 0.44 eur or 1.34 pct at 33.24, after requesting a meeting with hostile suitor Mittal Steel about Mittal's business plan for a merged company.

Major losers:
   
AGF, down 0.50 eur or 0.54 pct at 91.75, after parent company Allianz said a minority buyout offer this year is unlikely.
   
Electricite de France, down 0.21 eur or 0.50 pct at 41.90
   
Michelin, down 0.19 eur or 0.39 pct at 48.40

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