UK/Euro Financial Market Daily Morning Briefing 07-08-2007

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London shares firmer early, buoyed by Wall St rally ahead of FOMC meeting

The FTSE 100 index was firmer in early deals buoyed by a 2 pct rally on Wall Street Monday amid hopes that today's FOMC statement will reassure investors that economic growth has not been adversely
affected by recent turbulence in the credit markets.
   
By 9.00 am, the FTSE 100 stood 57.5 points higher at 6,246.7, after closing down 35.2 points on Monday. The broader FTSE 250 also rose, up 173.7 points at 11,171.5. Volume was average with 230 mln shares changing hands in 68,452 deals.
   
Last night on Wall Street, the Dow soared 286.87, or 2.18 pct, to 13,468.78. The blue chips closed near their highs after zigzagging throughout much of the session. On Friday, the Dow fell 281 points.
   
Broader stock indicators also rebounded. The S&P 500 index rose 34.61 to 1,467.67. The Nasdaq composite index rose 36.08 to 2,547.33.
   
Over in Asia, the Nikkei 225 ended up 7.31 points at 16,921.77, while over in Hong Kong the Hang Seng finished the morning up 36.85 points at 21,973.58.
    
Looking ahead to this afternoon's FOMC meeting, Fed policy makers are widely expected to hold the nation's benchmark rate steady at 5.25 pct. However, as usual, the greater concern is with the Fed's economic assessment statement. This time, investors will be looking to see what the Fed says about credit and hopes are it will take steps to reassure investors that troubles in the subprime mortgage market will not slow economic growth.
   
Among early risers, miners were prominent following gains by Asian listed counterparts, with Vedanta up 50 pence at 1,683, Antofagasta rising 23 to 695, Lonmin up 86 at 3171  and BHP up 33 at 1,366.
  
Peer Xstrata recovered early falls to trade 25 higher at 2,950 as investors saw enough in the diversified miners first half results to lend support.

Merrill Lynch however said the result was below its forecast. The miner said increased production volumes across the majority of Xstrata's commodity businesses were offset by lower production from Xstrata Copper.
    
On a slightly more upbeat note, Citigroup said that growth looks good for Xstrata as the group highlighted their belief that they can grow production by 12 pct pa between now and 2013 through a 28 bln usd capital project pipeline.
   
Elsewhere, fund management groups Man and Invesco recovered some of their shine following weakness precipitated by recent credit fears, with the former up 12 at 536 and the latter up 13 at 598.
   
And UK insurers continued to benefit from ongoing M&A speculation, with  Royal & Sun Alliance up 3.3 at 134.7 ahead of tomorrow's interim results.

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Standard Life took on 3-1/2 to 318-1/2 after reporting better-than-expected  first half sales figures.
   
Worldwide insurance sales for the six months to June 30 came in at 8.181 bln stg on a present value of new business premiums basis, up 31 pct from 6.235 bln stg in the same period last year.
   
Staying with the results theme, Standard Chartered took on 18 to 1588 ahead of the 9.15 am release of H1 numbers which are expected to reveal a 21 pct rise in pretax profit before items.
   
In broker generated news, Tesco added 7 to 416-1/4 after Deutsche Bank upgraded its recommendation to 'buy' from 'hold' and increased its target to 500 pence, from 430.
   
Deutsche said the recent selloff in Tesco, seemingly on concerns about Tesco UK, fundamentally misunderstands the UK food retail industry and Tesco's position with it.
   
It said this offers investors a good entry point to a quality long term investment. The broker said it had also examined the prospects for Tesco US, which it thinks could be worth at least 20 pence per share but has far greater strategic significance.
   
On the downside, and among the few issues trading in the red Scottish & Newcastle slid 12 to 560, after first-half pretax profit increased 5.5 pct to 191 mln stg while the company was blown off course by severe weather conditions in the UK and France.
   
The brewer of Kronenbourg 1664 and Foster's said it believes achieving its trading targets for the year will be "very challenging" due to the severe weather continuing into July, combined with a brewery strike in France.
   
UBS said the EPS figure of 15.1 pence was 7 pct below the broker's estimates. UBS said it was downgrading its 2007 earnings estimates by 3.5 pct to 36.1 pence from 37.4.
   
Turning to the second line, the UK's largest car dealership Pendragon rose 6 to 78.75 after H1 results results beat the expectations of analysts, who had predicted pretax profits before exceptionals of 27.1 mln stg and came in at 32.7 mln.
   
Elsewhere, Mouchel Parkman added 28 to 387 after acquiring HBS from Terra Firma for 46.24 mln stg in cash.

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Seymour Pierce said the acquisition provides diversified earnings growth  potential, and will also go some way to achieving the group's aim of doubling or trebling in size by 2012.

No frills airline easyJet rose 27 to 534 after reassuring investors that   pretax profit growth for the year to September 2007 will be in the range of 40-50 pct.
   
It added that it expects to maintain high load factors for the summer, while second half guidance on revenue per seat remains unchanged -- down 5-10 pct.
   
And Carpetright added 46 to 1145 after reporting its new financial year got off to a solid start thanks to its expanding European business and further market share gains.
   
Finally, Meggitt took on 5 to 313 after reporting an 11 pct rise in its first-half underlying profit, backed by very strong growth in civil markets and a healthy military market.
   
It also said it is on track to deliver further growth in the second half of this year.

UK 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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PARIS - Market data at 10.07 am:

Major indices:
   
CAC-40 up 73.23 points or 1.32 pct at 5,606.22
SBF-80 up 84.19 or 1.27 pct at 6,725.85
SBF-120 up 53.15 or 1.32 pct at 4,087.83

37 CAC-40 stocks up
3 CAC-40 stocks down

Major gainers:
   
Unibail-Rodamco up 6.84 or 4.24 pct at 168.18 as reassuring comments from banks on subprime risks also lifted property and construction stocks.
   
Dexia up 0.69 or 3.36 pct at 21.23 after the group's FSA unit said last night it was not concerned over its exposure to subprime mortgages.
   
Natixis up 0.71 or 4.84 pct at 15.30, adding to its 6.11 pct rise yesterday and recovering the remainder of the 9.90 pct lost on Friday. After reassuring on its subprime exposure and confirming its full-year guidance yesterday, the shares were boosted this morning by upgrades from UBS -- to 'neutral' vs 'sell' -- and Cheuvreux -- to 'outperform' from 'underperform'.
   
Societe Generale up 3.92 or 3.06 pct at 132.17, Axa up 0.84 or 3.01 pct at 28.77, Credit Agricole up 0.75 or 2.77 pct at 27.83, and BNP Paribas up 2.29 or 2.86 pct at 82.24 as all financial stocks were lifted by Dexia and Natixis' subprime updates.

Major losers:
   
Vallourec down 0.50 or 0.26 pct at 195.45

Most active stocks:
   
Alcatel-Lucent, 4.0 mln shares; up 0.07 or 0.86 pct at 8.17
   
Axa, 3.3 mln shares

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FRANKFURT - market data at 10.21 am
   
DAX - up 68.37 points, or 0.92 pct, at 7,512.82
MDAX - up 124.80 points, or 1.21 pct, at 10,477.61
TecDAX - up 11.93 points, or 1.35 pct, at 894.80
DAX futures - down 30.50, or 0.40 pct, at 7,551.00

Major Advancers:
   
Commerzbank, up 1.19 or 3.93 pct at 30.69, benefiting along with the majority of German financial stocks, after financials in the US saw strong advances yesterday after their battering in the subprime mortgage crisis. The rebound was provoked by the director of S&P's comment that the market had overreacted to its lowered Bear Stearns' credit rating. Moreover, some investors are hoping that the Fed will show some support to banks in today's meeting.
   
Deutsche Bank, up 2.81 or 2.88 pct at 100.30, also gaining due to the general rebound for financials
   
Hypo Real Estate, up 1.12 eur or 2.75 pct at 41.82, gaining for the same reasons
   
Henkel, up 0.69 eur or 2.01 pct at 38.11, as traders said investors are finally appreciating the merits of its plan to buy Imperial Chemical Industries PLC's (ICI) adhesives and electronic materials businesses for 2.7 bln stg, should a takeover of ICI by  Akzo Nobel NV go through.
   
Siemens, up 1.52 eur or 1.66 pct at 93.16. Late yesterday the IG Metall union said the electronic giant plans to cut 600 of its total 6,000 jobs at its Enterprise Communications unit.    

Major Decliners:
   
Volkswagen, down 1.59 eur or 1.13 pct at 139.90, correcting a bit from strong gains recently
   
Continental, down 0.11 eur or 0.11 pct at 98.60
   
Linde, down 0.37 eur or 0.42 pct at 87.50
   
MAN, down 0.50 or 0.47 pct at 104.95
   
Merck, down 0.62 eur or 0.65 pct at 94.58

Other Major Movers:
   
Bayer, up 0.43 eur or 0.82 pct at 52.66, as its stock followed a generally friendly market. Second-quarter results released today offered few surprises and were largely inline with market expectations, albeit coming in slightly above forecasts for some top line numbers.
   
MDAX-listed KUKA, up 1.10 eur or 4.37 pct at 26.30, after the robotics and automation specialist released half-year figures that trumped market expectations.
   
MDAX-listed AWD Holdings, up 1.65 eur or 6.24 pct at 28.09, as UBS and Deutsche Bank have stock in the financial services provider at 'buy', with the former cutting its target to 31.5 eur from 34 ahead of the financial services group's first-half results due August 14.
   
MDAX-listed Beiersdorf, up 1.24 eur or 2.54 pct at 50.15, after the cosmetic company's stock benefited from strong second-quarter figures released this morning that traders said came in higher than expected.
   
MDAX-listed Fraport, up 0.40 eur or 0.82 pct at 48.94, as traders said its recently-released second-quarter figures came in slightly higher than expected, and praised passenger growth that bodes well for the airport operator's future.

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AMSTERDAM - market data at 10.17 am

Major indices
   
AEX 520.96, up 4.92 points or 0.95
   
AMX Midcap 720.08, up 8.28 points or 1.16 pct
   
Government bonds mainly lower

Major gainers
   
Unibail-Rodamco up 3.33 pct at 167.40 eur
   
Corporate Express up 3.01 pct at 10.26 eur after upgrade to 'buy' at ING
   
Aegon up 2.03 pct at 13.06 eur
   
Ahold 1.82 pct higher at 8.97 eur
   
BAM 3.47 pct higher at 21.18 eur as analysts welcome acquisition of Belgian builder Betonac
   
Corio up 2.91 pct at 52.03 eur
   
Aalberts Industries puts on 1.99 pct at 19.43 eur
   
CSM gains 0.15 pct at 27.15 eur on news of Kate's Cakes buy in the UK
   
TKH surges 4.64 pct at 18.05 eur
   
Major decliners
   
Hagemeyer flat at 3.69 eur
   
USG People dips 0.86 pct at 26.48 eur
   
Stork falls 0.70 pct at 48.26 eur
   
Van der Moolen slips 0.53 pct at 3.78 eur

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