UK/Euro Financial Market Daily Morning Briefing 07-11-2007

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London shares up early on, miners aid gains on metal prices; NY higher

Leading shares rose in early deals, aided by a higher close on Wall Street overnight, with the mining sector underpinning blue-chip gains on rising metals prices, as gold hit 27 year highs.
  
At 9.02 am, the FTSE 100 index was 16.2 points higher at 6,491.1, after closing 13.5 points firmer at 6,474.9 yesterday, while the FTSE 250 index added 27.9 points to 11,362.8.
  
In the US, Wall Street bounded higher as investors, still mindful of widening credit problems nonetheless went in search of bargain stocks, with soaring oil and precious metals prices driving up the companies that produce those commodities.
   
The Dow Jones Industrial Average rose 117.54 or 0.87 pct, to 13,660.94. The size of the gain masked the nervousness in the market, stocks were lower earlier in the session.
   
Broader stock indicators also turned higher. The Standard & Poor's 500 index rose 18.10, or 1.20 pct, to 1,520.27, and the Nasdaq composite index rose 30.00, or 1.07 pct, to 2,825.18.
   
Meanwhile, in Asia this morning, the Japanese Nikkei closed down 152.95 points or 0.9 pct at 16,096.68, while Hong Kong's Hang Seng ended the morning up 597.60 points or 2 pct at 30,035.73.
   
In commodity news, oil prices powered past 98 usd in Asian trade Wednesday for the first time as the greenback sank to a new low amid expectations of further declines in US energy reserves.
   
Earlier, New York's main contract, light sweet crude for December delivery, was 1.16 usd higher at 97.86 a barrel from its closing record of 96.70 in US trades on Tuesday.
   
Brent North Sea crude for December delivery crossed 94 usd for the first time to a new high of 94.48.
   
Back in London, the mining sector underpinned Footsie gains, aided by rising metal prices, with Gold rising to another 27-year high settling up 12.60 usd to 823.40 usd an ounce on the New York Mercantile Exchange.
   
Kazakhmys was up 30 to 1,439, Anglo American added 63 to 3,215 but Rio Tinto was the top riser, 174 higher at 4,508. The mining giant was also given a boost by further rumours of a bid from BHP Billiton. Shares in BHP were up 35 at 1,810.

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Fellow miner Vedanta Resources also featured early on, up 56 pence at 2,170, after news its majority-owned Indian unit Sterlite Industries (India) Ltd plans to participate in coal-based thermal power and other ancillary activities projects in India through its unit Sterlite Energy.
   
In other commodity movements, heavyweight oil stocks rose this morning, as oil prices powered past 98 usd in Asian trade Wednesday for the first time as the greenback sank to a new low amid expectations of further declines in US energy reserves.
   
BP added 3 to 636-1/2, while Royal Dutch Shell jumped 26 to 2,046 and BG Group rose 11 to 907-1/2.
   
News it has won a Trent XWB engine contract from International Lease Finance Corp gave a boost to Rolls-Royce, up 12 at 528-1/2. The deal is worth 800 mln usd at list prices. It added that this makes ILFC its largest customer for the Trent family.
   
On the downside, British Energy Group was the top faller, down over 7 pct, or 39-1/2 to 515-1/2, this coming after it discovered a second failed wire winding at a boiler closure unit at Heysham I power station.
   
Despite this news, UBS repeated its 'buy' stance and 600 pence price target. However the broker said in its opinion the discovery of a second failure means that it is unlikely that these are isolated issues.
   
An in-line trading update did little for the high street and catalogue fashion retailer Next as it lost 25 to 2,027. It forecast year to end-January 2008 profit in-line with market expectations as it reported a recovery in underlying sales in its third quarter.  
   
Problems in the pub sector appear to be continuing despite brewer Scottish & Newcastle saying this morning its 50 pct-owned Baltic Beverages Holdings AB (BBH) joint-venture saw nine-months to September beer volumes grow 24.5 pct. Scottish & Newcastle fell 3 to 759-1/2.
   
On the second line, CSR was the top 250 riser, 40 higher to 630 after it reported underlying third-quarter pretax profit rose as revenues increased 12 pct, but warned revenues for the fourth quarter are expected to be slightly below the third quarter due to the usual quieter seasonal period.
   
In reaction Landsbanki repeated its 'buy' stance. The broker said after its Q3 it retains its view that CSR is executing well.
   
Continuing on results news, Millennium & Copthorne Hotels reported a higher third-quarter pretax profit benefiting from an increase in hotel operating profit and said it remains on course to meet its projected targets for the next quarter.

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The company said pretax profit for the three months to end-Sept came in at 37.8 mln stg compared with 33.3 mln the year earlier, while revenue stood at 160.6 mln stg compared with 156.1 mln last year. Shares in Millennium were up 16-1/2 at 630.
   
Lloyd's insurers Amlin and Hiscox were stronger in morning trade after broker Seymour Pierce upped earnings estimates for the two companies.
   
For Amlin, Seymour Pierce upped its pretax earnings estimates for the full year by 31 pct to 357.7 mln stg, and reiterated its 'buy' rating.
   
Hiscox shares were up 2-3/4 pence at 279, while Amlin added 1-1/4 pence at 327-1/4.
   
On the 250 downside, investors appeared unimpressed by first half results from FirstGroup, as shares fell 7 pence to 788.
   
The train and bus operator said annual savings from its acquisition of US transport group Laidlaw International could be more than 100 mln usd as it posted a 12 pct rise in interim adjusted operating profit to 103.1 mln stg.
   
However, the group said there could be back-office job losses among Laidlaw's 66,000-strong workforce, but declined to say how many. It ruled out cuts among front-line staff such as drivers, which it said made up the majority of the workforce.   
   
Meanwhile, WSP Group, the management and consultancy services provider, said it has bought CEL International Ltd for 22 mln stg, in line with the company's strategy to diversify into new markets as well as providing the opportunity to cross sell services. WSP was down 8 to 813-1/2 early on.
   
Finally, easyJet was an early casualty, down 2-1/2 at 635, this after it said October load factor fell to 82.5 pct compared with 83.2 pct a year ago.
   
The airline service company said load factor for the rolling 12 months ending October fell to 83.7 pct versus 84.6 pct a year earlier.  The company will announce full-results on Nov 20.

UK Diary of Events

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MILAN  - Market data at 9.55 am

Main indices
   
Mibtel at 30,804, up 0.25 pct
   
S&P/Mib at 39,544, up 0.23 pct

Main S&P/Mib gainers
   
Prysmian up 2.10 pct at 18.90 eur, continuing after yesterday's strength and as JP Morgan, while reiterating its 'overweight' stance with 27.0 eur target, upped its 2007 EPS estimates by 8.9 pct after a solid set of third quarter results
   
Tenaris up 1.90 pct at 17.73 ahead of the release of third quarter results that are expected to show higher sales and profits mainly owing to acquisitions, while analysts will be looking for comments on North America and weak margins there
   
Fastweb up 1.90 pct at 17.73, recovering after yesterday's slump
   
Eni up 1.48 pct at 24.76, boosted by the rise in oil prices   

Mediaset up 1.42 pct at 7.115 after yesterday's nine-month results rose to 372.3 mln eur against a consensus range of 361.-405.0 mln. The group also said it expects to end the year with a positive advertising sales trend.

Main S&P/Mib losers
   
Italcementi down 3.35 pct at 14.49 after the release of third quarter results that were below expectations and after the cement group cut its operating results guidance for this year
   
Buzzi Unicem down 1.74 pct at 17.64
   
Fondiaria-SAI down 0.50 pct at 31.72
   
Unipol down 0.46 pct at 2.5125
   
Banca Popolare di Milano down 0.43 pct at 10.71, after yesterday's strong rise and after its board decided to give priority to study an alliance with Credit Mutuel

Other stocks in the news
   
Safilo up 0.91 pct at 2.76 as Merrill Lynch reiterated its 'buy' stance but cut the  price 11 pct to 3.76 eur
   
Fiat up 1.08 pct at 21.62 after most Italian dailies cited its CEO Sergio Marchionne as saying that the group's alliance talks with Daimler are broad based and do not just involve engines. The CEO also said that it is mulling bringing to the US the Alfa Junior model and the 500 compact model
   
UniCredit down 0.02 pct at 5.565, Generali down 0.31 pct at 32.00. UniCredit said today that is has decided on the early redemption of a bond exchangeable in Generali shares that will allow the bank's stake in the insurer to fall to about 3.5 pct from 4.5 pct.
   
Tiscali up 1.33 pct at 2.445 on renewed speculation that the group may subject to take-over interest by foreign operators

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FRANKFURT - Market data at 10.18 am

DAX - up 11.94 points, or 0.15 pct, at 7,839.13
MDAX - up 21.99 points, or 0.21 pct, at 10,382.54
TecDAX - up 30.63 points, or 2.98 pct, at 1,057.40
DAX futures - down 34.00 points, or 0.43 pct, at 7,878.00
   
Major Advancers:
   
Henkel KgaA, up 1.36 eur, or 3.83 pct, at 36.85, after the household goods manufacturer released strong third-quarter sales figures and tweaked up its full-year outlook.
   
Deutsche Telekom, up 0.17 eur, or 1.21 pct, at 14.22, ahead of tomorrow's release of the telecom's third-quarter figures.
  
Analysts commented the consensus figures seem modest.
   
Hypo Real Estate, up 0.45 eur, or 1.18 pct, at 38.47, after the commercial real estate bank released slightly higher than expected third-quarter figures, with analysts pointing to positive cost and margin figures.
   
Linde, up 0.97 eur, or 1.11 pct, at 88.14
   
Bayer, up 0.59 eur, or 1.04 pct, at 57.21, correcting from yesterday losses from profit taking on better-than-expected third-quarter figures.

Major Decliners:
   
BMW, down 1.53 eur, or 3.42 pct, at 43.27, on continued pressure from the automaker's slightly-weaker-than-expected third-quarter numbers released yesterday and due to a downgrade to 'neutral' vs 'outperform' by Credit Suisse on the back of the results.
   
Infineon, down 0.12 eur, or 1.26 pct at 9.41
   
RWE, down 0.86 eur, or 0.92 pct, at 82.49
   
Allianz, down 1.13 eurk, or 0.77 pct at 145.11
   
Metro, down 0.34 eur, or 0.55 pct, at 61.95, which traders said was a result of continued pressure after media reports said it has no plans to sell its hard-hit Kaufhof retail unit to MDAX-listed Arcandor AG.

Other Stocks in Focus
   
MDAX-listed IVG Immobilien, down 0.62 eur, or 2.00 pct, at 30.34, taking the last spot on the index, after JP Morgan downgraded the company to 'underweight' from 'neutral' this morning, albeit with an increased price target of 28 eur from 27 on valuation grounds, following a strong run for the European property company.
   
MDAX-listed Pfleiderer, up 0.20 eur, or 1.12 pct, at 18.13, after the wood products specialist released third-quarter figures which came in slightly higher than expectations and showed indications of strong future growth potential.
   
MDAX-listed MTU Aero Engines, up 1.01 eur, or 2.49 pct, at 41.62, after Morgan Stanley initiated coverage on airplane engine specialist with an 'overweight' rating and 55 eur price target.
   
MDAX-listed MLP AG, up 0.13 eur, or 1.42 pct, at 9.30, after he financial services provider released third-quarter figures which were largely in line with forecasts but showed a better-than-expected bottom line.

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PARIS - Market data at 11.00 am:

Major indices:
   
CAC-40 down 49.70 points or 0.87 pct at 5,659.72
SBF-80 down 53,38 or 0.79 pct at 6,711.41
SBF-120 down 35.66 or 0.86 pct at 4,120.48

4 CAC-40 stocks up
36 CAC-40 stocks down

Major gainers:
   
Capgemini, up 1.20 eur or 2.80 pct at 44.00. The group posted below-consensus third quarter sales this but raised its full-year operating margin guidance
   
Total, up 1.38 or 2.53 pct at 55.99. Third quarter earnings came in at the higher end of analysts' expectations
   
Groupe Steria, up 2.13 or 7.05 pct at 33.10. Analysts said the group's announcement of a convertible bond issue could prompt a re-rating of the stock because of its impact on the planned refinancing of the company's acquisition of the UK's Xansa
   
JCDecaux, 0.76 or 2.90 pct ahead at 27.00. The group raised its guidance for full-year organic growth to "slightly ahead" of 8 pct

Major losers:
   
EADS, down 0.58 or 2.65 pct at 21.31, on concerns over the rising euro
  
Renault, down 3.39 or 3.10 pct at 106.02
   
Ciments Francais, off 2.93 or 2.35 pct at 121.63. Third quarter net profit dropped 12 pct drop to 152 mln eur "principally because of non-recurring provisions for tax risks"

Most active stocks:
   
Total, 8.01 mln shares traded
   
Alcatel-Lucent down 0.15 or 2.42 pct at 6.06, 4.12 mln shares traded

Forex

Pound hits 2.10 usd mark as dollar battered by Cheng comments

LONDON - The pound went above the physchologically important 2.10 mark against the dollar as the US currency continued to face severe pressure.
   
At 9.28 am GMT, the pound was trading at 2.1010 usd, having hit a high of 2.1025.
   
"This is the first time the pair (sterling/dollar) has been at these levels since May 1981, but the rally is being driven by dollar weakness as opposed to pound strength," said James Hughes, market analyst at CMC Markets.
   
The latest bout of dollar selling has been sparked by speculation that China could be set to diversify its reserves away from the dollar given the US currency's current weakness.
   
This follows comments by vice chairman of China's National People's Congress Cheng Siwei, who said the country's forex regulator will "shift" its foreign exchange holdings, and that China should consider shifting its forex reserves to "stronger" currencies.
   
"Speculation that the Chinese government may further diversify its currency reserves is being seen as largely responsible for this move (in the dollar)," Hughes said.
   
He added that the pound has gained some additional support from the Nationwide UK consumer confidence report released overnight, which showed confidence dipped only marginally in October despite the recent financial market turmoil.
   
"The consumer confidence figures released overnight certainly didn't reflect any noticeable fall-out from the credit squeeze, so again this could well help keep sterling cash yields looking attractive for some time yet," he said.
   
The Bank of England's Monetary Policy Committee begins its monthly two-day meeting today, with the decision scheduled for tomorrow. Though its next move on interest rates is set to be a cut, it is expected to hold fire for the time being, given that UK data have not yet suggested too much softening in the economy.

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