UK/Euro Financial Market Daily Morning Briefing 08-03-2007

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London shares open up after modest losses on Wall St; BoE, ECB in focus

Leading shares opened firmer this morning after a session of modest losses on Wall Street overnight, and with today's decision on interest rates by the Bank of England in focus as investors gear up for a busy earnings day.
   
At 8.56 am, the FTSE 100 index added 36.5 points to 6,193.5 while the wider market was also positive. Volume was average, with 219 mln shares in 44,020 deals.

Overnight across the Atlantic, stocks fell slightly but showed more signs of stability as investors shrugged off uninspiring data. The DJIA gave up 15.14 points to 12,192.45, trading within a 78-point range Wednesday, a much narrower band than in recent sessions. The tech-laden Nasdaq Composite Index declined 10.50 points to 2,374.64.
   
A cautious rebound reverberated through the Asian markets, with the Nikkei index clocking up 325.69 points to close at 17,090.31 while the Hang Seng ended the morning adding 256.53 points at 19,175.1.
   
Meanwhile in Europe today, analysts are unanimous in their prediction that the European Central Bank will increase its key interest rate, but investors are more interested to hear what bank president Jean-Claude Trichet says afterward.
   
Over in London on the economics front, the Bank of England is expected to leave interest rates unchanged at the current near six-year high, with only 5 out of 30 analysts polled by AFX News forecasting a quarter point hike to 5.50 pct; although most Bank watchers anticipate some further tightening either in April or May.
   
Meanwhile, oil prices were firmer on news of an across-the-board decline in US energy stockpiles. New York's main oil futures contract, light sweet crude for delivery in March, was up 0.4 usd at 61.86 usd a barrel from 61.82 usd in late trading in the US overnight.
   
BP was an obvious beneficiary of the firming prices, taking on 6-1/2 pence to 523-1/2, while BG Group added 7-1/2 pence to 699-1/2 and Royal Dutch Shell climbed 16 pence to 1,684.
   
On the corporate front, meanwhile, UK insurer Royal & Sun Alliance shares climbed 2-3/4 pence to 163 pence, after turning in a 5 pct increase in full-year profit, helped by cost controls and a reduction in weather-related damage claims, and hiked its dividend by 35 pct.
   
RSA said its operating result for the year to Dec 31 2006 came in at 780 mln stg, up from 743 mln stg the previous year. Analysts had expected an operating result of 764 mln stg, according to a consensus forecast supplied by the company.
   
Investors also piled into Arriva shares, up 12 pence to 742 pence, with Deutsche Bank reiterating its 'buy' stance after the UK bus and rail operator said it plans further acquisitions and returns to shareholders.
   
At the same time, the Sunderland-based group said pretax profits on continuing operations in the year to Dec 31 rose 6.5 pct to 109.8 mln stg on a 10 pct rise in revenues on the same basis to 1.729 bln stg.

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In response, the broker said 2006 EPS of 44.3 pence came in 1.5 pct ahead of its flagged 43.6p and a consensus of 43.25p with the variance due to lower interest and tax charges.   
   
Deutsche Bank said for the first time Arriva has disclosed its European order book -- an estimate of future contracted business revenue over a year in duration.
   
Elsewhere, Drax also gained 7 pence to 35-1/2 after posting a "solid" set of FY results which prompted Dresdner Kleinwort to raise it price target for the power group to 655 pence from 615.
   
Earlier, Drax unveiled full-year results showing EBITDA up 144 pct to 583 mln stg; with the surge in profits prompted a special dividend of 32.9 pence per share, on top of the final ordinary dividend of 9.1 pence per share.  Total dividend for the year was therefore 134.7 pence per share.
   
Reacting to the numbers, DK said results were driven by high dark green spreads, or the margin between coal plus carbon cost and power price for a typical coal plant, feeding through to the P&L. It noted that the update on forward sales confirmed that power price falls are filtering through to the achieved price.
   
Elsewhere, Kazakhmys shares also put on a strong performance, taking on 18 pence to 1,110 following its acquisition of Dostan-Temir, an oil and gas exploration firm, marking the group's first step in developing a petroleum business and prompting positive broker comment.
   
Dostan-Temir is a Kazakhstan-registered company with contract rights to undertake further oil and gas explorations in the East Akzhar field, West of Kazakhstan.
   
Reacting to the news, Credit Suisse reiterated its 'outperform' rating and 1,300 pence target adding that Kazakhmys is its top pure copper play. It said that Kazakhmys' 2006 results, due on March 15, could contain further acquisition announcements and numbers on the Dostan acquisition.
   
Firming metal prices overnight also spurred gains in mining peers, with Vedanta topping the gainers chart after climbing 28 pence at 1,242, while Lonmin took on 41 pence to 3,083, BHP Billiton took on 12 pence to 1,024, Antofagasta added 5-1/2 pence to 467-1/2 and Rio Tinto was 27 pence to the better at 2,740.
   
Vedanta shares also benefited from bullish broker comment following a recent visit to the group's Indian interests, with HSBC reiterating its 'overweight' recommendation and raising its target to 1,800 pence from 1,600, arguing that having recently visited the group's aluminium and zinc assets, it was impressed by the progress of planned projects some ahead of schedule.
   
Positive broker comment also lifted British Airways, who took on 11-1/4 pence to 536-1/4 after Citigroup upgraded its stance on the stock to 'buy' from 'hold'.
   
On the downside, Slough Estates gave up 6 pence shares at 754-1/2, with the broker as the market digested a set of uninspiring full year results after the property group, recently converted to tax-efficient Real Estate Investment Trust status.

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This morning, the group said full-year adjusted pretax profit increased 19.4 pct to 142.7 mln stg, driven by strong contributions by its European business. At the same time, it revealed adjusted net asset value increased 14 pct to 775 pence and EPS was up 3.3 pct to 25.1 pence in 2006. In response, Merrill Lynch said NAV of 775 pence came in short of its flagged 793p, after paying for the REIT conversion tax of 17p.
   
Likewise, UK Industrials, which accounts for 60 pct of the group's portfolio, were up 11.5 pct, shy of Merrill's forecast of 13 pct.
   
Meanwhile, Diageo shares gave up 1-1/2 pence to 985-1/2, following a set of weak numbers from French peer Pernod Ricard, which also unveiled an uninspiring outlook.
   
Resolution fell prey to profit takers, giving up 3 pence to 641, and reversing yesterday's gains after CEO Paul Thompson unexpected departure from the group was accompanied by vague talk of a takeover for the company.
   
On second tier, Aggreko shares were in fine fettle, climbing 36-1/2 pence to crown the gainers board at 487-3/4 were firmer this morning in reaction to its full year results which showed a strong rise in pretax profits prompting Citigroup to up its stance in the group to 'buy' from 'hold'.
   
Earlier today, the Scottish-based company which leases power generators and air compressors, announced full-year pretax profits before exceptionals of 83.1 mln stg compared with 56.4 mln stg in 2005, after a recovery in its European markets and a strong performance in North America.
   
In reaction, Citigroup said that the recovery which started in the first half of 2006 continued into the second half, with revenue growth accelerating to 22 pct and EBITA doubling.
   
Among the midcaps, Benfield Group was the main casualty, giving up 34-3/4 pence to 310, falling more than 10 pct after the company released full-year results that failed to set the market alight.
   
Benfield Group said full-year pretax profits fell to 53 mln stg from 53.8 mln stg, worse than analysts' expectations of 73.6 mln stg.
   
Reacting to the news, house broker Merrill Lynch said in a note to investors that the results were "disappointing", and reduced its EPS estimates by 15 pct for 2007 to 2008. However, it reiterated its 'Neutral' recommendation on the shares.
   
The broker also noted that the outlook was "gloomy," after the broker estimated a 10 mln stg hit to trading profits thanks to recent regulatory changes in Florida which limits the price of reinsurance.
   
Looking ahead to Wall Street later today, the market will be eyeing first-time jobless claims, seen falling slightly to 330,000 in the latest week after rising to 338,000 in the prior week. Investors are also gearing up for the February release of Wal-Mart Stores sales.

UK Diary of Events

For a diary of key UK financial and corporate events today, click here

US Summary

For a summary of US stocks at yesterday's close of trade, click here

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Paris shares AFX at a glance outlook

Forthcoming Events

Today
   
Chargeurs FY results
   
Jan govt budget data, 8.45 am
   
Thales FY results, after market closes
   
Tomorrow
   
EADS FY results
   
Jan industrial production, 8.45 am
   
Jan trade balance, 8.45 am
   
Company News

Carrefour FY net 2.268 bln eur vs 1.436 bln
   
Veolia FY underlying profit rises 16.7 pct to 2.222 bln eur
   
PPR FY net up 28 pct; sees higher 2007 results; plans dividend rise
   
Essilor FY net 328.3 mln eur, up 14.3 pct; to continue acquisitions
   
CGGVeritas swings to FY net profit 158.7 mln eur as Q4 net nearly doubles
   
Ciments Francais net rises 19 pct to 502 mln eur
   
Club Med Q1 sales up 2.3 pct; winter bookings up 7 pct like-for-like
   
BIC FY net profit 170.2 mln eur, up 8.8 pct; sees 2007 sales up 4-5 pct
   
Alstom to buy US gas turbine co PSM for 242 mln usd
   
Air Liquide buys Linde Gas UK; enterprise value 105 mln eur
   
Suez FY net tops guidance; raises div and sees strong 2007 earnings growth
   
Market Sentiment
   
Schneider Electric upgraded to 'overweight' vs 'equal-weight' at Morgan Stanley

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German shares AFX at a glance outlook

Forthcoming Events
   
Today
   
Salzgitter FY results
   
Lufthansa annual results news conference
   
Hochtief press talk with CEO Lueetkestratkoetter
   
German Jan industrial output
   
Tomorrow
   
Volkswagen AG annual news conference
   
Jan current account, balance of trade (0700)
   
Bundesbank president Axel Weber speech on "current challenges for monetary policy", Cologne (1115)
   
Lufthansa Feb traffic figures
   
MAN conference call with CFO Hornung

Company News
   
Salzgitter FY Sales 8.45 bln eur vs 7.15 bln

   
Market News
   
KLOECKNER & CO RAISED TO 'BUY' FROM 'NEUTRAL' AT UBS
   
BAYER RAISED TO 'BUY' FROM 'NEUTRAL' AT UBS

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Amsterdam shares AFX at a glance outlook

Forthcoming Events
  
Tomorrow
   
Dutch Jan retail sales (0830 GMT)
   
ASMI conference call (1400 GMT)
   
Draka FY results
   
Fugro FY results
   
Vopak FY results

Company News
   
Aegon Q4 results beat expectations on strong value of new business
   
Univar FY earnings miss forecasts, expects higher earnings in 2007
   
TKH Group FY net beats guidance; proposes 4-for-1 share split
   
Arcadis to sell Euroconsult to Mott McDonald for undisclosed sum

Macroeconomic News
   
Dutch three-party coalition government wins majority in Senate elections

Forex

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