UK/Euro Financial Market Daily Morning Briefing 08-05-2006

London shares spike higher at open as miners outweigh BSkyB weakness

Leading shares spiked higher in early deals as ongoing strength in oil and mining stocks on the back of sky-high commodity prices outweighed sharp losses in broadcaster BSkyB, dealers said
   
At 8.55 am, the FTSE 100 was 12.1 firmer at 6,103.8, but off initial highs, with the broader indices all positive.
   
Miners kicked off the week as they left off, in demand, as gold hit fresh 25-year highs this morning in Asian trade.
   
Rio Tinto took on 82 pence at 3,342, BHP firmed 24-1/2, Kazakhmys gained 23 at 1,250, Xstrata was 41 higher at 2,295 and Anglo American was up 42 at 2,518.
   
Oil majors also lent support amid higher crude prices as tensions between Iran and the West over its nuclear program continued to weigh.
   
Earlier this morning, New York's main contract, light sweet crude for June delivery was up 32 cents at 70.51 usd a barrel.
   
BP was up 4-1/2 at 688, Royal Dutch Shell firmed 2 at 1,956 and Cairn Energy took on 21 at 2,529.
   
In retail, Kingfisher added 3-3/4 at 240-3/4, building on gains last Friday, on the back of an upgrade in stance on the retailer to 'overweight' from 'underweight' at Lehman Brothers.
   
The move added to persistent talk the owner of B&Q is being eyed by private equity groups or US peers Home Depot and Lowes.
   
Still in retail, DSG took on 2-3/4 at 197-3/4 after Deutsche Bank raised its target to 225 pence from 210 ahead of a pre-close trading update on Wednesday.

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Broker comment also lifted ICI, 8-3/4 higher at 399-1/2, as Merrill Lynch upped its price target on the chemicals group to 450 pence as it reiterated its 'buy' advice.
   
Elsewhere, 3i was boosted by weekend press comment -- 11 higher at 947-1/2.
   
The Observer said the private equity group will this week hand 500 mln stg back to shareholders.
   
And The Business reported that 3I and Star Capital Partners are to float the aircraft maintenance business formerly owned by the airline Swiss for about 1 bln usd.
   
On the downside, British Sky Broadcasting fell 19 at 509 as investors digested news late Friday it won only four of the six contracts to show live premiership football games in the UK.
   
The group was expected to win at least five of the contracts and ended up paying around 30 pct more than was expected for 30 pct fewer games.
   
Goldman Sachs said the increase in price, for fewer rights and loss of exclusivity, will be taken negatively by the market and trimmed its target by 5 pct to 550 pence.
    
But Deutsche Bank said it isn't all doom and gloom. It lifted its target to 650 pence from 620 pence and repeated its 'buy' stance, saying BSkyB secured the better matches with the "top pick" match per week throughout the 38 week season.
   
Fellow faller Unilever eased 4 at 561-1/2 after being downgraded to 'equal-weight' from 'overweight' by Morgan Stanley, with a lowered target of 600 pence from 650.
   
The US broker argued that although the company has delivered an impressive top-line recovery as the year has progressed, it thinks this is unlikely to continue in 2006 and fails to see further catalysts for outperformance.
   
On the second-line, Arm Holdings took on 2-1/4 at 138-3/4 after UBS raised its rating to 'buy' from 'neutral' by UBS after recent solid first-quarter results.

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And Homeserve gained 30 at 1507 after the same broker also raised its recommendation to 'buy' from 'neutral' ahead of full-year results on May 22.
   
On the downside, Mitchells & Butler fell 6-1/2 at 471 after it confirmed this morning that property tycoon Robert Tchenguiz has dropped his bid for the pubs group.
   
The pubs group was further under the spotlight as CEO Tim Clarke said in the weekend press he would pay between 300-500 mln stg for the 250 pub restaurants to be sold by Whitbread.
   
Meanwhile on Wall Street, stocks also closed for the weekend sharply higher after a weaker-than-expected jobs report triggered hopes the Fed will stop hiking interest rates sooner rather than later.
   
The DJIA rose 138.88 points to 11,577.74, while the S&P 500 gained 13.51 to 1,325.7 --  its best level since February 2001.
   
And the positive mood spilled over into Asia, as the the Hang Seng started its afternoon session up 273.77 at 17,287.70, while the the Nikkei 225 closed 137.90 firmer at 17,291.67.
   
Back in the UK, in economics, input prices are likely to rise sharply in April, up 1.5 pct compared with the 0.3 pct recorded in March.
   
The annual rate is also expected to tick up to 14.3 pct from 13.2 pct.
   
As a result, output prices are seen rising 0.5 pct in April, up from the 0.3 pct recorded in March.

However, after stripping out base effects, the annual rate is likely to fall to 2.3 pct from 2.5 pct.

Diary of Events

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US Summary

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PARIS - Market data at 9.58 am:

Major indices:
   
CAC-40 up 15.28 points or 0.29 pct at 5,301.68
SBF-80 up 39.55 points or 0.64 pct at 6,212.09
SBF-120 up 13.15 points or 0.34 pct at 3,857.58

Volume: 541 mln eur
29 CAC-40 stocks up
10 CAC-40 stocks down
1 CAC-40 stock unchanged

Major gainers:
   
Alstom, up 2.05 eur or 2.64 pct at 79.65, after Areva said a tie-up with Alstom is possible
   
Capgemini, up 0.90 eur or 1.93 pct at 47.54, adding to gains it made last week after posting higher first quarter sales and raising its guidance.
   
Axa, up 0.57 eur or 1.90 pct at 30.57
   
EADS, up 0.41 eur or 1.35 pct at 30.78, after an upgrade by Merrill Lynch to 'buy' from 'neutral'.

Major losers:
   
Vinci, down 0.45 eur or 0.54 pct at 82.25
   
Pernod Ricard, down 0.90 eur or 0.59 pct at 150.90
   
Veolia, down 0.36 eur or 0.74 pct at 48.16

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FRANKFURT - Market data at 10.02 am

Major indices:
   
DAX 30 - 6,138.86, up 25.57 points or 0.42 pct
MDAX - 9,063.73, up 59.25 points or 0.66 pct
TecDAX - 756.07, up 3.96 points or 0.53 pct
DAX future - 6,159.00, up 1.00 points or 0.02 pct

Major gainers:
   
Adidas-Salomon, up 2.96 eur or 1.83 pct at 165.06, after the company said that business in products related to the World Football Championship games has exceeded its expectations in the first quarter and will benefit first-quarter results, due to be released tomorrow
   
Deutsche Post, up 0.21 eur or 0.96 pct at 22.19
   
Linde, up 0.65 eur or 0.93 pct at 70.85
  
Metro, up 0.41 eur or 0.89 pct at 46.39
   
TUI, up 0.14 eur or 0.83 pct at 16.94

Major losers:
   
Hypo Real Estate, down 0.76 eur or 1.40 pct at 53.60
   
ThyssenKrupp, down 0.21 eur or 0.74 pct at 28.25, on profit-taking after Friday's solid gains
  
MAN, down 0.48 eur or 0.69 pct at 68.82
   
Fresenius Medical Care, down 0.46 eur or 0.49 pct at 92.74
   
Altana, down 0.13 eur or 0.26 pct at 49.03

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AMSTERDAM - Market data at 10.11 am:

Major indices
   
AEX              473.53, up 1.81 points
AMX Midcap       643.44, up 0.50 points
Government bonds flat to higher

Major gainers
   
Second-liner Van der Moolen added 1.83 pct to 7.81 eur
   
Heijmans gained 1.66 pct to 40.36 eur after Van Lanschot added the stock to its Midcap favourites list
   
Aegon was up 1.24 pct to 14.66 eur
  
ABN Amro put on 1.22 pct to 23.27 eur
   
Buhrmann up 1 pct to 14.12 eur
   
ASML gained 0.97 pct to 17.63 eur
   
LogicaCMG added 0.71 pct to 2.85 eur after the company announced new orders valued at 20 mln eur
   
Major losers
   
Unilever lost 0.89 pct to 55.60 eur amid reports that shareholders are calling for a break-up of the company, and after brokerages downgraded the issue.
   
Second-liner ASMI lost 0.44 pct to 15.93 eur after a report that said one of ASMI's shareholders is considering legal action against the company
   
Fugro was 0.49 pct lower to 34.31 eur after brokerage Van Lanschot removed the stock from its Midcap favourites list
   
Univar shed 1.61 pct to 41.50 eur

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