UK/Euro Financial Market Daily Morning Briefing 08-06-2006

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London shares sharply lower, rate fears prompt investors to dump stocks

Leading shares were sharply lower this morning with trading expected to remain volatile in the wake of further heavy falls on Wall Street and in Asia as global interest rate worries continued to weigh on investor sentiment, dealers said.
   
At 9.00 am, the FTSE 100 was 111 points lower at 5,596.3 having hit an opening level of 5,586.9. The broader indices were also weaker.
   
Early volume was steady with 305.6 mln shares trading in 50,405 deals.
   
Last night on Wall Street, US stocks fell again, extending losses for the third straight session and pushing the Dow Jones industrial average below 11,000 for the first time since March 9.
   
The Dow has lost more than 316 points this week; the sell-off has also wiped out the Nasdaq composite index's gains for the year and put the Standard & Poor's 500 index less than 8 points away from its Dec 31 close.
   
The Dow Jones industrial average fell 71.24, to 10,930.90.
   
Broader stock indicators also fell. The Standard & Poor's 500 index fell 7.70 to 1,256.15, and the Nasdaq composite index fell 10.98 to 2,151.80.
   
In Tokyo, the blue-chip Nikkei 225 Stock Average closed down 462.98 points or 3.1 pct at 14,633.03, off a low of 14,496.96, while over in Hong Kong the Hang Seng closed the morning down 278.89 points at 15,537.66.
   
Among blue chips on the move this morning, resource stocks were again prominent among the fallers after base metal prices fell in London following a brief recovery yesterday. Xstrata was off 112 pence at 1,824, Antofagasta down 71 at 1,881, Rio Tinto down 131 at 2,643 and Anglo American off 74 at 1,906.
   
Oil stocks also fell, with RDShell off 36 pence at 1774, BP down 20 at 603, and Cairn Energy off 96 at 1946 as oil prices were weaker on easing US supply concerns and positive developments in the Iranian nuclear crisis.

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New York's main contract, light sweet crude for July delivery, was down 30 cents at 70.52 usd a barrel from its close of 70.82 usd in the United States on Wednesday.
   
Elsewhere, financial stocks with US earnings were also hit with Schroders off 36 to 912, Amvescap down 18 at 469, and Man Group off 61 at 2305.
   
Also weaker, Astrazeneca was off 49 at 2866 but dealers did say there were not any major surprises in the pharma group's pre-business strategy briefing statement released this morning.
   
According to chief executive David Brennan, the company is capable of delivering earnings growth ahead of sales growth, with effective lifecycle management of its key products, and control of costs.
   
Seymour Pierce said in reaction that there were "no major surprises" and kept its 'buy' rating.
   
Meanwhile in other news, BAA said bid talks with a consortium led by Goldman Sachs have ceased.
   
Its statement to the stock exchange that talks had ended came just 23 minutes after Goldmans issued a statement, dated June 7, that discussions were back on. BAA shares were 5 pence lower at 930.
   
First thing this morning the market was rife with traders saying Citigroup was in the market acquiring 110 mln shares in the airports operator on behalf of agreed consortium bidder Grupo Ferrovial.
   
The stock was being acquired at 935 pence -- the price of the Ferroval-led consortium's offer minus the 15-1/4 pence dividend which the shares went ex-off yesterday -- and traders said the dawn raid looked to be a success, with only 20-30 mln shares still needing to be acquired.
   
In other news, BOC was one of only two stocks to register gains in reaction to Tuesday's decision by the EU to clear Linde's intention to acquire the UK gas provider.
   
BOC was joined by Cable & Wireless, up 0-1/4 pence at 106, after being  upgraded to 'outperform' from 'neutral' by Credit Suisse saying that C&W UK remains key to the telecom  group's valuation.
  
The swiss broker said that new UK management has outlined a sensible plan to address, at last, the fundamental weakness of C&W UK.
   
The state of the UK business and the competitiveness of the market mean execution is not a given but its analysis suggests the balance of risk is biased on the upside, it said. 

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Meanwhile on the second line, shares in iSOFT plunged in early deals as the software group lowered its 2006 forecasts in an accounting shift, prompting house broker Morgan Stanley to suspend its rating on the stock with a 'zero to 60 pence' a share valuation.
   
iSOFT shares were down 16 pence at 67.
   
In earnings related news, shares in FKI edged lower as the weaker market dragged on the shares even as Merrill Lynch welcomed a solid set of full year numbers from the engineering group.
   
The stock was 0-1/2 pence lower at 105-1/4.
   
FKI posted underlying pretax profit up 14.2 pct to 79 mln stg, boosted by strong demand.
   
However, bucking the weaker market trend, shares in Enodis were higher on the back of a report in the FT that the UK kitchen equipment maker rebuffed a takeover offer of more than 800 mln stg.
   
According to the business daily, Manitowoc, the US cranes-to-food services group, approached Enodis this week with an offer pitched at between 205-210 pence a share.
   
Later this morning investors will focus on the Bank of England which is poised to keep borrowing costs unchanged for the tenth month running when it concludes its rate-setting meeting today.
   
All 35 forecasters polled by AFX News expect the nine-member Monetary Policy Committee to leave the key repo rate at 4.50 pct.

Diary of Events

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US Summary

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

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FRANKFURT - Market data at 10.03 am
   
Major indices:
   
DAX 30 - 5,434.62, down 109.31 points or 1.97 pct
MDAX - 7,680.68, down 185.22 points or 2.35 pct
TecDAX - 619.07, down 19.06 points or 2.99 pct
DAX future - 5,438.50, down 66.00 points 1.20 pct

Major gainers:
   
Schering, down 0.01 eur or 0.01 pct at 85.77
   
BMW, down 0.26 eur or 0.69 pct at 37.49
   
Lufthansa, down 0.09 eur or 0.66 pct at 13.60, outperforming the overall market, as industry sources told Handelsblatt that the flag carrier plans to introduce a new cost-cutting programme in the second half of this year that could allow the company to save up to 200 mln eur
   
Adidas, down 0.26 eur or 0.70 pct at 36.70
   
Deutsche Boerse, down 0.74 eur or 0.74 pct at 98.78, as its CEO Reto Francioni hinted in the Financial Times that he is prepared to offer further concessions on issues such as management structure and price to win over shareholders in the battle for rival stock exchange operator Euronext
   
Major losers:
   
MAN, down 2.52 eur or 4.61 pct at 52.13
   
ThyssenKrupp, down 1.12 eur or 4.39 pct at 24.39
   
Hypo Real Estate, down 1.46 eur or 3.13 pct 45.20
   
Infineon, down 0.26 eur or 3.02 pct at 8.34, amid fears the planned IPO of its Qimonda unit could be delayed, after Sueddeutsche Zeitung reported that the chipmaker may face court action after two shareholders said investors were not given the opportunity to vote on the planned divestment of Qimonda at the AGM
   
Siemens, down 1.79 eur or 2.77 pct at 62.87

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PARIS - Market data at 9.39 am:

Major indices:
   
CAC-40 down 102.92 points or 2.1 pct at 4,721.85, as worries about the impact of expected interest rate tightening in the US rattle investor confidence.
   
SBF-80 down 119.97 at 5,372.69
SBF-120 down 75.00 at 3,419.48
Volume: 1.0 bln eur
All CAC-40 stocks down

Major losers:
   
Iliad, down 2.80 or 4.5 pct at 59.75.
   
Societe Generale, down 3.20 or 2.8 pct at 110.90. Analysts at CA Cheuvreux said this morning that the bank could proceed with a capital increase to finance its current acquisition programme.
  
Bouygues, down 0.47 at 41.28 after posting first quarter net profit of 148 mln eur and raising its 2006 sales guidance, which was not enough to help the stock resist the broad market decline.

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AMSTERDAM -  market data at 10.35 am:

   
AEX index             422.71, down 9.35 points
AMX Midcap index      538.52, down 19.62 points
Govt bonds            unchanged to slightly higher
    
   
Major losers:
   
Hagemeyer led blue chip fallers, tumbling 5.98 pct to 3.46
   
Oil sector issues were among the sharpest fallers, with SBM Offshore shedding 3.67 pct at 19.68 and Royal Dutch Shell sliding 2.21 pct at 24.77    
   
Financials were also hard-hit, with Aegon dropping 3.53 pct at 12.28, ABN Amro losing 2.08 pct at 21.14, Fortis falling 1.91 pct at 26.19 and ING off 1.73 pct
   
Other notable blue chip losers were Philips, down 3.44 pct at 23.0, Vedior easing 3.2 pct at 16.02 and Unilever, 2.2 pct lower at 16.92
   
Biotech stock Crucell was the sharpest second-line faller, crashing 5.97 pct to 14.95, while dredging group Boskalis slumped 5.76 pct at 48.06 and Corus tumbled 5.39 pct at 5.27
   
Endemol was off 1.38 pct at 13.59 after rising to an early high of 13.95 as news of the group's CEO resignation sparked speculation the sale of Telefonica's stake in Endemol may be imminent
   
Major gainers:
   
There were no gainers among AEX or Midcap stocks

Forex

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