UK/Euro Financial Market Daily Morning Briefing 09-06-2006

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London shares open up, led higher by miners; US trade gap in focus

London shares opened in positive terrain, led higher by miners which bounced back from yesterday's losses, following a marginally-positive close in the US and ahead of today's US trade gap data, dealers said.
   
At 9.02 am, the FTSE 100 climbed 78.3 points to 5,641.2, repairing some of Thursday's 143.3 point plunge, while the FTSE 250 ran up 168.1 points to 8,981.8.
   
Volume was relatively high, with 362.1 mln shares trading hands in 40,729 deals.
   
Last night on Wall Street, US stock performances remained cautious amid revived interest rate fears.
   
However, the Bush administration increased its economic growth forecast to 3.6 pct in 2006 from 3.4 pct previously estimated, providing a much-needed boost in late trade.
   
The Dow closed up 7.9 points at 10,938.8, while the S&P 500 managed to add 1.8 points at 1,257.95.
   
The Nasdaq Composite, meanwhile, fell for a fifth consecutive session -- closing down 6.48 at 2,145.32 -- although chip-maker Texas Instruments issued a better-than-expected quarterly outlook after the close, which could provide some lift in today's US session.
   
In Asia, Japan's Nikkei 225 index ended the morning down 37.65 points at 4,595.38, also affected by caution surrounding the US Fed's next interest rate move, while Hong Kong's Hang Seng closed the morning up 10.99 at 15,461.10.
   
Looking ahead, all eyes will be on this afternoon's release of the US trade gap data for April, with consensus pointing to a widening of the gap to 64.5 bln usd after an unexpected narrowing to 62.0 bln usd in March.
   
In London, leading shares got off to a positive start, with notable movers including the miners after yesterday's negative performance and as commodity prices remained steady today.
   
Only a handful of stocks traded in the red.

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Among mining stocks, Xstrata led the blue chip risers, up 83 pence at 1,898, followed closely by Kazakhmys, rising 41 at 1,047, and Antofagasta climbing 74 at 1,920.
   
The former was also fuelled by Merrill Lynch initiating coverage of the shares with a 'neutral' rating.   
   
Commodities prices were relatively stable this morning, with gold falling only 2.0 usd to 611.8 per ounce, and with silver and copper prices posting moderate gains.
   
Also in play was the financial sector after Merrill Lynch upgraded European banks to 'neutral' from 'underweight', raising its recommendation on Provident Financial to 'buy' and upgrading Alliance & Leicester and Bradford & Bingley both to 'neutral' on valuation grounds.
   
The broker said that Northern Rock, up 23 at 991, was its preferred play in the banking sector. 
   
Alliance & Leicester gained 9 at 1,166, while midcaps Bradford & Bingley rose 7-3/4 at 457 and Provident Financial climbed 22 at 582.
   
Among oil-related stocks, Cairn Energy was 55 firmer at 1,980 after Citigroup lifted its target on the oil group to 2,310 pence from 2,200, reflecting increases in the broker's oil price forecasts.
   
Meanwhile, crude futures hovered around the 70 usd per barrel mark on reports that Iran has accelerated uranium enrichment, dampening hopes of a resolution to Tehran's controversial nuclear programme.
   
BP subsequently rose 11-1/2 at 614-1/2, while Royal Dutch Shell jumped 35 at 1,780.
   
Elsewhere, Sage Group was a top performer, clambering back into positive terrain after losing out yesterday on the back of its announcement that it is buying German firm Baurer for an enterprise value of around 16 mln stg in cash.
   
Sage shares added 8-3/4 at 222-1/4.

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On the broker front, Rolls Royce Group enjoyed a Panmure Gordon upgrade to 'hold' from 'sell', based almost entirely on valuation, which boosted the shares 9-1/4 at 388-1/2.
   
And Kesa Electricals added 8-1/2 at 295-1/2 after Goldman Sachs upgraded it to 'outperform' from 'in-line' in a review of the UK and French goods sectors.
   
Goldman Sachs said Kesa is poised to benefit from an improvement in the French electrical and furniture sectors, as well as from a likely recovery in the UK white goods market in the second half of 2006.
   
On the second line, soon-to-be FTSE 100 members Vedanta Resources and Lonmin followed the miners' suit, up 71 or 6.3 pct at 1,195 and 110 or 5.0 pct at 2,367, respectively.    

Elsewhere, ComputaCenter gained 9-3/4 at 236-1/4 after Credit Suisse upgraded the IT group to 'outperform' versus 'neutral' following a site visit.
   
The broker said that the firm's business is on track and noted areas of improvement in both UK product and Services offerings.
   
Finally, Signet Group climbed 3 at 95-1/4 after reporting a 10 pct increase in first quarter pretax profit to 30.7 mln stg, up from 27.9 mln stg last time.
   
In response, Cazenove said headline numbers were above consensus and added that recent trading trends, if sustained, should be more than enough to offset adverse currency and commodity price movements.

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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FRANKFURT - Market data at 10.05 am
   
Major indices:
   
DAX 30 - 5,456.17, up 72.89 points or 1.35 pct
MDAX - 7,741.94, up 170.95 points or 2.26 pct
TecDAX - 630.57, up 15.87 points or 2.58 pct
DAX future - 5,460.50, up 17.00 points 0.31 pct

Major risers:
   
Continental, up 2.50 eur or 3.25 pct at 79.45, on bargain-hunting
   
ThyssenKrupp, up 0.74 eur or 3.09 pct at 24.67, recovering from yesterday's solid losses, having been one of yesterday's worst performers
  
MAN, up 1.63 eur or 3.22 pct at 52.18, bouncing back from yesterday's 7.50 pct slump
  
BMW, up 0.95 eur or 2.53 pct at 38.45
   
Siemens, up 1.41 eur or 2.25 pct at 64.05
   
Major losers:
   
Schering and Bayer, down 0.97 eur or 1.13 pct at 84.83 and 0.09 eur or 0.27 pct at 33.50 respectively, amid concerns over the latter's planned takeover of Schering, after Bayer said that Merck KGaA may not tender its  stake in Schering to Bayer's 86 eur per share takeover offer.

Merck said in a statement to the US Securities and Exchange Commission last night that it has raised its stake in Schering to more than 10 pct.
   
Metro, down 0.16 eur or 0.37 pct at 42.71

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Paris shares at a glance outlook
 
Shares are expected to open higher after Wall Street's late upturn, dealers said. Yesterday, the CAC-40 index closed down 140.43 points or 2.91 pct at 4,684.34, wiping out the gains made since the beginning of the year.
   
Trading volume was heavy at 8.11 bln eur. The euro was quoted at 1.2643 usd, against 1.2645 late yesterday.

Forthcoming Events

Today
   
April industrial production, 8.40 am
   
April trade balance, 8.45 am
   
Club Mediterrannee H1 results, 7.30 am; webcast 11.00 am
   
Electricite de France AGM, 3.00 pm
   
Oberthur Card Systems AGM
  
Monday
   
Remy Cointreau FY results
   
Beneteau Q3 sales
   
Havas AGM

Today's Press
   
Bouygues to raise stake in Alstom to up to 30 pct (Financial Times)
   
Arcelor poised to announce shareholder vote on Severstal merger (Financial Times)

Company News
   
Club Med swings to 1 mln eur H1 net profit; sales up 10.5 pct
   
Eurotunnel's Gounon ready to adapt debt restructuring plan
   
French Govt confirms IPO for Aeroports de Paris oversubscribed
   
Arcelor small shareholders assn plans legal challenge to force Severstal bid
   
Lucent-Alcatel gets U.S. antitrust OK
   
Airbus wins central govt approval for A320 assembly site in northern China
   
Caisse des Depots trims Michelin stake to less than 5 pct voting rights

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AMSTERDAM - Market data at 10.36 am:

AEX index             424.48, up 4.84 points
AMX Midcap index      543.72, up 9.37 points
Govt bonds            unchanged to slightly higher

Major gainers:
   
Buhrmann firmed 3.22 pct at 11.21 and Hagemeyer was 2.59 pct higher at 3.56
   
Staffing stocks were also among leading gainers, with Vedior climbing 2.42 pct to 16.09, USG People rising 3.51 pct to 54.50 and Randstad putting on 2.42 pct at 44.95
   
SBM Offshore added 2.65 pct at 19.75, Royal Dutch Shell was up 1.59 pct at 24.98
   
Vopak advanced 3.13 pct to 27.38 amid news it signed up RWE and another major European gas company as customers for its newly planned LNG terminal together with Gasunie
   
Philips added 2.7 pct at 23.57
   
ABN Amro climbed 2.1 pct to 21.44 after an upgrade 'buy' from 'hold' with an unchanged price target of 25 eur at Deutsche Bank
   
Oce was up 1.39 pct at 11.64 after saying it intends to appoint Anton Schaaf, chief technology officer at Deutsche Telekom AG since 2005, as its chief technology & operations officer.

Major losers:
   
Rodamco Europe was off 0.6 pct at 74.70, Corio declined 0.02 pct at 45.50
   
KPN lost 0.34 pct at 8.91 and Reed Elsevier gave up 0.17 pct at 11.55

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