UK/Euro Financial Market Daily Morning Briefing 10-02-2006

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London shares open lower after late Wall Street pull-back, Shire suffers

Leading shares remained lower in early deals, undermined by last night's late sell-off on Wall Street, while profit taking across the mining sector and weakness in Shire Pharmaceuticals also weighed, dealers said.
    
By 9.00 am, the FTSE 100 index was down 21.2 points at 5,787.6, while the
broader indices were also weaker.
   
Volume was moderate, with 320.3 mln shares changing hands in 25,580 deals.
   
US stocks ended mixed on Wall Street last night as a round of upbeat earnings reports was tempered by a Fed official's remarks hinting at higher interest rates, with some investors also choosing to lock in gains in high-profile sectors such as energy.
   
The DJIA rose 24.73 points to 10,883.35, well below its early high of 10,952.27, while the Nasdaq Composite Index fell 11.11 points to 2,255.87 after spending most of the session in positive territory.
    
Across Asia overnight, the Nikkei 225 index closed 181.84 points lower at 16,257.83, while the Hang Seng ended the day 12.52 points higher at 15,425.95.
   
In the UK, Shire Pharmaceuticals was under pressure, down 3 pence at 880, after a US FDA advisory panel voted in favour of adding a black box warning to stimulant ADHD drugs in relation to cardiovascular risks in certain patients.
   

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UBS however, said it believes the move could be a modest positive for Shire's Adderall XR, which is the only stimulant ADHD drug to have such a black box warning currently, "as it would level the playing field for this class of drugs".
   
Elsewhere, mining stocks were lower, as the sector's volatile week continued, with metal prices slipping back again.
   
Antofagasta eased 29 pence to 2,043, BHP Billiton lost 9 pence to 997 and Anglo American fell 16 pence to 2,063 following in line numbers from its De Beers diamond unit.
    
XStrata gained 26 pence to 1,660 however, following an upgrade to 'overweight' from 'equal-weight' by Morgan Stanley.
    
The US broker highlighted the fact that, on its estimates, Xstrata is the cheapest stock in the mining sector, trading at a 24 pct discount in 2006.
   
Also on the upside, BAA remained in demand after the Times reported that private equity group Star Capital Partners is eyeing the airports operator.
   
Centrica topped the early risers however, with a gain of 6-1/2 pence to 292, following news of Scottish Power's gas and electricity price rises in the UK.
   
"This move is positive for Centrica as it will dampen the customer reaction to their own increase." UBS noted, repeating its 'buy' recommendation.
   

Scottish Power shares gained 8 pence to 598.
   
Compass was another early riser, adding 3-1/2 pence to 221-3/4 after the troubled support services group revealed trading was in line with expectations
and the planned sale of its travel concessions business is on track, dealers said.
   
In a statement ahead of its annual meeting, the company reported strong trade at its North American division though indicated conditions remained more challenging in the UK and Europe.
   
In response, Merrill Lynch said the statement should be a relief to the market as trading appears to be in line with expectations, as it reiterated its 'neutral' stance.
   
On the second line, Arriva added 13 pence to 614-1/2 after Merrill Lynch upgraded the stock to 'buy' from 'sell', saying it is a "compelling LBO candidate."
   
The broker said it expects interest from private equity or corporate buyers in UK bus and rail stocks to gain momentum over the next two to three years.
   
Elsewhere, new issue Qinetiq got off to a good start, with shares in the defence technology group edging up to 209-1/2 in conditional dealing, from its placing price of 200 pence per share.
   
On the economic front, US preliminary Michigan sentiment data for January should be followed, while trade balance data could also attract attention.

Diary of Events

For a look at key financial events in the UK today, click here

US Summary

For a summary of US stocks at the close of trade, click here

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FRANKFURT - AFX market data at 09.30 GMT

   
Major indices:
   

DAX 30 - 5,722.72, down 20.96 points or 0.36 pct
MDAX - 8,117.42, down 19.59 points or 0.24 pct
TecDAX - 701.78, down 0.21 points or 0.03 pct
DAX future - 5,738.50, down 14.00 points or 0.24 pct

   
Major gainers:
   
Hypo Real Estate, up 1.02 eur or 1.90 pct at 54.70
   
Volkswagen, up 0.44 eur or 0.87 pct at 51.06, on reports the carmaker will
release FY results today, sparking speculation the figures may be better than
expected
   
Bayer, up 0.26 eur or 0.76 pct at 34.53, extending yesterday's gains
   
BMW, up 0.25 eur or 0.64 pct at 39.40
   
Henkel, up 0.26 eur or 0.29 pct at 89.20
   
   
Major losers:
   
TUI, down 0.21 eur or 1.19 pct at 17.40, on concerns over rising oil prices
in the wake of the Iranian nuclear crisis
   
Lufthansa, down 0.13 eur or 0.95 pct at 13.49 for the same reason
   
Commerzbank, down 0.26 eur or 0.88 pct at 29.27
   
Siemens, down 0.65 eur or 0.86 pct at 75.30
   
RWE, down 0.56 eur or 0.81 pct at 68.16

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