UK/Euro Financial Market Daily Morning Briefing 10-04-2007

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London shares up, Sainsbury slips on bid haggling concerns, miners gain

Leading shares were a tad firmer this morning with mining issues dominating the early risers on the back of stronger base metal prices and helping to offset a weaker oil sector, although J Sainsbury PLC fell amid fears the family's 600p asking price may be too high for the CVC-led consortium, dealers said.

By 9.00 am, the FTSE 100 was up 12.5 points at 6,409.8, with the broader FTSE 250 up 30.00 points at 11,945.9. The other indices were mixed.

Early volume was thin with 221 mln shares trading in 38,776 deals.

Although there is little earnings news scheduled for the week, a scattering of economic data, including UK BRC retail data on Tuesday and the latest Bank of Japan rate verdict out this morning, should provide enough fundamentals for the markets to contemplate.

Last night on Wall Street, the Dow Jones industrials rose 8.94, or 0.07 pct, to 12,569.14, with the broader stock indicators mixed. The Standard & Poor's 500 index edged up 0.85 to 1,444.61, and the Nasdaq composite index fell 2.16 to 2,469.18.

Over in Japan, the benchmark Nikkei 225 index closed down 79.07 points or 0.45 pct at 17,664.69, while over in Hong Kong the Hang Seng closed the morning up 121.24 points at 20,330.95.

In London this morning, Kazakhmys topped the board, up 25 at 1,225 after base metal prices rose in Asian trade on expectations of increased Chinese demand.

Xstrata also gained, up 41 to 2754, with news of its 391 mln aud bid for Gloucester Coal, which at 4.75 aud per share is at a 33 pct premium to one month volume, according to analysts. 

Elsewhere, Rio Tinto took on 46 to 3,091 and Vedanta 18 to 1,400.

Among financials, RBS gained 18 to 2,022 after being repeated as a 'buy' at Merrill Lynch following reports over the weekend that the UK bank is mulling a joint bid for ABN Amro with Spanish peer Banco Santander Central Hispano.

The Sunday Telegraph reported that Royal Bank of Scotland is working on plans to table a counterbid for ABN Amro with long-term ally Banco Santander, disrupting the proposed 80 bln stg merger between ABN and Barclays. 

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The newspaper said the two banks believe they could generate a bigger premium for the Dutch bank's shareholders than the proposed Barclays deal.

Meanwhile Barclays shares ticked up 2-1/2 to 735-1/2 on vague rumours JP Morgan could be eyeing the UK Bank.

Reits issues were also in demand on news Dutch property group Rodamco Europe is to merge with peer Unibail, with the French company's offering valuing Rodamco Europe at 124.50 eur per share.

News of the merger boosted British Land shares 17 to 1,573 and Slough Estates 9 to 796.

On the downside, oil stocks were weaker after the price of crude oil fell 2 usd to under 63 usd a barrel Monday as skepticism over Iran's claim that it has begun enriching uranium on an industrial scale sank an early rally.

BP slipped 4 to 550, RDS eased 10 to 1,681 and Cairn Energy fell 19 to 1,584.

On the M&A front, shares in J Sainsbury slipped at open as reports of an increased offer of 582 pence per share for the UK supermarket group by suitor CVC were tempered by fears the Sainsbury family would not sell at below 600p.

According to the Financial Times, the Sainsbury board signalled to the private equity consortium that the price was high enough, but warned the deal was still not deliverable because of the Sainsbury family's position on price.

Furthermore, The Times said it still lacks the support of the pension trustees who appear to be unimpressed by the proposed 300 mln stg cash injection.

In response, Merrill Lynch said the net result is that, despite the board considering the offer 'high enough', it is unable to recommend the offer or open its books given that the non-consenting parties control more than 25 pct of the equity.

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The broker said the fact that no formal statement has been issued by Sainsbury suggests that management is leaving scope for further negotiation ahead of the Takeover Panel's deadline on Friday.

Elsewhere, ICI dipped 7 to 538 as bid hopes for the speciality chemicals group faded on talk Dow Chemical could be the subject of a bid from private equity, with interest also seen from potential Middle East investors.

Shares in Imperial Tobacco slipped 21 to 2,242 on concerns it may be forced into paying more than it intended for Altadis after the Spanish board unanimously rejected the improved 47-eur-per share "indicative" offer proposed by its British competitor.

Altadis said the board has studied and evaluated the increased bid with its advisors, highlighting that it is "non-binding" and does not constitute an  offer "either for all or part of" the Spanish-French tobacco manufacturer. 

Imperial had initially offered 45 eur per share for Altadis, amid speculation that only a minimum 50 eur proposal would be acceptable to the board.

On the second line, British Energy moved up 10 to 498 after releasing a better-than-expected trading update.

British Energy noted that total output for its financial year ended 31 March 2007 is expected to be 58.4 TWh, marginally ahead of current market expectations.

In response to the update, Merrill Lynch said it believes shares are likely to remain well supported in the short-term anticipating upgrades on these numbers.

On the downside, HMV slid 2.5 to 110.25 after a report signalled that the music industry faces another two years of declining compact disc sales that will not be offset by new revenues from music downloads.

Enders Analysis, a media research company, predicts that overall music sales by 2009 will be half their level at the peak of the CD boom. 

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Amsterdam shares TFN market data at 10.13 am - AEX up, property stocks in focus

Major indices:

AEX 521.89, up 2.60 points
AMX Midcap  739.57, up 6.42 points
Government bonds unchanged

Major gainers:

-Rodamco Europe surged 10.94 pct at 120.30 after the property company announced a 21 bln eur merger with peer Unibail, with the French company's offering valuing Rodamco Europe at 124.50 eur per share. Other Dutch property companies also fared well, with Wereldhave advancing 4.38 pct at 117.43, Corio gaining 3.76 pct at 70.57, Prologis rising 5.0 pct at 16.17, Eurocommercial Properties putting on 4.19 pct at 46.26, VastNed O/I firming 1.54 pct at 31.0 and VastNed Retail climbing 3.18 pct at 77.64

-ABN Amro rose 1.48 pct at 33.68 after a UK newspaper report over the weekend said Banco Santander and RBoS are preparing a counterbid for the Dutch bank

-Ahold added 1.43 pct at 9.21

Major decliners:

-ASML dropped 0.68 pct at 19.04 after AMD's weaker-than-expected first-quarter sales report

-TNT was off 0.52 pct at 34.22 ahead of tomorrow's discussion of the new postal act in Dutch parliament, with a majority seen in favour of full liberalisation of the market from 2008.

-Akzo Nobel fell 0.79 pct at 56.74

-Royal Dutch Shell slipped 0.48 pct at 24.77, SBM Offshore shed 0.58 pct at 27.26

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German shares TFN market data at 10.27 am

Major indices:

DAX - up 32.70 points, or 0.46 pct, at 7,132.61
MDAX - up 99.09 points, or 0.95 pct, at 10,572.29
TecDAX - up 4.57 points, or 0.53 pct, at 873.26
DAX futures - up 2.00 points, or 0.03 pct, at 7,180.00

Major advancers:

-DaimlerChrysler, up 2.01 eur or 3.34 pct at 62.20, after billionaire Kirk Kerkorian announced a 4.5 bln usd bid for the automaker's troubled Chrysler unit

-Adidas, up 1.29 eur or 3.10 pct at 42.90, after the shoe and sports equipment manufacturer announced that it plans to consolidate five Adidas and Reebok US apparel and footwear distribution centres into one new facility

-Deutsche Boerse, up 2.46 eur or 1.43 pct at 174.71, after the exchange operator said its Clearstream unit saw a 9 pct year-on-year increase in March transactions

-Siemens, up 1.4 eur or 1.25 pct at 84.10

-BASF, up 1.00 eur or 1.15 pct at 87.77

Major decliners:

-Infineon, down 0.12 eur or 1.03 pct at 11.48, as US rival Advanced Micro Devices Inc announced a large-scale restructuring effort after it said its first quarter was likely to come in below analysts' consensus

-Lufthansa, down 0.19 eur or 0.88 pct at 21.30

-E. ON, down 0.54 eur or 0.50 pct at 107.95

-SAP, down 0.17 eur or 0.49 pct at 34.60

-Deutsche Telekom, down 0.06 eur or 0.47 pct at 12.83

Other Major Mover:

-MDAX-listed Puma, up 30.64 eur or 9.75 pct at 344.89, PPR SA bought a 25.14 pct stake in Puma AG from German billionaire siblings Guenter and Daniela Herz and aims to buy the rest of the company for 330 eur a share in a "friendly transaction."

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Paris shares TFN market data at 10.15 am; construction stocks shine on M&A talk

Major indices:

CAC-40 down 0.38 points or 0.01 pct at 5,741.00
SBF-80 down 15.76 or 0.21 pct at 7,380.49
SBF-120 down 2.27 or 0.05 pct at 4,229.20

Volume: 584 mln eur
20 CAC-40 stocks up
2 CAC-40 stocks unchanged
18 CAC-40 stocks down

Major gainers:

-Klepierre, up 5.10 eur or 3.46 pct at 152.52 after Dutch property company Rodamco Europe NV announced merger with peer Unibail

-Kaufman & Broad up 1.90 or 3.42 pct at 57.50

-PPR 2.86 or 2.22 pct ahead at 131.80. The group this morning said it intends to purchase a 25.14 pct stake in Puma AG as a precursor to a takeover

-Cap Gemini, 0.85 or 1.46 pct higher at 58.97. Last Friday, Le Figaro cited banking sources as saying Cap Gemini is mulling a bid for Atos Origin

-Atos Origin up 1.00 or 1.89 pct at 53.97

Major losers:

-Soitec, down 0.75 or 4.14 pct at 17.58 after its biggest customer, US semiconductor giant Advanced Micro Devices Inc, revealed a sharp sales drop in Q1

-Eiffage, down 4.26 or 3.30 pct at 124.74 as shares remain volatile ahead of the AGM on April 18 and speculation over Sacyr Vallehermoso's intentions

-Areva down 23.55 or 3.04 pct at 749.99 after Suzlon Energy Ltd increased its takeover offer for Repower Systems AG to 150 eur per share from 126

Most active stocks:

-Total, down 0.48 or 0.91 pct at 52.21 in 65.34 mln eur

-Axa, up 0.17 or 0.52 pct at 32.59 in 64.50 mln eur

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