UK/Euro Financial Market Daily Morning Briefing 10-08-2006

Leading shares opened lower as news that Scotland Yard thwarted a major terrorist plot weighed on sentiment, and while US investors remained cautious following hawkish comments from the Fed on Tuesday, dealers said.

At 8.36 am, FTSE 100 took a knock, 71.9 points lower at 5,788.6; while the FTSE 250 sank by 104 points to 9,225.1.

Volume was dismal, with 176.2 mln shares exchanging hands in 16,233 deals, as the renewed threat of terrorist attacks made investors jittery.

Across the Atlantic overnight, investors were spooked by the spectre of rising inflation after the Fed's comments on Tuesday, while a new spike in oil prices capped positive sentiment resulting from positive numbers from Cisco Systems and Walt Disney.

The Dow Jones Industrial Average fell 97.41 points to 11,076.18 after having risen as much as 77.25 early in the session.

The Nasdaq Composite Index lost 0.57 points to 2,060.28.

In Asian trade, crude oil eased back 0.2 usd to 76.33 usd per barrel after climbing to 77.3 usd in the previous day.

Still in Asia, Japan's main market the Nikkei 225 closed 25.68 points lower at 15,630.91 while the Hang Seng began its afternoon session 29.91 points lower at 17,316.6.

Crude-oil futures edged lower in Asian trade, shrugging off a greater-than-expected decline in US fuel stockpiles, but ongoing concerns regarding the situation in the Middle East and continued strong energy demand in the United States and China could support higher oil prices during the day.

In London, fears of terrorist attack saw shares in leisure and tourism groups hit turbulence, with shares British Airways sinking by 20 pence at 370, the main casualty among blue chips after Scotland Yard said today it has foiled a terrorist plot to blow up aircraft in mid-flight.

Major disruption to flights is expected, according to press reports, as security is tightened at UK airports. No hand baggage is being allowed on planes.

Shares in BA also deflated following recent strength on the back of strong first quarter numbers on Monday.

Among other issues in the leisure and tourism sector, Intercontinental Hotels Group shares lost 16-1/2 pence to 846, while Easyjet plummeted by 15-3/4 pence to 405-3/4, the biggest faller among midcaps.

Still with the leisure market, broker action weighed down on Whitbread, shedding 18 pence at 1,214, after UBS cut its rating to 'reduce' from 'neutral' by UBS on valuation grounds, with the broker noting that bid speculation has buoyed the share price.

Still on the downside, the insurance sector suffered, with Royal & Sun Alliance hit, losing 2-1/2 pence at 130-3/4 as its majority-owned Codan cut its full year net forecast after negative interim value adjustments.

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Major indices:

    CAC-40 down 82.94 points or 1.7 pct at 4,942.21
    SBF-80 down 70.65 at 5,428.78
    SBF-120 down 57.42 at 3,564.49

    Volume: 698 mln eur
    1 CAC-40 stocks up
    38 CAC-40 stocks down

Arcelor has been removed from index following Mittal Steel takeover, no replacement yet.

Major gainers:

Electricite de France, up 0.12 eur or 0.3 pct at 44.57 and the only blue chip stock in positive territory, after a government advisory body ratified a 1.7 pct tariff increase. Analysts at Exane BNP Paribas estimate the price hike will boost 2006 EBITDA by 135 mln eur, and by 360 mln next year.

Groupe Steria, up 1.65 or 5 pct at 34.99 after the IT services group predicted an increase in sales growth in the second half, as it posted a 4 pct rise in first half sales to 607.2 mln eur.

Major losers:

EADS, down 0.66 or 2.7 pct at 23.90 after a downgrade to 'neutral' from 'outperform' by Credit Suisse.

Air France-KLM, down 0.83 or 4.2 pct at 18.92. The airline has cancelled all flights to London until later today, in line with other carriers, after revelations of a thwarted terror plot. The news offset the airline's first quarter sales increase of 11.9 pct to 5.802 bln eur, ahead of most analyst expectations.

France Telecom, down 0.47 or 2.9 pct at 15.83 after its German rival Deutsche Telekom posted weaker than expected second quarter earnings, and warned profits would not meet the targets set for this year and next.

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Major indices:

    AEX 447.52, down 5.77 points
    AMX Midcap 557.35, down 8.08 points
    Government bonds were broadly higher

Major decliners:

KPN led decliners, down 3.65 pct at 9.24 eur

ING lost 1.51 pct to 31.93 after posting Q2 results which beat expectations, led by strong insurance Europe ops

Aegon lost 1.35 pct to 13.19 on the back of Q2 results which were in-line, and with a raised interim dividend

Ahold was 0.14 pct off at 6.92 eur, as the food retailer released Q2 sales which came in below estimates, with the company saying US Foodservice to meet FY opg margin tgt

ABN Amro fell 1.73 pct to 20.48 eur

Shell was off 1.58 pct to 27.48 eur

Univar was down 6.81 pct at 33 eur
 
Major gainers

Fortis was up after posting better-than-expected Q2 results and saying that as a result of its "excellent results in the last 18 months" it will next year re-evaluate its long-term financial targets.

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Major indices:

    DAX 30 - 5,585.90, down 118.72 points or 2.07 pct
    MDAX - 7,795.28, down 129.04 points or 1.64 pct
    TecDAX - 621.89, down 13.34 points or 2.10 pct
    DAX future - 5,648.95, up 23.4 points or 0.42 pct
    Bund future - 116.95, up 0.17 points or 0.02 pct

Major risers/outperformers:

Volkswagen, up 0.21 eur, or 0.34 pct at 61.42: Morgan Stanley ups tgt to 75 eur

Hypo Real Estate, down 0.35 eur, or 0.80 pct at 43.50: UBS retains 'buy'

Schering, down 0.44 eur, or 0.48 pct at 90.30

MAN, down 0.34 eur, or 0.60 pct at 56.00

Bayer, down 0.37 eur, or 1.00 pct at 37.70

   
Major fallers:

Deutsche Telekom, down 1.03, or 8.53 pct at 11.05: slashes guidance

TUI, down 1.04 eur, or 6.69 pct at 14.49: Q2 weak, cuts guidance

Lufthansa, down 0.66 eur, or 4.37 pct at 14.02: London airport threat

RWE, down 2.34 eur, or 3.35 pct at 67.59: Cautious FY guidance

Commerzbank, down 0.52 eur, or 1.98 pct at 25.25: Price targets cut
   

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