UK/Euro Financial Market Daily Morning Briefing 11-04-2006

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London shares open higher, M&S Q4 results impress, miners & oils gain UPDATE

LONDON - London shares opened firmer this morning with investors
encouraged by the continuing recovery at M&S, while concerns over the price of
crude and the prospect for global interest rates were temporarily pushed into
the background, dealers said.

At 9.00 am, the FTSE 100 was up 5.8 points at 6,072.8, while the broader
indices were also higher.

Last night on Wall Street, US stocks closed 21.29 points higher at
11,141.33, off a session high of 11,185.54, with sentiment darkened by
interest-rate concerns and a rise in crude-oil futures to a nine-week high, as
investors waited for the first-quarter earnings season to begin.

Meanwhile, over in Asia, Japan's Nikkei 225 index closed down 38.45 points
at 17,418.13, while the Hang Seng closed 45.78 points lower at 16,475.81.

Among shares in the headlines this morning, Marks & Spencer was the top
riser, up 19 at 582-1/2 after the retailer reported a third consecutive quarter
of underlying sales growth, showing its recovery under chief executive Stuart
Rose is continuing to gain momentum despite the tough UK retail environment.

For the fourth quarter to April 1 the retailer saw total UK sales increase
9.1 pct and rise 6.8 pct on a like-for-like basis, which strips out the impact
of new space, easily surpassing analysts' consensus expectations of growth of
3.2 pct and an acceleration from third quarter growth of 2.9 pct.

Non-food (clothing and home goods) like-for-like sales were up 8.2 pct --
smashing analysts' consensus expectations of growth of 1.6 pct and accelerating
from third quarter growth of 0.8 pct.

In reaction to the result, broker Seymour Pierce upgraded its stance to
'outperform' from 'hold'.

Mining issues underpinned this morning's gains after copper and zinc prices
returned to record levels overnight, and nickel rose to a nine-month high.

Miners were also benefiting from upgrades in Anglo American and Xstrata to
'buy' from 'hold' by Deutsche Bank on the back of the rise in metal prices.

The broker said stronger commodity prices and higher earnings and cashflow
remain key catalysts to sector outperformance this year, prompting increases in
its forecasts.

Xstrata took on 79p to 2053, while BHP gained 31 to 1173. Anglo American was
up 47p at 2452, Rio rallied 99p to 3214 and Kazakhmys up 39 to 1273.

Elsewhere, Sage Group took on 1-1/2p to 267-1/2 after being upgraded to
'outperform' from 'underperform' by CA Cheuvreux following a positive trading
update this morning.

Earlier today, Sage said revenues, operating profit and pretax profits for
the first half to end-March were all in line with market expectations, which
consensus sees at 444 mln stg, 115 mln and 111 mln respectively.

Oil giants BP and Royal Dutch Shell both rose, up 8-1/2p to 702 and 30p to
2,000 after the price of Brent North Sea crude hit a new historic high point of
69.38 usd on concern that the US might launch a military strike against Iran
despite US comments to play this down.

The price of Brent crude for May delivery surged 63 cents to 69.38 usd per
barrel in electronic trading.

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On the downside, Scottish & Newcastle fell 9-1/2p to 522 after unveiling
plans to raise about 210 mln stg via a share placing to help finance its
acquisition of the Fosters brand in Europe from Australia's Fosters Group Ltd.

Meanwhile investors took profits from Prudential, off 9-1/2p at 658, after
AXA said it is "unequivocally" not in talks to buy or combine in any way with UK
insurer, and that it has no plans to enter into such talks.

Tesco dipped 3p to 326 on news UK retail sales posted their worst
performance in eight months, falling by 1.4 pct in March from a year earlier on
a like-for-like basis, a survey by the British Retail Consortium showed.

The figure -- which strips out the impact of changes in floor space -- is
the worst reading since July last year and comes well below the median forecast
of analysts polled by AFX News for an unchanged reading. It is significantly
lower even than the most pessimistic forecast for a fall of 0.5 pct.

GUS faded 5p to 1058, and Next lost 4p to 1646.

On the second line, Carphone Warehouse traded higher, 4 pence higher at
317-1/2, as brokers welcomed a positive trading update.

The UK mobile retailer said plans to launch high-speed internet access will
cost more than 100 mln stg in the current financial year, but will boost
operating profits by between 30-40 mln stg the following year.

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The group also reported pretax profits for the year to March in line with
expectations of around 135 mln stg.

In reaction, Merrill Lynch retained its 'buy' rating noting that although
detractors could take fright at the scale of the operation, investors should not
forget the robust Distribution business that can support the strategy.

Elsewhere, Misys topped the leaderboard after UBS upped its stance to 'buy'
from 'neutral' with an increased aim price of 260 pence.

The broker noted that the postponed disposal of Sesame has counterbalanced
the good price achieved for its general insurance business.

Vedanta Resources moved higher, up 13 at 1529, as brokers welcomed the
miner's Q4 production report, while bullish sector comments from Deutsche Bank
and fresh record highs across metal prices also provided support

Finally UK builder Wilson Bowden eased 21p to 1540 after being downgraded to
'neutral' from 'buy' by UBS on valuation grounds.

The broker said the stock had a strong run in the year-to-date, up 35 pct,
and up 8 pct in the last quarter.

UK Small Cap Report

For a summary of today's trading on the FTSE Small Cap and the AIM, click here

Diary of Events

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German shares AFX market data at 9.32 am
 
Major indices:
DAX 30 - 5,984.02, down 19.38 points or 0.32 pct
MDAX - 8,687.20, up 17.66 points or 0.20 pct
TecDAX - 728.66, up 0.95 point or 0.13 pct
DAX future - 6,015.00, down 5.50 points or 0.09 pct

Major risers:

-RWE, up 1.38 eur or 1.95 pct at 72.33, after Credit Suisse upgraded its
stance on the stock to 'outperform' from 'neutral' with a new price target of 83
eur from 59.5, and as Cheuvreux upgraded RWE to 'outperform' from 'underperform'
with a new price target of 77 eur

-Metro, up 0.28 eur or 0.64 pct at 44.02, as the retailer sold its remaining
40.5 pct stake in MDAX-listed Praktiker, apparently at 20.40-21.40 eur per
share, which prompted Landesbank Rheinland-Pfalz to raise its price target on
the issue to 45 eur from 42
-Linde, up 0.35 eur or 0.51 pct at 68.38
-Adidas-Salomon, up 0.62 eur or 0.37 pct at 168.12   

Major fallers:
-Henkel, down 1.64 eur or 1.66 pct at 97.05, trading ex-dividend after
paying out a 2005 dividend of 1.36 eur per preferred share and 1.30 eur per
ordinary share following its AGM yesterday
-Commerzbank, down 0.36 eur or 1.09 pct at 32.64
-SAP, down 1.96 eur or 1.05 pct at 185.48
-Infineon, down 0.09 eur or 1.04 pct at 8.59, after US peer Micron reported
what HVB described as "relatively weak" second quarter results yesterday

-Deutsche Bank, down 0.91 eur or 0.94 pct at 95.85

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Shares AFX market data at 10.19 am

Major indices:

AEX index             468.95, down 1.71 point
AMX Midcap index      633.29, down 1.0 point
Government bonds      unchanged to slightly higher
  
Major decliners:

-Technology issues led decliners. ASML dropped 1.98 pct at 16.85, ASMI gave
up 0.77 pct at 16.74 and Philips lost 0.72 pct at 27.42 as investors digested
results and outlook of its LG Philips LCD venture

-KPN was down 1.22 pct at 9.69, TNT eased 1.48 pct at 29.32  

-TomTom slipped 0.91 pct at 30.40

Major gainers:

-Oil sector issues were in demand, with Royal Dutch Shell rising 1.33 pct at
27.41 and SBM Offshore adding 0.52 pct at 86.35, while Fugro put on 0.65 pct at
33.94

-Staffing stocks also performed well after Rabo Securities raised its growth
projections for the Dutch recruitment market and upped the price target for
several staffing groups. USG People, with a new price target of 82 eur from 70,
rose 2.13 pct to 64.85 while Randstad advanced 1.33 pct at 53.30 as its price
target was hiked to 64 eur from 58. Vedior, up 0.06 pct at 17.38, also benefited
from the report  

-Other gainers included Wolters KLuwer, 0.59 pct higher at 20.38, and
Rodamco Europe, up 0.28 pct at 90.0

Paris shares at a glance outlook

PARIS - Shares are expected to open flat to slightly lower as a mixed
overnight performance on Wall Street prompts caution, dealers said.
Yesterday, the CAC-40 index 15.31 points or 0.30 pct higher at 5,190.27.
On the Matif, April CAC-40 futures were trading down 3.0 at 5,191 ahead of
the official opening.

FORTHCOMING EVENTS TODAY
-Feb trade balance (8.45 am)
-Caisses des Depots (CDC) property unit Icade IPO closes

TOMORROW
-Carrefour Q1 sales (after close)
-Groupe SEB Q1 sales
-Eurotunnel SA/Eurotunnel PLC FY results
-Caisses des Depots (CDC) property unit Icade shares scheduled to start   
trading

TODAY'S PRESS
-Alstom CEO Kron sees FY China sales 1 bln eur vs 1.6 bln; aims for more   
JVs (interview in La Tribune)

COMPANY NEWS
-Sanofi-Aventis says wins appeal over Lovenox patents in US, annulling
decision of a tribunal which ruled in favour of generic drug cos challenging

Lovenox patent
-Aeroflot to join SkyTeam alliance this week
-BNP Paribas wins licence to open office in Israel
-Euronext shareholder group favours merger that goes beyond euro zone
-BNP Paribas says paid around 800 mln eur for 5.6 pct stake in SKorean
Shinhan Financial
-Danone Asia to buy additional 8.45 pct stake in Shanghai Bright Dairy
-AXA denies rumours mulling bid for Prudential

POLITICS/MACROECONOMIC/MISCELLANEOUS
-Govt may commence debate on new jobs law to replace CPE tonight
   
MARKET SENTIMENT
-SANOFI-AVENTIS UPGRADED TO 'NEUTRAL' FROM 'UNDERPERFORM' AT CREDIT SUISSE

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London 0808 GMT     Singapore 3.05 pm (0705 GMT) 

US dollar
yen             118.44 up from          118.42
sfr             1.3002 down from        1.3005   

Euro    
usd             1.2133 up from          1.2130    
stg             0.6955 unchanged        0.6955   
yen             143.71 up from          143.65   
sfr             1.5777 up from          1.5774    

Sterling
usd             1.7445 up from          1.7437    
yen             206.60 up from          206.47    
sfr             2.2682 up from          2.2671    

Australian dollar
usd             0.7322 up from          0.7317    
stg             0.4196 up from          0.4195    
yen             86.72 up from           86.660 

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