UK/Euro Financial Market Daily Morning Briefing 11-06-2007

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London shares higher early on after NY rebound; Centrica up on bid hopes

UK blue chips pushed higher in early deals this morning after a difficult time last week reflecting a triple-digit rebound on Wall Street Friday, with Centrica the top riser on fresh Gazprom bid hopes.
   
At 9.10 am, the FTSE 100 index was 36.5 points higher at 6,541.6, with all the broader FTSE indices also rallying -- the FTSE 250 index jumped 64.0 points higher to 11,647.6. Volume was solid, with 236 mln shares changing hands in 53,010 deals.
   
Pre-weekend on Wall Street, the DJIA closed 157.66 points higher at 13,424.39, while the S&P 500 index ended 16.95 points firmer at 1,507.67, and the Nasdaq composite index finished 32.16 points stronger at 2,573.54.
   
Fridays gains could not offset all the losses seen over a week that had started out with fresh closing records for the DJIA and the S&P 500 indices - the DJIA shed 1.78 pct in value for the week, while the S&P 500 lost 1.87 pct and the Nasdaq composite gave up 1.54 pct.
   
The recovery continued today in Asia. The Nikkei 225 index ended 55.39 points higher at 17,834.48, meanwhile the Hang Seng index ended its morning session 113.87 points stronger at 20,623.02.
   
In London, Centrica was the best blue chip performer in early deals, adding 15 pence at 374-1/2 on speculative interest after the Russian gas monopoly Gazprom said yesterday it was about to close a deal that would increase its presence in Britain but did not name the company, according to a report in The
Guardian.
   
Also on the M&A front, ongoing bid speculation continued to drive shares in InterContinental Hotels shares higher, up 32 pence at 1,335, while miner Lonmin extended Friday's speculative run, adding 70 pence at 3,857 amid vague takeover talk.
   
Meanwhile Barclays shares added 17-1/2 pence at 740 after US hedge-fund firm Atticus Capital said it has acquired shares and met with the bank to discuss whether it should drop its effort to buy ABN Amro, the Wall Street Journal reported in its online edition.
   
The newspaper cited people familiar with the situation as saying that Atticus has told Barclays officials that Barclays stock is under-valued and that the situation would change if the bank drops its bid for ABN.
   
RBS shares, however, slipped back 0-1/2 pence to 656-1/2 as the odds increase on its rival consortium bid for ABN Amro succeeding, and on profit-taking after a good run last week following an upbeat trading statement.
   
Elsewhere among the minority blue chip fallers, Rexam stood out down another 15 pence at 496-1/2 after confirming plans to buy O-I Plastic Products from Owens-Illinois Inc for 1.825 bln usd in cash. Rexam is to part-fund the deal by a placing of about 58.35 mln new shares through an accelerated book-building process.

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In reaction, Seymour Pierce noted that the price being paid is at the very top end of the range it expected, although it said the new equity funding was in the middle of its range. Given the weak outlook for the current year, shareholders are in for a long wait, said Seymour Pierce, noting that the shares are unlikely to make much progress in the short-term.
   
Elsewhere Vodafone shares ran in to some profit taking, down 1.8 pence at 158.2 following last week's good gains on rebel shareholder Efficient Capital Structure's radical proposals to change the telecoms operator's structure and debt levels via a resolution to be put to the firm's AGM.
   
The Sunday Telegraph reported that ECS has claimed that 19 of the UK group's institutional investors support its move, however Saturday's Times reported that investors have snubbed the rebels, with fund manager M&G leading the 'no' vote, and the Independent on Sunday said the activist shareholder has failed to win support from the City for its radical plans    
   
Royal Dutch Shell shares saw some profit-taking after Friday's gains on the back of a broker upgrade, losing 2 pence at 655.
   
On the second line, property firm Workspace dropped 32-1/4 pence to 395 on profit taking after reporting an in-line 24 pct drop in full-year pretax profit to 112.5 mln stg. The group saw its its adjusted net asset value rise by 48 pct to 351 pence.
   
Elsewhere shares in car rental firm Avis Europe shed 1-1/4 pence at 54-1/4 after the firm said it has identified potential malpractice in its local Portuguese subsidiary.
   
The group said it believes the suspected malpractice, if substantiated, will have resulted in an overstatement of the group's net assets as at 31 December 2006 by about 3 mln eur.
   
EMI shares shed 2-1/2 pence at 270-1/2 after the Sunday Times reported that leading shareholders in Warner Music Group are said to be opposed to chief executive Edgar Bronfman's plans to make a renewed offer for the UK firm.
   
Signet shares shed 0-3/4 pence at 109-1/2 after being downgraded to 'hold' from 'buy' by Goldman Sachs with a reduced price target of 115 pence from 130 after the jewellery retailer reported a decline in first quarter earnings last week.
   
On the upside, JJB Sports shares rebounded 7-3/4 pence higher to 257-1/4 after after the firm's after-hours announcement Friday that its founder and former executive chairman David Whelan sold his family's entire 28.96 pct stake in the UK sports retailer and has quit the board.
   
The Wigan-based group said Whelan's family sold just under 69 mln shares at 275 pence a share, worth 190 mln stg, to a joint venture consortium formed by Icelandic financial group Exista hf and Chris Ronnie.

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Ronnie is a close associate of Mike Ashley but The Observer reported that the consortium have given JJB written assurances that they are not linked the controversial sportswear billionaire who runs rival Sports Direct.

Elsewhere shares in Go-ahead Group added 51 pence at 2,441 after Goldman Sachs added the stocks to its Conviction Buy list.
   
The broker reiterated its 'buy' rating and 2,750 pence target on the transport firm, saying that near-term momentum in the groups key bus and rail divisions shows no signs of slowing.     
   
And Friday's Goldman Sachs upgrade continued to buoy SSL shares, up 6-3/4 pence at 423-1/4.       
   
On the macro front, the main domestic focus will be on UK May PPI numbers later this morning.
   
Input prices are seen up 0.5 pct on April and 0.7 pct year on year. Output prices are also seen up 0.4 pct on the month or 2.5 pct year on year. No important US economic data is due for release today.

UK Diary of Events

For a diary of financial and corporate events in the UK next week, click here

US Summary

For a summary of US stocks at Friday's close of trade, click here

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PARIS - Market data at 10.24 am:

Major indices:
   
CAC-40 up 49.87 points or 0.85 pct at 5,933.16
SBF-80 93.49 or 1.31 pct at 7,223.08
SBF-120 38.76 or 0.90 pct at 4,334.70

Volume: 996 mln eur
36 CAC-40 stocks up
3 CAC-40 stocks down

Major gainers:
   
Nexans up 5.21 eur or 4.62 pct at 118.01. Dealers said that Cheuvreux analysts had raised their target for the company to 145 eur vs 120.
   
Vallourec up 6.16 or 2.75 pct at 230.15, reclaiming some of its heavy losses from last week.
   
BNP Paribas up 1.52 or 1.74 pct at 88.68 and Societe Generale up 1.87 or 1.33 pct at 142.12 as speculation continued of a possible tie-up between the two banks. According to Le Figaro, BNP Paribas executives yesterday repeated their opposition to a merger, while The Times claimed Societe Generale CEO Daniel Bouton is keen to complete a merger deal this year.
   
Havas up 0.09 or 2.08 pcrt at 4.41 ahead of today's AGM. Separately, the advertising group announced the creation of a new agency, H, bringing together several existing agencies.
   
Major losers:
   
Ipsen down 1.19 or 3.20 pct at 36.01 after the French pharmaceuticals group halted a phase three study for its investigational four-month formulation of triptorelin.
   
Club Mediterranee down 0.41 or 0.84 pct at 48.51 , giving up some of its gains from Friday when it reported improved first-quarter results
   
France Telecom down 0.15 or 0.71 pct at 21.09

Most active stocks:
   
BNP Paribas, 101 mln eur
   
Societe Generale, 88 mln

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MILAN - TFN market watch at 9.36 am:
   
Main indices
   
Mibtel at 32,734, up 0.46 pct
S&P/Mib at 41,890, up 0.43 pct

Main S&P/Mib gainers:
   
Atlantia up 1.44 pct at 24.72 eur
   
Lottomatica up 1.43 pct at 31.26
   
Fiat up 1.35 pct at 20.29, after its CEO Sergio Marchionne, who is credited for the turnaround of the company, repeated he is willing to stay at the helm of the group beyond 2010, following losses last week.
   
Main S&P/Mib losers:
   
Alitalia down 1.13 pct at 0.781
   
Parmalat down 0.39 pct at 3.15
   
Eni up 0.19 pct at 26.28
   
Other stocks in the news:
   
Banca Italease up 2.12 pct at 20.26, after an over 25 pct drop on Friday due to expectations that its deteriorating financial situation may require it to launch a capital hike. Mediobanca and Goldman Sachs have said they are ready to support the bank.
   
Tiscali up 0.90 pct at 2.402, after its CEO Tommaso Pompei said the company could consider possible acquisitions.
   
On Saturday, the Il Sole 24 Ore daily said Tiscali is ready to make an offer for Tele2 Italia, the Italian operations of Tele2, in a deal that could be worth 350-400 mln eur.
   
Bulgari up 0.84 pct at 11.53. The luxury goods company could nearly double sales in six to seven years if it achieves its ambition to increase the size of the business by 10 pct a year, its CEO Francesco Trapani said today.

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