UK/Euro Financial Market Daily Morning Briefing 11-07-2006

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London shares open lower, M&S food operations offset Partyaming upgrade

Leading shares opened lower this morning in quiet early trade with concerns over Marks & Spencer's food operations blighting an otherwise solid first quarter trading update and offsetting a broker upgrade for PartyGaming, dealers said.
   
At 9.05 am, the FTSE 100 was off 6.2 points at 5,890.7, having pulled back from an opening low of 5872.3. The other indices were also lower.
   
Early volume was moderate with 201 mln shares trading in 21,083 deals.
   
Last night on Wall Street, US stocks closed higher but lost most of the session's earlier gains as investors grew nervous ahead of the second-quarter earnings season. Weakness in the technology sector dragged on the Nasdaq. At the close of trading, the Dow added 12.88 to 11,103.55, after gaining as much as 84 points earlier.
   
Broader stock indicators were mixed. The S&P 500 rose 1.86 to 1,267.34, and the Nasdaq dropped 13.13, or 0.62 percent, to 2,116.93.
   
Meanwhile over in Asia, Tokyo's Nikkei 225 index closed the morning session down 140.40 points at 15,412.41, while in Hong Kong the Hang Seng Index ended the morning down 97.98 points at 16,505.83.
   
Oil prices were lower on hopes of progress on Iran's nuclear program at the upcoming Group of Eight summit, and as some of the tension over North Korea's missile tests eased, analysts said.
   
New York's main contract for delivery in August, was down 19 cents at 73.42 usd per barrel from 73.61 usd in late US trade Monday.
   
Gold for August delivery ended down 8.70 usd at 626.10 an ounce on the New York Mercantile Exchange. Other metals prices were mixed with Copper adding 3.50 cents to 3.5825 usd a pound.
   
In the absence of any significant domestic or US economic releases for the next few days, focus has now fallen on the first few trading updates of this latest cycle with M&S posting a trading update ahead of its AGM later today.

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Investors, used to stellar trading updates from the UK food and clothes retailer, were left non-plussed by like-for-like food sales only up 5.8 pct, from 5.6 pct in the last quarter and compared to analysts' forecasts 5-10.5 pct.
   
M&S revealed its UK like-for-like sales for its first quarter to July 1 increased 8.2 pct, however, CEO Stuart Rose cautioned investors to expect a slowdown in underlying sales growth from July onwards as comparative numbers get much tougher. M&S shares were flat at 583-1/2.
   
Elsewhere, Vodafone slipped 1-3/4 pence to 118 after UBS cut its rating to 'neutral' from 'buy'.
   
The broker said the reasons for Vodafone's problems being difficult to avoid include increased price competition regulation in Europe, especially regarding roaming, increased competition from peers and margin pressure from the move into broadband.
   
Meanwhile, the corporate governance group RREV is expected to advise shareholders today to vote in favour of the company's controversial executive pay deal.
   
In other news, International Power slipped 4-3/4 pence to 290-1/2 after saying it is launching a 200 mln eur convertible bond issue, expected to close by the end of business today with a coupon range of 2.5 pct to 3.25 pct, due in 2013.
   
The company said it expects to use the net proceeds from the sale to fund the equity of 288 mln usd it spent on its acquisition of the 632 megawatt coal fired Coleto Creek power generation facility in Texas.
   
On the upside, PartyGaming was the FTSE 100 top rise, up 1-1/2 pence to 107-1/2 after HSBC upped its stance on the online gaming group to 'overweight' from 'neutral' noting that recent share price weakness now allows for an attractive entry point into the stock for investors.
   
Elsewhere, British Airways recovered initial losses to trade moderately higher in early deals after Panmure Gordon issued an upbeat research note, in which the broker upgraded the stock to 'buy' from 'hold'.

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The airline's shares added 0-3/4 at 366-3/4 pence.
  
The broker also raised its price target to 420 pence from 340, citing load factors in the North Atlantic and increased EPS estimates for this year and next, adding that trading within the sector appears to be good, as shown by easyJet last week.
   
BT Group rose a penny to 238 after UBS upped its target to 280 pence from 260, saying that the sale of Openreach could generate significant value.
   
On the second line, Taylor Nelson continued to show weakness, off 4 pence at 177-1/2, following last week's profit warning, and after JP Morgan cut its price target to 216 pence from 277 although 'overweight' recommendation saying it was difficult to see a catalyst that would re-rate the shares in the near term.
   
On the upside, 888 rallied 5 pence to 211-3/4 on the read across from PartyGaming and ahead of the Goodlatte and Leach gaming bills will are scheduled to be brought to the House of Representatives in the US tomorrow.

UK Diary of Events

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European Economic Data

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US Summary

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AMSTERDAM - Market data at 10.10 am:

Major indices

AEX index             440.75, down 1.83 point
AMX Midcap index      591.19, down 0.12 point
Govt bonds            unchanged to slightly higher

Major losers:
   
Philips led blue chip fallers, off 1.92 pct at 23.50 after disappointing second-quarter results from its joint venture LG Philips LCD 
   
TomTom extended its slide following the second-quarter sales warning issued late Friday, down 1.07 pct at 29.51 after losing almost 7 pct yesterday
   
ASML dropped 1.23 pct at 33.54, ASMI shed 1.13 pct at 12.26
   
Heineken lost 1.38 pct at 33.54, Reed Elsevier gave up 1.03 pct at 11.49

Major gainers:
   
Numico added 0.85 pct at 35.56
   
Getronics firmed 0.35 pct at 8.61
   
ING was up 0.32 pct at 30.88, Fortis edged up 0.04 pct at 27.55

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PARIS - Market data at 10.05 am:

Major indices:
   
CAC-40 down 12.18 points or 0.24 pct at 4,970.30
SBF-80 down 24.14 points or 0.43 pct at 5,615.20
SBF-120 down 9.49 points or 0.26 pct at 3,597.75

Volume: 471 mln eur
10 CAC-40 stocks up
29 CAC-40 stocks down
(Arcelor temporarily suspended from CAC-40)

Major gainers:
   
Sanofi-Aventis, up 0.45 eur or 0.58 pct at 78.15
   
Carrefour, up 0.20 eur or 0.43 pct at 46.81
   
Michelin, up 0.15 eur or 0.32 pct at 46.81   

Major losers:
   
Safran, down 1.59 eur or 9.36 pct at 15.40, after issuing a warning on its full year margin amid higher than expected costs in its defense business and heavy competition in communications. Yesterday it said 100 mln eur in sales may be pushed from 2006 into 2007 by delays with the Airbus A380 program.
   
Alcatel, down 0.44 eur or 4.50 pct at 9.34, after reporting a drop in its second quarter operating margin amid a 7.5 pct rise in sales.
   
EADS, down 0.29 eur or 1.34 pct at 21.30

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German shares AFX at a glance outlook

Forthcoming Events

TODAY July 11
   
June Wholesale Prices (WPI)
   
Lufthansa June traffic figures, around 11.00 am
   
Deutsche Bank holds investment press conference with Klaus Martini, global      chief investment officer

TOMORROW July 12
   
Press Conference with BMW Mangement Board, Munich

Company News
   
Schroders says now holds 5.02 pct of MTU (Boersen-Zeitung)  
   
Sky Investment increased its stake in Singulus to 5.11 pct (Boersen-Zeitung)
   
Macroeconomic News
   
German June WPI up 0.5 pct vs May, up 5.3 pct yr-on-yr

Market News/Sentiment
   
ING Bank Reiterates 'Buy' rating for Allianz, ups target to 150 eur from 145

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