UK/Euro Financial Market Daily Morning Briefing 11-09-2007

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London shares up early on; NY closes higher; Next gains on strong results

UK blue chips pushed higher in early deals, following a stronger close on Wall Street, with Next a good gainer as its first-half pretax profits topped market hopes.
   
At 9.17 am, the FTSE 100 index was 52.8 points firmer at 6,186.9, with the majority of its components trading in the blue, with the FTSE 250 index making good gains too, up 78.4 points ahead at 11,053.2. Early volume was fair, with 209.6 mln shares changing hands in 54,696 deals.
   
Overnight on Wall Street, the DJIA ended 14.47 points firmer at 13,127.85, after a volatile session, ahead of the next FOMC meeting on Tuesday Sept 18.
   
While most investors expect a rate cut, many are hoping for a reduction of as much as 50 basis points to help the US economy avoid a recession induced by housing and credit market weakness.
   
Broader stock indexes fell back slightly. The Standard & Poor's 500 index slipped 1.85 points to 1,451.70, and the Nasdaq composite index declined 6.59 to 2,559.11.
   
Today in Asia, Japan's Nikkei 225 index closed up 112.70 points at 15,877.67. Meanwhile, the Hang Seng at midday ended its morning up 80.91 points at 24,080.61.
   
Oil prices came within sight of a fresh record in Asian trade as OPEC ministers headed into crunch talks over the cartel's output. There were signs in Vienna that the group might bend to the will of Saudi Arabia and increase production.
   
New York's main futures contract, light sweet crude for delivery in October, was 41 cents higher at 77.90 usd a barrel from 77.49 usd in late US trades on Monday.
   
The price was not far off its record high of 78.77 usd set on Aug 1. Brent North Sea crude for October delivery was at 75.76 usd a barrel.
   
In London, on the corporate news front, Next was among the top blue-chip gainers early on, soaring up 54 pence at 1,915, after the high street catalogue and fashion retailer reported a 10.8 pct increase in pretax profit to 198.2 mln stg, against analyst forecasts of 170-190 mln stg, for the six months to end-July 2007.
   
However, the Leicester-based group said the combined sales of Next Retail and Next Directory for the six weeks to Sept 8 were down 2.9 pct compared with the same period last year.
   
In reaction, UBS said Next's gross margins in Retail and Directory bad debt reduction were better than expected, and maintained its 'buy' rating and target of 2,225 pence on the stock.

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Landsbanki also kept its 'buy' rating on the company, saying the interims were well ahead of market expectations with current trade somewhat worse.
   
Also lending support were the miners, against a background of stronger commodity prices, with Antofagasta up 16-1/2 pence at 692, Rio Tinto up 74 pence at 3,619, BHP Billiton 28 pence firmer at 1,439, Vedanta Resources up 40 pence at 1,850, and Anglo American 50 pence ahead at 2,769.
   
Shares in oil stocks also pushed higher early on, after oil prices near fresh highs, with BG Group up 15-1/2 pence at 806-1/2, and BP 3-1/2 pence firmer at 561-1/4.
   
And positive broker comment provided the spur for Tesco, up 7 pence at 422-1/4, with Lehman Brothers upgrading its rating to 'overweight' from 'equal-weight', saying it believes the company's international business will start to thrive, thereby accelerating the globalisation of Tesco.
   
Lehman Brothers said both the Asian and European components of Tesco's international business should drive long-term value for the shares towards 734 pence by 2011/12, on its estimates.
   
Turning to the blue-chip casualties, shares in DSG International took a tumble, down 0.9 pence at 146.3, following a rating cut from Morgan Stanley to 'underweight' from 'equal-weight', with the broker lowering its target too, to 135 pence, from 155.
  
Morgan Stanley said in a note published this morning that it believes DSG is much more sickly than most investors realise and needs radical surgery (for example merging Currys and PC World into a single format) to return it to long-term health.
   
Looking at the midcaps, Cairn Energy was a good gainer early on, up 54 pence at 1,840, after saying the Indian government has given a "right of use" approval from the group's pipeline project in Rajasthan.
   
The approval will allow Cairn India and the state-owned Oil and Natural Gas Corp, which are jointly developing the vast Rajasthan oil fields, access to the land to build the pipeline, it said.
   
Cairn made the announcement alongside interim results which showed profit before tax and exceptional items of 10.5 mln usd, down from 12.7 mln last time, on a decline in turnover to 138.7 mln usd from 153.9 mln, reflecting a fall in production to 22,486 barrels of oil equivalent per day from 27,346 boepd.
   
In reaction, KBC Peel Hunt reiterated its 'hold' recommendation but lowered estimates on the group.
   
In other earnings news, Premier Farnell shares climbed early on, up 4 pence at 175, after the UK electronics distributor reported a 14 pct increase in its interim pretax profit on the back of growing internet sales.
   
The firm's pretax profit rose to 33.8 mln stg, against market expectations of 33 mln stg, and up from 31.4 mln last time, but the group's overall sales adipped to 362.5 mln from 369.6 mln last time.

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Solid first-half numbers also provided impetus to Derwent London's shares, 40 pence firmer at 1,694, after the property group reported a 26.8 pct increase in adjusted pretax profits of 12.3 mln stg for the six months to June 30.
   
The company said adjusted NAV increased by 12.5 pct to 1,931 pence, against a proforma figure of 1,717p on Feb 1, when it completed the acquisition of London Merchant Securities.
   
If the REIT conversion charge of 54.7 mln stg is excluded, the rise would have been 15.7 pct, it added.
   
In reaction, KBC said: "Derwent London is expertly run for total return and the programme now includes potentially  though not yet consented  four very substantial and credible schemes for the period 2009-13: a possible renewal of 1-5 Grosvenor Place, the possibility to rework the Saatchi headquarters in Charlotte Street, the vacated Angel headquarters building and the mixed scheme at North Wharf Road."
   
Strength in Provident Financial was an early feature as well, with its shares up 8 pence at 872-1/2, after the UK doorstep lender, which recently demerged its international division - renamed International Personal Finance -, said first half pretax profits at the combined operation rose to 56.3 mln stg from 47 mln stg last year.
   
But rising pretax profit failed to support shares in Savills, whose shares slipped 7-1/2 pence to 452-1/2, after the company said first-half underlying pretax profit was 32.5 mln stg, up 27 pct the previous year.
   
The property services company warned that the tightening credit market is affecting transactional volumes in the commercial investment markets but said it believes prime UK residential should remain resilient.
   
And finally, shares in Redrow also slipped, down 2 pence at 498-1/4, after the housebuilder said full-year results fell slightly to 120.5 mln stg from 122.5 mln, in a stable but competitive UK new homes market with up to four interest rate increases during the period. Revenue increased by 3.3 pct to 795.7 mln.
   
In reaction, Citigroup noted that volumes rose 1 pct to 4,823 adding that while this was expected, it is down on the 10 pct growth the group had expected to achieve at the start of the year due to the problems with getting sites through the planning process.

UK Diary of Events

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US Summary

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

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PARIS - Market data at 10.15 am:

Major indices:
   
CAC-40 up 40.57 points or 0.75 pct at 5,427.00
SBF-80 up 32.69 points or 0.5 pct at 6,551.60
SBF-120 up 27.95 points or 0.71 pct at 3,960.20

38 CAC-40 stocks up
2 CAC-40 stocks down

Major gainers:
   
Alstom up 3.62 eur or 2.8 pct to 131.41, Bouygues up 0.58 or 1.05 pct to 55.75 after report government has hired advisers to look into merger opportunities for Areva.
   
ArcelorMittal up 1.01 or 2.22 pct to 46.08 after says to hike shipments by over 20 pct by 2012 via organic expansion.
   
CNP Assurances up 0.80 or 0.89 pct to 90.44 ahead of scheduled H1 results.

Major decliners:
   
BNP Paribas down 0.32 eur or 0.46 pct to 72
   
LVMH down 0.21 or 0.27 pct to 78.12

Most active stocks:
   
Alcatel-Lucent up 0.01 eur or 0.14 pct at 7.35; 2.71 mln shares
   
Total up 0.64 or 1.17 pct at 55.18; 1.14 mln shares

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FRANKFURT - Market data at 10.16 am

DAX - up 45.62 points or 0.62 pct at 7,421.06
MDAX - up 92.94 points or 0.94 pct at 9,943.49
TecDAX - up 7.35 points or 0.82 pct at 907.59
DAX futures - up 10.00 points or 0.13 pct at 7,431.50
   
Major Climbers:
   
Merck KgaA, up 3.69 eur or 4.00 pct at 95.95, after its Erbitux cancer drug was shown to prolong the lives of people with a difficult-to-treat form of lung cancer.
   
Infineon, up 0.21 eur or 1.74 pct at 12.26, as traders said the chipmaker was benefiting from higher valuations after US Peer Intel Corp, the world's largest semiconductor company, boosted its third-quarter sales forecast on Monday amid stronger-than-expected demand for its microprocessors.
   
MAN, up 1.69 eur or 1.70 pct at 100.90, after news that the heavy truck manufacturer said it is set to transfer its bus operations from Salzgitter to Poland.
   
Hypo Real Estate, up 0.64 eur or 1.69 pct at 38.50, rebounding from recent declines
   
Deutsche Boerse, up 0.85 eur or 1.12 pct at 76.75

Major Decliners:
   
Lufthansa, down 0.03 eur or 0.15 pct at 20.47, ahead of today's release of August traffic figures

Other Major Movers:
   
ThyssenKrupp, up 0.32 eur or 0.80 pct at 40.11, after the Financial Times Deutschland reported that the steel giant is considering a sale of its steering systems unit Presta, and has started sounding out potential buyers.
  
MDAX-listed Wacker-Chemie, up 3.40 eur or 2.26 pct at 153.70, after Citigroup initiated coverage with a 'buy' rating and a price target of 190 eur per share, saying it expects the silicon chemistry specialist to show long-term earnings growth that will maintain its strong track record despite the share's recent strong run.

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AMSTERDAM - market data at 10.08 am
   
Major indices
   
AEX                517.21, up 4.31 points
AMX Midcap         696.24, up 6.30 points
Government bonds   lower

Major gainers
   
KPN rose 2.54 pct to 11.72 eur after an upgrade to 'buy' from 'neutral' at Merrill Lynch, and also after KPN's takeover bid on Getronics was officially launched this morning.
   
TomTom added 2.34 pct to 51.17 eur after news it will supply navigation devices to Toyota.
   
Arcelor Mittal put on 1.95 pct to 46.01 eur after news that it expects to hike shipments by over 20 pct by 2012.
   
Philips rose 1.78 pct to 29.77 eur following a string of price target upgrades at several brokerages.
   
ABN Amro added 1.06 pct to 33.44 eur amid news that Fortis will split its headquarters between Amsterdam and Brussels following a successful takeover by the RBS consortium, of which Fortis is a part. Fortis edged 0.08 pct higher to 25.56 eur.
   
Major decliners
   
DSM slipped 0.03 pct to 36.69 eur amid news of a reorganisation in China.
   
SNS Reaal dropped 0.32 pct to 15.50 eur after it confirmed its interim dividend of 0.36 eur per share.
   
Grolsch was flat at 27.59 eur amid minimal trading volumes following disappointing first-half earnings.
   
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