UK/Euro Financial Market Daily Morning Briefing 11-10-2006

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London shares slip on profit taking in early deals, Shire under pressure
   
At 9.44 am the FTSE 100 was down 13.5 points at 6,059.2, with the rest of the market also lower following solid gains yesterday.
   
Overnight on Wall Street, the Dow Jones Industrial Average set its fourth record close in two weeks, finishing less than a point above its previous closing high. After a lacklustre day of trading, broader indices also rose slightly, putting the Standard & Poor's 500 back near its 5 1/2 year highs.
   
The Dow Jones industrials rose 9.36, or 0.08 pct, to close at 11,867.17. Its previous record, set Thursday, was 11,866.69.
   
Overnight in Asia, Japan's Nikkei 225 index closed down 76.68 points at 16,400.57, while in Hong Kong the Hang Seng wrapped the early session down 12.45 points at 17,811.25.
   
The New York Mercantile Exchange's main contract, light sweet crude for November delivery, was up 0.01 usd at 58.53 usd a barrel from 58.52 usd in late trading in the US overnight, when prices fell more than 1.00 usd on skepticism about reports of OPEC output cuts. Brent North Sea crude for November was up 0.08 usd at 59.42 usd.
   
In London, Shire remained under pressure this morning as brokers digested news of a disappointing profit sharing agreement with New River Pharmaceuticals for its recently FDA approved NRP104 ADHD treatment.
   
Shire shares were down another 29 pence to 932, after falling nearly 5 pct yesterday afternoon.
   
Shire shares had jumped 15 pct on Monday to a new five-year high however, on news that the Food and Drug Administration issued a so-called "approvable letter" for the group's new hyperactivity drug, NRP104, developed with partner New River Pharmaceuticals.
   
Goldman Sachs however, removed Shire from its 'Conviction Buy' list last night, largely on valuation grounds, although noted some disappointment at the details of Shire and New River's profit sharing agreement, disclosed yesterday.
   
The broker noted that the economic profit to Shire is lower than its original assumptions and it has therefore placed its numbers under review.

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Elsewhere, bid speculation turned sour for Brambles, off 8 at 492, with investors swerving the recently hyped stock with recent predator speculation also eclipsing Man Group, off 5-1/4 at 472-3/4. And steel maker Corus also suffered a lack of investor confidence, dropping 9-1/2 pence to 469-1/2.
   
Poor sentiment continued as J Sainsbury also appeared immune to good news, dipping 3-1/2 pence 387-1/2, even though it reported better-than-expected underlying sales growth in the second quarter of the year, benefiting from good summer weather which the grocer said drove demand for fresh and healthy foods.
   
Britain's third-biggest supermarket group said like-for-like sales growth, excluding petrol, advanced 6.6 pct in the 16 weeks to Oct 7 when compared with the same period last year.
   
On a happier note, with little in the way of focus, investors hung onto the fact that BG Group was upgraded to 'buy' from 'neutral' by UBS with a raised target of 800 pence, up from 750, dealers said.
   
The broker argued that it believes consensus asset valuations do not reflect the potential upside which BG could realise from exploration.
   
UBS pointed out that over the last 18 months, it estimates that BG added 640 mln barrels of new reserves via exploration success, equating to 43 pence per share on its NAV.
      
On the second tier, Burberry Group took pole position, up 18-3/4 at 528-1/2, after reporting consensus-beating first-half retail sales, prompting positive broker comment, dealers said.
   
Earlier Burberry said its first-half retail sales rose 23 pct underlying, driven by new and existing stores. Burberry said that underlying wholesale sales increased by 1 pct.
   
In reaction to the numbers, JP Morgan said the excellent like-for-like sales, up 14 pct, were well above market expectations and its own top end estimate of 6.5 pct. It said the sales were boosted by very strong outerwear and womenswear and the first new iconic handbag product launches.
   
Investors seemed to still cheer market rumours of a suggested bid for First Choice, up 7 at 223-3/4.

For months punters, and traders alike, have been touting the notion of an approach for the holiday group, with suggested bids coming from the likes of Kuoni, with the most recent predator being eyed as German operator, TUI.
   
In reaction, Morgan Stanley upped the stock to 'overweight' from 'equal-weight' with a 260 pence target.

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In a research note landing on fund managers' desks this morning, Morgan Stanley said its price target implies a 21 pct upside potential.
   
Also making gains was N Brown Group, up 4-1/4 at 256-1/4, after reporting an expected 16.3 pct increase in first half pretax profit, a 20.3 pct hike in its interim dividend and robust current trading.
   
For the six months to August 26 the group made a profit before tax of 29.2 mln stg. This compares to analyst forecasts of about 29.5 mln stg and 25.1 mln stg last time. Turnover from continuing operations increased 11.8 pct to 255.8 mln stg. N Brown said it achieved growth in all product and customer groups with like-for-like home shopping sales increasing 10.2 pct.
   
On the downside, Morgan Crucible was another loser to a lack of market support of a possible bid approach, shedding 13 pence to 269-1/2.
   
The firm fell back following press reports that takeover talks between the UK engineer and potential bidder DLJ, the private equity arm of Credit Suisse, have faltered.
   
UK mobile phone retailer Carphone Warehouse warned that start-up costs for its recently launched broadband business will be 20 mln stg higher than originally planned.The stock dropped 9 pence to 324-1/2.
   
Delays in activating orders and the need to hire extra call-centre staff meant its cut-price broadband service would incur a loss of 70 mln stg in the current fiscal year, compared to an original budget of 50 mln, cautioned the group.

Finally, investors also shied from UK investment bank Collins Stewart Tullet, down 13 at 897-1/2, after it said it is in talks to buy unlisted corporate finance advisory firm Hawkpoint Partners, confirming an earlier report in the Daily Telegraph newspaper.

UK Diary of Events

For a diary of key financial and corporate events today, click here

US Summary

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

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PARIS - Market data at 9.40 am:

Major indices:
   
CAC-40 down 21.05 at 5,288.74
SBF-80 down 22.00 at 6,041.11
SBF-120 down 15.07 at 3,829.68

Volume: 650 mln eur
6 CAC-40 stocks up
30 CAC-40 stocks down
4 CAC-40 stocks unchanged

Major gainers:
   
CNP Assurances up 3.15 or 4.25 pct at 77.30, upgraded to 'outperform' from 'underperform' at CA Cheuvreux after announced purchase of 49.9 pct stake in Ecureuil Vie for 1.406 bln eur
   
Societe Generale up 1.20 at 127.70 UBS says prefers SocGen to Credit Agricole
   
EADS up 0.11 at 21.00, recovers a little more ground after yesterday's bounce
   
Vivendi up 0.09 at 23.38 after yesterday's slide
   
Peugeot up 0.04 at 42.78 bouncing back

Major losers:
   
Credit Agricole down 0.95 or 2.68 pct at 34.55, downgraded to 'neutral' from 'buy' at UBS
   
Schneider Electric down 0.80 at 90.60 on profit-taking
   
Havas down 0.06 or 1.60 pct at 3.70 after yesterday's gains
   
Safran down 0.15 or 0.96 pct at 15.47 profit-taking after gains yesterday; 9-mths sales rise 8 pct

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AMSTERDAM - Market data at 10.10 am
   
Major indices

AEX 487.29, down 2.51 points
AMX Midcap 611.42, down 4.64 points
Government bonds Flat

Major gainers
   
Van der Moolen was up 1.70 pct to 4.79 eur in bargain-hunting after recent sharp declines, dealers said
  
Getronics rose 0.58 pct to 5.24 eur
   
Philips gained 0.11 pct to 27.81 eur
   
Major losers
   
Corus dropped 3.09 pct to 6.91 eur in profit-taking after recent gains on news that Indian steel maker Tata is contemplating buying the company, dealers said
   
Royal Dutch Shell shed 0.35 pct to 25.80 eur after the International Energy Agency trimmed global oil demand forecasts for 2006 and 2007, dealers said
   
ABN Amro declined 0.94 pct to 23.29 eur amid reports it may be interested in buying Pirelli's 1.92 pct stake in Capitalia
   
TNT dropped 0.75 pct to 30.28 eur after reports the company is thinking of selling its Freight Management division

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FRANKFURT - Market data at 10.21 am   

Major indices:
   
DAX 30 - down 27.25 points or 0.45 pct at 6,090.46
MDAX - down 24.34 points or 0.28 pct at 8,603.34
TecDAX - up 0.17 points or 0.03 pct at 671.50
DAX future - down 27.5 points or 0.45 pct at 6,134.00

Major gainers:
   
Deutsche Telekom, up 0.19 eur or 1.53 pct at 12.64
   
Fresenius Medical Care, up 0.77 eur or 0.76 pct at 101.70, up after its parent company MDAX-listed Fresenius AG announced a three for one share split 
   
TUI, up 0.07 eur or 0.42 pct to 16.91   
   
Commerzbank, up 0.3 eur or 0.11 pct at 27.15
   
Hypo Real Estate, up 0.12 eur or 0.24 pct to 50.65

Major losers:
   
Linde, down 1.13 eur or 1.50 at 74.12, after Goldman Sachs reportedly sold 650,000 shares, dealers said
   
Deutsche Bank, down 1.05 eur or 1.06 pct to 98.10   
   
BASF, down 0.53 eur or 0.81 pct to 64.60   
   
Deutsche Postbank, down 0.59 eur or 0.98 pct to 59.45 eur, as Morgan Stanley reiterated its 'overweight' stance but cut the target to 24 eur from 25
   
SAP down 1.58 eur or 0.98 pct to 159.97

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