UK/Euro Financial Market Daily Morning Briefing 11-10-2007

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London shares firmer in early deals; NY mixed, Asia up; RICS news

UK blue chips moved higher in early deals today after a mixed performance overnight on Wall Street, lifted by good gains in Asia and by increased hopes for further UK rate cuts after news the Royal Institution
of Chartered Surveyors saw a big rise in members reporting house price falls in August.
   
At 9.16 am, the FTSE 100 index was 55.4 points firmer at 6,688.4, with all the broader FTSE indices also higher. Early volume was solid, with 450 mln shares changing hands in 87,538 deals.
   
In its monthly survey of the housing market, the RICS said 14.6 pct more of its members reported a fall than a rise in house prices, well above after August's -3.3 pct reading.
   
Today's news is far worse than expected, analysts had expected another reading of around -3.0 pct.
   
Overnight on Wall Street, the DJIA closed 85.84 points lower at 14,078.69 knocked back by profit-takers after rising 120 points on Tuesday, while the broader S&P 500 index ended down 2.68 points at 1,562.47, but the tech-laden Nasdaq composite index added 7.70 points to finish at 2,811.61.
   
US investors were also unsettled by some cautious corporate statements including a profit warning from oil giant Chevron, disappointing Q3 numbers from aluminium group Alcoa, and news Boeing is delaying initial deliveries of its 787 Dreamliner commercial aircraft by six months.
   
But the mood was positive today in Asia. In Tokyo, the Nikkei 225 index closed 281.09 points higher at 17,458.98 helped by late news that the Bank of Japan, as expected, is keeping its overnight call rate target unchanged at 0.5 pct for the ninth straight meeting.
   
Meanwhile in Hong Kong, the Hang Seng ended 563.69 points higher at 29,133.02, another record close after the territory's Chief Executive Donald Tsang unveiled his administration's economic package for the coming fiscal year.
   
Meanwhile oil prices in Asian trade moved higher albeit in an edgy market ahead of the latest weekly US Department of Energy energy stockpiles report, released later than usual because of Monday's public holiday in the US.
   
New York's main oil futures contract, light sweet crude for delivery in November, was 14 cents higher at 81.44 usd a barrel in morning trade after rising more than a dollar in US trades to 81.30 usd per barrel on Wednesday.
   
In London, fund manager Schroders was the top FTSE 100 riser, up 55 pence at 1,559, extending yesterday's gains amid fresh chatter the firm could sell its investment arm to focus on private banking, or just sell several of its low margin businesses, according to the Financial Times.
   
Elsewhere among financials, insurer Resolution added 9-1/2 pence to 689-1/2 after the firm revealed after the market close last night that it has rejected a 660 pence per share cash proposal from Pearl Assurance.

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Resolution said Pearl's proposal significantly under-values the group and its prospects as part of a planned merger with Friends Provident -- shares in which slipped 0.1 pence lower to 177.7.
   
Northern Rock also continued to be a positive feature, up a further 4-1/2 pence at 278. The stock soared higher yesterday as dealers noted that banks lending stock in the stricken mortgage lender were making life difficult for hedge funds looking to short the stock, as moves from the BoE and Jon Wood forced a squeeze.
   
Elsehere Vodafone shares added 4.5 pence to 175.5 as vague rumours circulated that CEO Arun Sarin has resigned from the company. A spokesman for the company denied the rumours.
   
And gains in heavyweight mining issues provided the main strength for blue chips in early deals, carrying on overnight gains in Sydney.
   
Australian shares closed at record highs for the fourth straight day on Thursday as overseas investors continued to buy leading resources stocks including BHP Billiton which ended at all-time high.
   
In London, BHP Billiton shares added 35 pence to 1,836, while Antofagasta gained 22-1/2 pence to 859, Xstrata firmed 91 pence to 3,546, and Rio Tinto took on 79 pence to 4.487.
   
On the downside with blue chips, however, accounting software group Sage topped the fallers board, down 4-3/4 pence at 247 after a trading statement revealed disappointing organic growth at its US business that prompted the departure of two members of its US management team.
   
Sage said it expects full-year results to be in line with market consensus forecasts at 1.158 bln stg, up from 0.892 bln last time.
   
In reaction to the news, Landsbanki noted that once again the concern that Sage is losing market share to Microsoft and to a lesser extent to Intuit will resurface. The broker reiterated its 'hold' rating on Sage and favours LogicaCMG at present.
   
Also among the fallers, RBS shares shed 7 pence to 552 on profit-taking following gains earlier this week following the success of its consortium bid for Dutch bank ABN Amro and as Deutsche Bank resumed coverage on the stock with a downgrade to 'hold' from 'buy' with a cut in target to 570 pence from 750 pence
   
Meanwhile shares in Barclays, which lost out in the bid battle for ABN Amro also fell back down 2-1/2 pence at 653 as ABN Amro, the broker, resumed coverage on the stock with a downgrade to 'hold' from 'buy' with a cut in target to 660 pence from 850 pence.

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And shares in credit checking firm Experian shed 5-1/2 pence to 390-1/2 after being downgraded by both Citigroup and Credit Suisse following yesterday's trading update.
   
Credit Suisse cut its rating to 'neutral' from 'outperform', also dropping its target to 580 pence from 700 pence, meanwhile Citigroup downgraded Experian to 'hold' from 'buy', cutting its target to 560 pence from 680.
   
On the second line, shares in retailer WH Smith dropped 6 pence to 414 as dashed hopes for a share buy-back and concerns for the long term outlook offset better-than-expected full year numbers.
   
WH Smith said it would only decide on a possible share buy-back after Christmas as it reported a 29 pct increase in full year underlying pretax to 66 mln stg, ahead of consensus and ahead of the company's own 63 mln stg forecast.  But the group cautioned it expects a "very competitive" Christmas.
   
On the upside with mid caps, Hays took on 6-1/4 pence to 149 after a positive trading update which revealed a 24 pct increase in first quarter net fees.
   
The UK's largest recruiter posted the rise amid continued strong demand across its markets and said it will continue with strong international expansion.
   
And Cookson added 18 pence to 840 as the group confirmed an 497 mln stg agreed takeover offer for Foseco. Cookson said the deal would be part funded by the pre-emptive placement of 18.58 mln new ordinary shares in the company.
       
Back on the macro front, the latest British Chamber of Commerce UK economic survey will also be released later today.
   
And across the Atlantic, aside from the latest weekly US jobless claims, August International trade numbers and September import prices will all give a snapshot of the health of the world's biggest economy.

Diary of Events

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

US Summary

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

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MILAN - Market data 9.45 am

Main indices
   
Mibtel at 31,952, up 0.35 pct
   
S&P/Mib at 41,029, up 0.28 pct

Main S&P/Mib gainers
   
Prysmian up 1.65 pct at 20.97 eur, aiming to reach the highest level since the stock started trading in May of this year
   
Saipem up 1.51 pct at 30.17
   
Luxottica up 1.40 pct at 26.06
   
Fiat up 1.33 pct at 22.78, as its chairman Luca Cordero di Montezemolo confirmed contacts with Daimler on possible cooperation on the next generation A- and B-class models. According to one dealer this could help the Italian group improve profitability and reduce fixed costs
   
Telecom Italia up 1.09 pct at 2.0925
 
Main S&P/Mib losers
   
Banca Popolare di Milano down 1.13 pct at 10.59 as JP Morgan cut the stock from 'neutral' to 'underweight' with the target reduced to 11.46 eur from 12.19
   
Finmeccanica down 0.72 pct at 20.66 as investors digest the further delay in delivery of Boeing's 787 Dreamliner plane. The group's Alenia Aeronautica is a supplier of parts to the plane
   
Mediobanca down 0.65 pct at 15.67 as JP Morgan cut its stance from 'neutral' to 'underweight' with a target of 16.61 eur, down from 18.10 as it sees the Italian investment bank as having less flexibility on costs than its peers
   
Seat Pagine Gialle down 0.47 pct at 0.4045 after yesterday's strong gains
   
Unicredito Italiano down 0.21 pct at 6.27

Other stocks in the news
   
Beni Stabili up 2.50 pct at 0.885. Exane BNP Paribas initiated the stock with a 'neutral' stance with a 0.86 eur target

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FRANKFURT - Market data at 10.16 am

DAX - up 45.42 points, or 0.57 pct, at 8,031.99
MDAX - up 100.91 points, or 0.95 pct, at 10,757.41
TecDAX - up 4.87 points, or 0.48 pct, at 1,011.32
DAX futures - up 54.50 points, or 0.68 pct, at 8,097.00
   
Major Climbers:
   
Volkswagen, up 6.34 eur, or 3.62 pct at 181.58, as traders pointed to extremely strong sales data from China, which prompted the automaker to raise its full-year sales guidance for the country
   
Henkel, up 0.76 eur, or 2.15 pct, at 36.10
   
MAN, up 2.33 eur, or 1.93 pct, at 123.00, on persistent rumours of a possible takeover from Investor AB, Scania or Volkswagen AG.
   
Deutsche Boerse, up 1.98 eur, or 1.85 pct, at 108.72, after Dow Jones Indexes confirmed yesterday that the German stock market operator's stock will be included on its EURO STOXX 50 Index replacing ABN-AMRO effective at of the opening of trade on Monday, Oct 15.
   
Hypo Real Estate, up 0.74 eur, or 1.69 pct, at 44.63, on ongoing positive effects from a reshuffle of several units the bank announced yesterday as part of planned restructuring following the purchase of peer DEPFA.
   
Major Decliners:
   
Merck, down 0.40 eur, or 0.44 pct, at 89.72, after ING Bank initiated coverage of the pharma and chemicals company with a 'buy' rating and a target of 110 eur per share, perhaps triggering profit taking
   
Deutsche Bank, down 0.10 eur or 0.11 pct, at 93.90

Other Shares in Focus:
   
MDAX-listed Suedzucker AG, up 0.60 eur, or 3.93 pct at 15.85 as the top gainer on the index after Europe's largest sugar supplier and processor

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PARIS - Market data at 10.45 am:

Major indices:
   
CAC-40 up 36.27 points or 0.62 pct at 5,874.76
SBF-80 up 25.81 or 0.37 pct at 7,069.91
SBF-120 up 24.56 or 0.58 pct at 4,285.58

33 CAC-40 stocks up
7 CAC-40 stocks down

Major gainers:
   
Michelin, up 2.34 eur or 2.37 pct at 100.89
   
Capgemini, up 1.24 or 2.66 pct at 47.88, extending yesterday's gains
   
Clarins, 1.57 or 2.88 pct at 56.05. French weekly Challenges reported PPR may transfer YSL Beaute to Clarins in return for a stake of up to 30 pct in the company
   
Rexel, 0.66 or 4.92 pct ahead at 14.08. Sonepar today announced it has raised its stake in Hagemeyer to 10.24 pct from 5.77 pct
   
Oberthur Card Systems, up 0.15 or 2.22 pct at 6.90. Goldman Sachs raised the stock to 'buy' from 'neutral' and included it in its 'conviction buy' list
   
EADS, up 0.43 or 1.89 pct at 23.23. Boeing has announced a six-month delay in the delivery of its 787 programme
   
ArcelorMittal, up 1.17 or 2.11 pct at 56.67. The stock is to replace ABN Amro Hldgs in the Dow Jones STOXX 50 Index

Major losers:
   
TF1, down 0.37 or 1.67 pct at 21.37, pulling back from its three-day rally. The share rose has risen over 16 pct since the government announced plans to reform broadcasting regulations
   
Iliad, 0.62 or 0.84 pct lower at 73.12, shedding some of yesterday's gains
   
Credit Agricole, down 0.06 or 0.21 pct at 27.87. ABN Amro cut its stance on the group to 'hold' from 'buy'

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