UK/Euro Financial Market Daily Morning Briefing 11-12-2006

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London shares open higher as Corus bid battle hots up

LONDON - Leading shares spiked higher at the opening, buoyed by renewed M&A fever, as Corus surged almost 5 pct on the back of rival bids for the Anglo-Dutch steel giant, dealers said.

At 9.05 am, the FTSE 100 was 26.1 points firmer at 6,178.5, mirroring the positive wider sentiment.

Volume was solid with 248 mln shares changing hands in 37,308 deals.

Wall Street had closed for the weekend higher after a government employment report revealed the US job market was robust heading into the holiday season, easing concerns that the economy was losing steam too quickly.

The DJIA ended up 29.08 points at 12,307.49, the S&P ended up 2.55 at 1,409.84 and the Nasdaq rose 9.67 at 2,437.36.

The upbeat mood spilled over into Asia as the Nikkei 225 ended the day 110.17 to the good at 16,527.99, while the Hang Seng closed up 184.67 points at 18,924.66.

Back in London, Corus was the early standout winner, up 24 pence at 524-1/2, as rival suitors CSN from Brazil and India's Tata Steel slugged it out for control of the group.

Moments before the open, CSN confirmed weekend press reports by making an agreed 515 pence per share bid for Corus, valuing the group at 4.9 bln stg.

This trumped an increased bid from Tata Steel just yesterday pitched at 500 pence per share or 4.7 bln.

In response, Tata said it was considering its options and would make an announcement in due course.

Still in M&A, Prudential took on 13-1/2 to 699-1/2 after the UK's second-largest insurer revealed yesterday it turned down an approach for its troubled online banking unit Egg from an unnamed suitor.

The news comes after the Sunday Times reported that US financial giant Citigroup Inc is plotting a 950 mln stg offer for Egg.

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This morning, the Financial Times said Prudential's review of its UK life assurance business could trigger a break-up of the group.

The Pru, which recently rejected a 17 bln stg takeover approach from Aviva, announced in the autumn that it was reviewing the future of its UK life assurance business which generates about 200 mln stg cash per year.

M&A news also lifted Pearson, 10 better at 771-1/2, after the media and education company agreed to sell its Government Solutions business to New York-based private equity firm Veritas Capital for 560 mln usd in cash plus equity.

In response, Goldman Sachs said today's shock announcement should be taken positively by the market as it signals Pearsons willingness to rationalize its portfolio.

ICI continued to be courted, 8 higher at 34, amid ongoing hopes the chemical giant could link up with Holland's Akzo Nobel.

Elsewhere, Lloyds TSB, itself the subject of vague bid talk, took on 8 at 563-1/2, after the UK's fifth-biggest bank said it is on course for a 7 pct increase in full-year profit, helped by cost cuts and stable bad debt charges.

In its final trading statement of 2006, Lloyds said its expects its pretax profit for the year to Dec 31, 2006, to be in line with the current consensus analyst forecast of 3.69 bln stg.

In response, Merrill Lynch reiterated its 'buy' advice and said Lloyds TSB released a trading update confirming expectations of strong trading performance and satisfactory profit growth.

US-exposed stocks also found favour as the dollar continued to firm over the weekend following Friday's stronger-than-expected November US nonfarm payroll data.

ICAP added 10 at 473-1/2, Man Group rose 19 at 1260, Amvescap rallied 7-1/2
at 572-1/2, WPP firmed 8 to 696-1/2, Rolls Royce took on 9-1/4 to 436-1/4 and
Capita was 6-1/2 better at 604.

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In contrast, AstraZeneca lost 29 to 2,885 after the drug giant was cut to 'reduce' from 'neutral' at UBS with a reduced target of 2,700 pence, down from 3,400.

In a note to clients, UBS said a negative outcome for the AGI 1067 ARISE study in the first quarter 2007 could see AstraZeneca retest the valuation lows experienced following previous pipeline disappointments.

Oil heavyweights also weighed as crude prices dipped slightly amid caution ahead of OPEC's mooted production cut at its next meeting on Thursday.

Cairn Energy fell 25 at 20833, Royal Dutch Shell eased 15 a 1829, BP lost 2 at 580-1/2 and BG was down 1-1/2 at 685.

Meanwhile, profit taking hit tobacco groups after M&A fuelled gains in the latter part of last week, following confirmation that Gallaher had received a bid approach -- Gallaher lost 9 at 1,163 and Imperial Tobacco fell 5 to 2044.

On the second line, Amec added 3-1/2 at 421-1/2 after the Sunday Times said the construction group will announce this week it is to split itself in two following a year-long strategic review.

Under the move, one company, which will keep the Amec name, will comprise its energy and process-management operations, the newspaper said.

The second, which will be spun off through a trade sale or float, will include Amec's private-finance initiative projects and infrastructure business, which builds road, rail and port schemes.

The London Stock Exchange gained 12 at 1,327 after The Times claimed  ASDAQ
is expected to issue the formal offer document for its hostile 2.9 bln stg bid for the UK bourse operator this week.

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Paris shares market data at 9.57 am; Arcelor Mittal leads broadly higher mkt

Major indices:

CAC-40 up 42.25 points or 0.78 poct at 5,426.41
SBF-80 up 7.19 points or 0.11 pct at 6,544.91
SBF-120 up 26.91 points or 0.68 pct at 3,960.65

Volume: 561 mln eur
37 CAC-40 stocks up
3 CAC-40 stocks down

Major gainers:

-Mittal Steel (Arcelor Mittal), up 0.77 eur or 2.41 pct at 32.77. The company renegotiated its mining pact with Liberia and will accelerate the reopening of an iron ore mine there.

-LVMH, up 1.45 eur or 1.88 pct at 78.70

-Alcatel-Lucent, up 0.20 eur or 1.92 pct at 10.59

Major losers:

-Club Mediterranee, down 0.10 eur or 0.24 pct at 41.70, as analysts brace for poor full-year results Tuesday.

-Vinci, down 0.15 eur or 0.15 pct at 98.80

-Schneider Electric, down 0.10 eur or 0.12 pct at 83.05

Most active stocks:

-Total, 59 mln eur, up 0.10 eur or 0.19 pct at 54.00

-Alcatel-Lucent, 42 mln eur

-BNP Paribas, 37 mln eur, up 0.75 eur or 0.93 pct at 81.45

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German shares at a glance outlook

FRANKFURT - Shares are expected to open higher on the back of a higher close on Wall Street on Friday following positive US job data, dealers said.

M&A news surrounding Commerzbank and Continental has put their shares in focus in pre-bourse trade, as a report in Switzerland's Tages-Anzeiger said that UBS may be considering taking over Commerzbank's investment banking  operations and WirtschaftsWoche reported that private equity firms may renew  efforts to take over Continental.

At 8.25 am, brokerage Lang & Schwarz forecast that the DAX 30 index will open at 6,464 points, around 37 points higher than Friday's close of 6,427.41

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Amsterdam shares market data at 10.29 am - AEX broadly up; RD Shell down

Major indices

AEX  471.90, up 0.71 point
AMX Midcap   646.88, up 1.25 point
Government bonds broadly lower
 
Major gainers:

-Corus was up 4.73 pct to 7.75 after Tata Steel raised its bid for the steel company, to have CSN trump it with a higher offer.

-Univar lifted 3.36 pct to 42.75.

-Hagemeyer added 2.51 pct at 3.67 after SNS Securities reiterated its 'buy' rating because of the expected improvements in the PPS Europe division, which are not fully reflected in the share price yet.

-TomTom put on 1.83 pct to 34.41.

-Fortis went 1.46 pct higher to 31.22, Aegon was up 1.24 pct to 13.88, and ING advanced 1.11 pct to 31.88.

-ABN Amro added 1.15 pct at 22.96 after the group raised its cost synergies estimate for the integration of recently acquired Antonveneta to 178 mln a year from its initial estimate of 160 mln a year.
 
Major decliners:

-Heineken was down 0.62 pct to 35.43.

-Royal Dutch Shell fell 0.30 pct to 26.76 following reports the group has agreed to hand over control of Sakhalin II, the huge oil and gas extraction project in Russia, to Gazprom, Dutch news agency ANP reported, citing sources in the industry. SBM Offshore slid 0.04 pct to 24.95 and Fugro shed 0.54 pct to 34.84.

-Ahold weakened 0.53 pct to 7.48 after the Financial Times reported that division US Foodservice is facing a new lawsuit in Connecticut, one year after it paid 1.1 bln usd to settle claims arising from accounting fraud at the unit in 2003.

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