UK/Euro Financial Market Daily Morning Briefing 12-04-2007

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London shares down in early deals; Sainsbury lower, SABMiller higher

Leading shares opened lower after the DJIA dropped almost 90 points overnight amid interest rate hike fears, with J Sainsbury sliding as brokers downgrade following CVC's indicative bid withdrawal, but SABMiller up on a pleasing trading update, dealers said.
   
At 8.47 am, the FTSE 100 index was 11.4 points behind at 6,401.9 after giving up earlier gains to close down 4.5 points at 6,413.3 yesterday, while the broader indices were also lower. Early volume was fair, with 196 mln shares changing hands in 35,713 deals.
   
In the US, Wall Street fell back Wednesday after minutes from the Federal Reserve's most recent meeting indicated the central bank is not ruling out an interest rate hike to curb inflation.
   
The Dow Jones closed 89.20 points weaker at 12,484.60, while the Nasdaq Composite lost 18.30 points to 2,459.31 and the S&P 500 index ended down 9.55 points at 1,438.85.
   
Meanwhile, Asian indices were also under pressure this morning, with Tokyo's Nikkei 225 index closing 129.65 points lower at 17,540.42 and Hong Kong's Hang Seng down 92.69 at 20,356.74 by midday -- both hit by US interest rate fears.
   
In London, Sainsbury led the blue-chip casualties, extending yesterday's decline with a fresh fall of 10 pence at 516 this morning.
   
After the CVC-led consortium yesterday withdrew its indicative bid for the supermarket group, ABN Amro today downgraded the stock to 'sell' from 'hold' saying the move leaves the stock exposed to short-term downside risk. This followed on from Seymour Pierce last night cutting its recommendation on Sainsbury to 'sell' from 'hold'.
   
The mining sector also weighed as softer metal prices initiated profit-taking within the resources sector, traders said. Anglo American lost 37 at 2,728, Vedanta Resources dipped 10 at 1,396 and BHP Billiton eased 11 at 1,158.
   
On the upside, SABMiller led the risers in opening deals, up 12 pence at 1,131, as investors cheered a 10 pct surge in full-year organic lager volumes, driven by strong growth in South America, Europe, Africa and Asia.
   
At the same time, the owner of the Peroni Nastro Azzurro and Pilsner Urquell brands said its financial performance was in line with management's expectations with good revenue growth partially offset by higher input costs and increased investment across.
   
In response, Merrill Lynch reiterated its 'neutral' stance and said although headline 2007 volumes were in-line with expectations, fourth quarter volumes surprised well on the upside in key markets.

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Elsewhere, bullish broker comment helped shares in Compass Group and Vodafone Group, up 2-1/2 at 355-1/2 and 0.8 at 139.3 respectively.
   
This morning, ABN Amro upgraded Compass to 'buy' from 'hold' with a raised target of 395 pence from 275 pence. The broker said that in light of the recent positive trading update it has upgraded its 2007 EPS estimate by 6 pct.
   
Vodafone was also upgraded to 'buy' from 'hold' at Deutsche Bank on valuation grounds following the recent correction in its share price.
   
Oil heavyweights helped to minimise Footsie losses, fuelled by a jump in crude oil prices overnight following a US report that showed a sharp drop in gasoline stocks.
   
This morning, New York's main oil futures contract, light sweet crude for delivery in May, continued to hover around the 62 usd a barrel mark, sending shares in Royal Dutch Shell 6 higher at 1,699 and BP 0-1/2 firmer at 560.
   
The latter hosts its AGM today where a number of investors will attempt to block the company's executive pay report, including the retirement package for outgoing chief executive John Browne.
   
Among the second-liners, Carpetright stood out, dropping over 6 pct, down 71 pence at 1,067 after the UK's largest floor coverings retailer said trading in the UK and Ireland has been more difficult than it anticipated over the last ten weeks with like-for-like sales declining by 5.2 pct.
   
In the second half, to date, total sales in the UK and Ireland have risen by 4.4 pct with like-for-like sales down 2.2 pct.
   
Aveva Group also released a trading update today, but the shares slipped 25-1/2 at 860 as its statement that it expects full-year results to be "somewhat" ahead of the market's expectations failed to impress.
   
A broker downgrade hit shares in Shanks Group, 8-1/2 lower at 261-3/4 after Merrill Lynch downgraded to 'neutral' from 'buy' on valuation as the broker anticipates a period of consolidation for the shares until the company's outlook is clarified.
   
In a research note, Merrill noted the shares have enjoyed a strong run which has taken them to levels not seen since September 1991, and through the broker's 260 pence price target.
   
Similarly, IMI fell back 17-1/2 at 566-1/2 after being downgraded to 'neutral' from 'buy' at Goldman Sachs following the stock's recent strong performance.
   
Goldman said in a note this morning the share price outperformed the Eurotop 300 by 10 pct over the last three months, and has now exceeded the broker's 12-month target of 575 pence.

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Among the mid-cap climbers, Catlin Group topped the leaderboard, adding 14-3/4 at 519-3/4 on the back of an upgrade to 'buy' from 'hold' by Citigroup with an improved price target of 640 pence versus 500.
   
The broker told clients in a note this morning that it sees the stock's valuation as compelling following its acquisition of Wellington.
   
Returning to the earnings front, JJB Sports was 3-1/4 ahead at 263-1/4 after the company's preliminary full-year results beat expectations.
   
The sportswear and equipment retailer reported a better-than-expected 28.8 pct increase in full-year underlying pretax profit to 45.9 mln stg and said it has made a solid start to its new financial year.
   
In reaction, UBS said that both JJB Sports's retail and leisure divisions beat expectations.
   
On the economic front, the UK's housing market appears to have brushed off the latest interest rate rise in January from the Bank of England, a leading industry body said today.
   
In its monthly survey of the sector, the Royal Institution of Chartered Surveyors said a balance of +26 pct of its members reported house prices rose during March, up on the +25 pct reported in February and expectations for a modest decline to +21 pct. Prices have now risen for 17 consecutive months.
   
In the US later today, lacking any key data of interest, all eyes will be on the North American import price index for March, seen rising to 0.6 pct from 0.2 pct previously.

UK 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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PARIS - Market data at 10.08 am:

Major indices:
   
CAC-40 down 25.36 points or 0.44 pct at 5,726.56
SBF-80 down 62.43 or 0.85 pct at 7,272.70
SBF-120 down 21.37 or 0.50 pct at 4,211.26

Volume: 589 mln eur
4 CAC-40 stocks up
36 CAC-40 stocks down

Major gainers:
   
Ipsos up 1.22 eur or 4.46 pct at 28.56 after a report that principal shareholders Jean Marc Lech and Didier Truchot are ready to look at buyout offers.
   
SEB up 1.62 or 1.97 pct at 135.40 after the company said the Chinese ministry of commerce has authorised it to take a majority stake in China's Zhejiang Supor Cookware Co Ltd.
   
Carrefour up 0.35 or 0.62 pct at 56.47 as analysts welcomed first-quarter sales that eased concerns about the French supermarket chain's prospects following a difficult fourth quarter.
 
Major losers:
   
Eiffage down 4.40 or 3.83 pct at 110.60 as it continued to drop from last week's high of 129 eur that followed intense speculation about a possible buyout by Sacyr Vallehermoso SA.
   
Unibail Holding down 7.95 or 3.63 pct at 210.97 as profit-taking continued following Monday's announcement of the property company's merger with Rodamco Europe.
   
EADS down 0.42 or 1.75 pct at 23.55.
   
Vallourec down 2.48 or 1.31 pct at 186.99 as it lost further ground after strong gains last month.

Most active stocks:
   
Total, down 0.15 or 0.28 pct at 52.72, on volume of 48 mln eur
   
Carrefour, 43 mln eur
   
BNP Paribas, down 0.31 or 0.39 pct at 79.82, on 36 mln

London - April 19th 2007

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FRANKFURT -  market data at 10.06 am  

Major indices
   
DAX - down 23.30 points, or 0.33 pct, at 7,129.53
MDAX - down 49.68 points, or 0.46 pct, at 10,533.47
TecDAX - down 6.91 points or 0.79 pct at 868.40
DAX futures - down 12.00 points, or 0.17 pct, at 7,179.00

Major decliners:
    
DaimlerChrysler, down 1.02 eur or 1.65 pct at 60.97, as traders said its shares were consolidating and falling victim to profit-taking in a slightly downward-moving market
   
MAN, down 1.33 eur or 1.47 pct at 89.45
   
Bayer, down 0.62 eur or 1.27 pct at 48.28
   
Siemens, down 0.84 eur or 0.988 pct at 84.56, after it announced the spinoff of its car components unit VDO will be delayed by one month to June 1
   
Adidas, down 0.42 eur or 0.98 pct at 42.50, after yesterday's gains

Major advancers:
   
ThyssenKrupp, up 0.65 eur or 1.72 pct at 38.48, after the steel giant issued a bullish mid-term forecast for pretax profits
   
TUI, up 0.20 eur or 1.02 pct at 19.79
   
Deutsche Boerse, up 1.17 eur or 0.67 pct at 175.92, due to an upwards shift in sector valuations on the back of reports that Nasdaq has made a 2.5 bln eur bid for Scandinavian exchange OMX
   
Deutsche Post, up 0.12 eur or 0.52 pct at 23.00, after its shares were initiated with an 'equal-weight' rating and 27.5 eur price target by Lehman Brothers
   
BMW, up 0.22 eur or 0.49 pct at 44.98, bouncing back from yesterday's losses

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AMSTERDAM - market data at 10.35 am

Major indices
   
AEX 519.45, down 2.65 points
AMX Midcap 736.64, down 6.58 points
Government bonds unchanged to lower
   
Major decliners:
   
TNT fell 2.75 pct at 32.92
   
Rodamco Europe lost 3.93 pct at 110.29 in an extension of yesterday's slide
   
SBM Offshore gave up 1.43 pct at 26.94
   
Hagemeyer dropped 1.39 pct at 3.56 while Buhrmann eased 1.17 pct at 10.11 ahead of its AGM later today
   
Tele Atlas fell 2.05 pct at 16.22 after the digital map-maker was downgraded to 'sell' from 'hold' at ABN Amro with a reiterated target of 13.5 eur
   
Major gainers:
   
Numico advanced 0.39 pct at 39.01 after news Nestle bought Novartis' baby food unit Gerber for 5.5 bln usd, increasing hopes among some investors for a takeover offer for the Dutch company
   
ABN Amro rose 0.06 pct at 34.02 amid a report shareholders advisor ISS has recommended shareholders vote against proposals by hedge fund TCI, which is pushing to break up the bank
   
Royal Dutch Shell put on 0.2 pct at 25.02
   
SNS Reaal added 0.86 pct at 17.54 after announcing the sale of its remaining 40 pct stake in LSN for 36 mln eur, resulting in a 14 mln eur book profit

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