UK/Euro Financial Market Daily Morning Briefing 12-06-2006

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London shares lower, drifting in cautious trade ahead of inflation data

Leading shares were seesawing in early trade with a clutch of M&A stories helping to offset a weaker mining sector, although concerns over key inflationary reports due later this week were seen preying on investors' minds and preventing markets from building on last Friday's rally, dealers said.
   
At 9.00 am, the FTSE 100 was off 5.2 at 5,650.1, with the broader FTSE 250 index rising 31.9 points to 9,056.6.
   
Last Friday, Wall Street finished its worst week of the year with a moderate decline as persistent unease over inflation and interest rates kept investors nervous about buying.
   
The DJIA slid 46.90 to 10,891.92 while the Standard & Poor's 500 index fell 5.63 to 1,252.30 and the Nasdaq composite index lost 10.26 to 2,135.06.
   
Over in Asia interest rate concerns hit sentiment with the Nikkei 225 index ending the morning session down 4.78 points at 14,746.06, while over in Hong Kong, the Hang Seng Index closed the morning down 52.57 points or 0.34 pct at 15,576.12.
   
Oil prices were easier with the market waiting for the next lead from the confrontation over Iran's controversial nuclear program.
   
New York's main contract, light sweet crude for July delivery, was down 0.11 usd at 71.52 usd a barrel from its close of 71.63 usd in the US Friday.
   
Among issues on the move, Smith & Nephew topped the FTSE 100 leaders board in early deals, extending Friday's strong run as bid rumours continued to swirl around the medical products firm.
   
Smith & Nephew shares were 8-1/2 pence higher at 442-1/2, having taken on 14 pence on Friday.
   
After Friday's speculative gains in the stock, The Financial Times' market report on Saturday spotlighted talk that US firm Bristol Myers Squibb Co is considering a bid for the UK blue chip.
   
Meanwhile Saturday's market report in the Independent noted rumours that Johnson & Johnson of the US is preparing a 500 pence a share bid for Smith & Nephew.

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Elsewhere, GUS gained 15 to 928 after weekend press reports suggested that US private equity groups were considering bids of more than 10 bln stg for the retail and business services group.
   
Continuing the M&A theme, Unilever rose 4 pence to 1160 after private equity firms Capvest and Blackstone emerged as favourites to buy the conglomerate's frozen food business for an estimated 1 bln stg, according to a report in the Times.
   
Elsewhere, investors warmed to mortgage lender Alliance & Leicester, up 9 pence at 1164, after the group said it is making good progress against its strategic objectives and added its asset quality remains strong and above industry averages.
   
In a pre-close trading statement, the group said gross mortgage lending was 3.2 bln stg in the first quarter, giving Alliance & Leicester a market share of 4.3 pct, and net lending was 1.4 bln, giving a share of 6.3 pct.
  
Merrill Lynch reiterated its 'neutral' advice, saying the trading update suggests progress is largely in line with expectations.
  
It added that while income may be a touch weaker than its previous expectations, cost management looks to be ahead of expectations, providing an offset.
   
On the downside, miners again dominated the list of fallers after base  metal prices slipped on growing concerns higher interest rates will affect global growth prospects.
   
Antofagasta fell 22 pence to 1870, while BHP dipped 15 to 951, Xstrata fell 16 to 1877 and Kazakhmys eased 31 to 997.
   
On the second line, Misys gained in early deals after UBS said the software group could be worth up to 300 pence per share on growing hopes of a bid battle.
   
Misys revealed on Friday it received an indication of bid interest from a group of senior management and the weekend press has reported further private equity interest.
   
According to today's FT, the group received a separate approach from a private equity team from General Atlantic Partners and Permira and has also attracted the interest of Texas Pacific Group.

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The stock was 7-1/2 pence higher at 29 having jumped 23 pct to end Friday at 225 pence.
   
Elsewhere, Signet, the worlds biggest jeweller, added 3-1/2 pence to 99-1/2 on weekend press reports it is in talks about a possible 2.3 bln stg tie-up with Americas Zale Corp.
   
On the earnings front, Workspace Group jumped in early deals on the back of the firm's better-than-expected full-year results and with Merrill Lynch subsequently reiterating its 'buy' recommendation on the stock.
   
The stock added 4.1 pct or 12 pence at 305.
   
The commercial property group announced its full-year net asset value per share (NAV) was 3.12 stg, up 36 pct from a year earlier, and said the company is positioned for further growth.
   
Merrill Lynch said NAV was well above its forecast of 2.80 stg, as was the group's pretax profit of 15.1 mln stg versus 14.5 mln stg in the previous year and against the broker's forecast of a small decline to 13.1 mln stg.
   
Also on the M&A front, Associated British Ports firmed 3 to 778 on reports that a consortium led by Goldman Sachs is finalising a 2.5 bln stg offer for the UK port operator.
   
Emap rose 6 to 870 after the UK media group said it is in exclusive talks with Italian media company Arnoldo Mondadori Editore SpA on the sale of its struggling French consumer magazines business.
   
Emap, home to magazines FHM and Closer and radio stations Kiss and Magic, said it expects the sale to be completed by September, the end of the first half of its current financial year to March 2007.
   
However, iSoft again topped the list of fallers on news the firm's chairman John Weston is moving to oust the beleaguered chief executive Tim Whiston.

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 Friday's close of trade, click here

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FRANKFURT - Market data at 10.05 am
   
Major indices:
   
DAX 30 - 5,445.71, down 18.37 points or 0.34 pct
MDAX - 7,696.08, down 2.64 points or 0.03 pct
TecDAX - 631.22, up 1.60 points or 0.25 pct
DAX future - 5,448.00, up 36.00 points 0.67 pct

Major gainers:
   
SAP, up 1.40 eur or 0.89 pct at 158.00, after UBS upgraded its stance on the issue to 'buy' versus 'neutral' with a 200 eur price target
  
MAN, up 0.45 eur or 0.87 pct at 52.20
   
Linde, up 0.50 eur or 0.82 pct at 61.50, as UBS raised its rating on the stock to 'neutral' from 'reduce' and lifted its price target to 66 eur from 62, arguing that the stock has fallen to a level near its price target
   
Volkswagen, up 0.26 eur or 0.50 pct at 52.69   
   
BMW, up 0.16 eur or 0.42 pct at 38.50, after Dresdner Kleinwort Wasserstein upgraded the shares to 'buy' from 'hold', with an unchanged price target of 46 eur
       
Major losers:
   
Bayer, down 0.95 eur or 2.87 pct at 32.15, amid concerns its plans to take over Schering AG might fail or that it might have to raise its offer or divest parts of the business to acquire Merck KGaA's stake, following news that Merck has increased its stake in Schering to 18.6 pct
   
Siemens, down 0.61 eur or 0.96 pct at 63.04
   
Hypo Real Estate, down 0.39 eur or 0.86 pct at 45.10
   
Infineon, down 0.07 eur or 0.82 pct at 8.49
   
E.ON, down 0.55 eur or 0.64 pct at 84.73.

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PARIS - Market data at 9.44 am:

Major indices:
   
CAC-40 down 8.32 points at 4,759.86
SBF-80 down 0.49 at 5,412.17
SBF-120 down 5.01 at 3,446.87

Volume: 307 mln eur
17 CAC-40 stocks up
21 CAC-40 stocks down
2 unchanged

Major gainers:
   
Arcelor, up 0.49 eur or 1.5 pct at 34.19 after the company said Mittal Steel has indicated that it could raise its 25.8 bln eur takeover offer, and will soon begin talks aimed at reaching a deal.
   
Air Liquide, up 2.10 at 146.30 and leading bounce among industrial stocks after recent declines.

Major losers:
   
Suez, down 0.39 or 1.3 pct at 30.65 after Les Echos reported that Enel is no longer considering a hostile bid for the company, though it is still interested at acquiring Suez's energy unit Electrabel.
   
Michelin, down 0.51 at 47.81; CEO Michel Rollier told the Financial Times that he will not pursue job cuts as part of his efforts to boost productivity.
   
Remy Cointreau, down 0.73 or 1.8 pct at 40.42 after posting an 11.3 pct rise in current operating profit of 141.8 mln eur for the full year, below analyst forecasts; JP Morgan had expected 157 mln eur, while Societe General had expected 152 mln.

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AMSTERDAM - Market data at 10.30 am
   
Major indices
   
AEX              424.84, down 1.63 points 
AFX Midcap       544.46, up 1.10 points
Government bonds Mixed

Major gainers
   
Ahold led gainers, soaring 4.15 pct to 6.52 eur, after a newspaper said that a group of hedge funds has bought a stake in the company in order to break it up.
   
TomTom added 0.62 pct to 32.72 eur
   
Heineken lifted 0.61 pct to 31.55 eur
   
Royal Dutch Shell gained 0.40 pct to 25.17 eur
   
Second-liner Boskalis gained 1.95 pct to 49.64 eur

Major losers
   
Fortis shed 0.80 pct to 26.15 eur
   
Vedior lost 0.80 pct to 16.10 eur
   
Rodamco Europe dropped 1.09 pct to 72.85 euro   

Philips shed 1.88 pct to 22.94 eur
   
Hagemeyer lost 3.69 pct to 3.39 eur
   
Crucell shed 2.71 pct to 15.05 eur

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