UK/Euro Financial Market Daily Morning Briefing 12-07-2006

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London shares open in positive mode after NY recovery; miners among top gainers

Leading shares opened higher after Wall Street recovered early losses overnight to end up, ahead of today's key US trade deficit data, and with the UK's miners supporting the blue chip rise, dealers said.
   
At 8.45 am, the FTSE 100 index traded 15.8 points firmer at 5,873.1, although off initial highs of 5,888.2, while the broader indices also enjoyed a bullish start.
   
Last night on Wall street, US blue chips recovered initial losses to close moderately higher on strength from the oil and metals sectors and upbeat news among tech stocks.      
   
The DJIA closed 31.3 points stronger at 11,134.80, while the Nasdaq Composite Index ended up 11.93 points at 2,128.86 and the S&P 500 index finished the day 5.15 points higher at 1,272.50.
   
Meanwhile, in Asian trade this morning, the Japanese Nikkei 225 index ended the morning session 105.93 points lower at 15,367.89, while Hong Kong's Hang Seng was also in negative terrain, down 19.97 points at 16,470.16 by midday.
   
In London today, the mining sector was in fine fettle after a continued rise in commodity prices in Asia this morning, with UK performances bolstered by Lehman Brothers raising its seaborne thermal coal contract price forecasts and subsequently its earnings estimates.
   
The gold price currently trades above 640 usd per ounce.
   
Lonmin lifted 58 pence at 2,837, Vedanta Resources climbed 19 at 1,389, Rio Tinto added 31 at 2,891, and BHP Billiton rose 13 at 1,084.
   
Elsewhere, GUS added 11-1/2 pence at 1,001 after its trading update revealed that all businesses are trading in line with expectations versus analyst forecasts for a mixed statement.
   
Sales at the group's Argos business came in up 14 pct, with the like-for-like figure 7 pct higher versus UBS' forecast of a "small" increase, while Homebase like-for-like sales slipped just 5 pct against the Swiss-owned broker's expectation of a 'high-single-figure' decline.
   
Burberry Group was also higher following its trading update, in which the fashion retailer said its strong first quarter results are consistent with expectations for the full financial year.

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In the first quarter, total revenue on an underlying basis grew by 12 pct, while retail sales rose by 19 pct, driven by new and existing stores.
   
Burberry shares were 5-1/4 firmer at 465-1/4.
   
Results apart, British Sky Broadcasting Group added 3-1/2 pence at 551 after securing the final package of Premier League Football rights, beating a consortium backed by the UK's five mobile phone networks, according to the Guardian.
   
And 3i Group also joined the risers, up 9 at 899, as it held its AGM which will be followed this morning with an EGM to discuss a proposed 700 mln stg bonus issue of B shares and a share capital consolidation.
   
On the downside, BP was among only a handful of fallers following a press report that it will take a stake worth about 1 bln usd in Rosneft as part of the Russian state oil group's flotation.
   
The Independent newspaper said this will be a huge boost to the Kremlin, but added that opponents of the flotation said last night that BP had "a gun to its head" because of its existing oil interests in Russia, which would have been compromised had it decided not to back the Rosneft offer.
   
BP slipped 3 at 639.
   
On the second line, Wolfson Microelectronics headed up the mid-cap leaderboard as investors bought into the technology stock following yesterday's weakness, when the shares dropped over 13 pct amid sector concerns and following a profit warning from US group Lucent.
   
Wolfson regained 13-3/4 pence at 400 this morning, while fellow tech group CSR also rallied 40 pence at 1,140.
   
On the reporting front, Gondola Holdings climbed 7-1/4 at 326-1/4 after the restaurant group said the growth rate in the second half of the year was maintained despite the combined impact of the World Cup and the exceptionally
hot weather, which reduced the rate of revenue growth in the final weeks of the fourth quarter.
   
Gondola said the trading performance of all three of its brands is "on track to deliver sales growth in line with management's expectations".
   
And contract news boosted Premier Foods up 7-1/4 at 316-3/4 after it cinched a deal to buy the UK and Irish businesses of the Campbell Soup Co. for 460 mln stg.

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Premier Foods said the deal would take its branded sales mix to 69 pct and sees projected cost synergies of 28 mln stg within three years.
   
Meanwhile, among the mid-cap fallers, Kensington Group was the main casualty, dropping 12.5 pct or 128 pence at 900 as the sub-prime mortgage lender's in-line results were overshadowed by a cautious outlook statement and fears over rising arrears.
   
This morning, the group revealed half year pretax profit came in at 30.3 mln stg, up 24 pct from 24.5 mln a year earlier.
   
But in response, Citigroup highlighted management comments that the specialist mortgage market has become very competitive and the credit environment is more challenging.
   
Furthermore, the group said conditions are not expected to get any easier during the rest of the year.
   
Elsewhere, on the economic data front, investors will be watching the UK labour market report, due midmorning, for evidence of further strengthening of the economy.
   
At the same time, figures on UK investment by insurance companies, pension funds, and trusts during Q1 are also due.
   
However, the main focus for today will be the US trade balance, with a further widening of the gap expected in May to 65.0 bln usd from 63.4 bln usd in the previous month.

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 9.41 am:

Major indices:
   
CAC-40 up 31.86 points or 0.65 pct at 4,946.25
SBF-80 up 39.44 points or 0.71 pct at 5,596.12
SBF-120 up 23.37 points or 0.66 pct at 3,581.05

Volume: 203 mln eur
38 CAC-40 stocks up
1 CAC-40 stock down
(Arcelor temporarily suspended from CAC-40)

Major gainers:
   
Capgemini, up 0.77 eur or 1.86 pct at 42.27
   
Alstom, up 1.20 eur or 1.79 pct at 68.15, rebounding from yesterday's losses.
   
STMicroelectronics, up 0.16 eur or 1.34 pct at 12.07
   
Carrefour, up 0.59 eur or 1.26 pct at 47.26, ahead of its first half sales report due out after the market closes.

Major losers:
   
Ipsen, down 0.35 eur or 1.13 pct at 30.65, after a plan to sell its Reloxin drug in Europe through Medicis collapsed when the companies failed to reach an agreement.
   
L'Oreal, down 0.05 eur or 0.07 pct at 73.40, ahead of its first half sales report due out after the market closes.

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AMSTERDAM - Market data at 10.09 am
   
Major indices
   
AEX                441.95, up 3.38 points
AMX Midcap         590.95, up 4.73 points
Government bonds   flat to lower

Major gainers
   
Tech stocks led gainers as investors picked up the shares after yesterday's sell-off. ASML added 2.91 pct to 15.57 eur, Philips put on 1.73 pct to 23.46 eur, and second-liner ASMI added 1.41 pct to 12.23 eur.
   
Hagemeyer added 2.09 pct 3.90 eur amid high copper prices
   
ING put on 1.11 pct to 31.05 eur
   
Buhrmann added 1.10 pct to 11.01 eur
   
Reed Elsevier lifted 0.96 pct to 11.53 eur
   
Second-liner Oce gained 3.72 pct to 12.56 eur
   
Major losers
   
TomTom shed 0.57 pct to 29.67 eur
   
KPN lost 0.11 pct to 8.89 eur amid reports the European Commission is contemplating putting price caps on cross-border mobile phone calls
   
Pharming lost 0.31 pct to 3.25 eur
   
Ordina shed 1.01 pct to 17.56 eur

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