UK/Euro Financial Market Daily Morning Briefing 12-09-2006

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London shares turn down at open on reported attack on US embassy in Syria

At 9.05 am, the FTSE 100 was down 12.9 points at 5,837.9, reversing initial gains, with the broader indices mixed. Volume was poor with 291 mln shares changing hands in 34,685 deals.
   
Meanwhile, Wall Street ended a see-saw session slightly higher, rebounding from initial losses, as the continuing drop in the price of oil offset news Dell would delay filing its second-quarter earnings report.
   
The DJIA finished 4.73 points higher at 11,396.84, the S&P 500 index was 0.62 firmer at 1,299.54 and the Nasdaq ended 7.46 better at 2,173.25.
   
And today, all eyes will be on the US July trade gap, with the deficit seen widening slightly to 65 bln usd in July from 64.8 bln usd a year earlier.
   
Over in Asia, the mood was mixed as Hang Seng Index ended the morning up 97.54 at 17,046.13, while the Nikkei 225 closed down 75.04 at 15,719.34.
   
Back in London, the threat of global terrorism once again rattled investors on initial reports of an attack on the US embassy in Syria just a day after New York commemorated the fifth anniversary of the World Trade Center attacks.
   
Initial reports say Syrian security forces have surrounded the US embassy in Damascus, with black smoke seen bellowing around the area.
   
Turning to equities, mining stocks again dragged down blue chips, mirroring heavy losses in Australia overnight, as investors feared a a slowing US economy could hit commodity prices further.
   
BHP Billiton and Xstrata were further knocked by reports out of Canada that both companies could be dragged into a bidding war for nickel miner Skye Resources.
   
In response, BHP was down 11 at 923, Xstrata was off 2 at 2,275, Rio Tinto fell 24 at 2,520, Lonmin eased 16 to 2,660 and Kazakhmys was 8 lower at 1,218.
   

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But Drax was the top biggest blue chip casualty, off 15-1/2 at 858 as investors failed to be impressed by a surge in interim profits and news of an 80 pence special dividend.
   
This morning, the power generator said pretax profit jumped to 316.7 mln stg from 12.7 mln previously on revenues from generation of 603 mln stg, up from 366 mln.
   
In response, Merrill Lynch reiterated its 'neutral' stance and said EBITDA of 239 mln was in line with its flagged 240 mln and a consensus of 245 mln.    

Oil stocks also weighed as the price of crude hovered around 65.89 usd, having sunk to 64.85 usd in New York yesterday-- its lowest level since March 28.
   
Royal Dutch Shell fell 18 to 1,805, BP was off 4 at 579 and BG fell 3 to 656-1/2.
   
In contrast, Sage topped the risers list, 4 higher at 246 on the back of a positive broker comment from Credit Suisse.
   
In a note to clients, the broker reiterated its 'outperform' stance saying following recent weakness in the stock the shares look good value.
   
Furthermore, it believes, a trading update due in October will show both better organic growth and progress integrating the recent acquisitions.
   
Positive broker comment also provided a lift to AstraZeneca -- 23 higher at 3,317 as HSBC said it saw the drug giant as a short-term trading buy and lifted its price target to 3,650p from 3,516p.
   
And in financials, HBOS added 2-1/2 to 1,008-1/2 on news that Nationwide, the UK's biggest building society, is to merge with third-ranked Portman, creating a new mutually-owned retail financial services group with 150 bln stg in assets.
   
Meanwhile, BAE Systems took on 3 to 376 ahead of results tomorrow and after mid cap peer Cobham posted a rise in first half profits.
   
Earlier, Cobham unveiled a 18 pct rise in underlying interim profits, rising to 78.9 mln stg, driven largely by the acquisition of the American Cystoscope Makers Inc last year.

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In response, Merrill Lynch reiterated its 'buy' advice - helping to send Cobham shares 5 higher at 175.
   
Still on the second line, Charter took on 33-1/2 to 754-1/2 after the engineer posted a 55 pct rise in interim profits to 68.9 mln stg and said it expects full year's results to come in ahead of expectations.
   
And Redrow rose 4-1/2 to 534-1/2 after the housebuilder offset a 13 pct fall in full year profits to 120.5 mln stg with positive dividend news.
   
The group grew its dividend by 20 pct to 13 pence and pledged this will be increased by 20 pct next year and the year after.
   
On the downside, a disappointing drilling update knocked JKX Oil, off 8 -1/4 at 250 after the explorer said it plugged and abandoned the first exploration well it drilled on the Zaplavskoye prospect in Ukraine after the hole turned out to be dry.
   
Turning to economics, investors will scrutinise August inflation data, with the market keen to see if the Bank of England's recent rate hike was justified.
   
The annual CPI rate is seen coming in at 2.4 pct for the second month running -- holding above the 2.0 pct target set by the Treasury for the Bank of England.
   
The core CPI rate which excludes food, alcohol, energy and tobacco, is predicted to reach an annual rate of 1.1 pct in August from 0.9 pct the previous month.
   
The annual all-items RPI rate, used in pay deals, is seen at 3.3 pct in August, unchanged from July while the RPI-X which excludes mortgage interest payments is seen rising by 3.3 pct, up from 3.1 pct the previous month.   

UK Diary of Events

For a calendar 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 9.55 am:

Major indices:
   
CAC-40 down 6.14 at 5,052.17
SBF-80 up 2.24 at 5,712.91
SBF-120 down 3.47 at 3,654.57

Volume: 660 mln eur
16 CAC-40 stocks up
23 CAC-40 stocks down

Major gainers:
   
Gaz de France up 0.51 or 1.77 pct at 29.38 eur on above-consensus H1 earnings, raised FY guidance
   
Suez up 0.10 at 33.30
   
EADS up 0.20 at 22.66
   
Sopra up 3.05 or 5.65 pct at 57.95 after H1 results
   
Iliad up 2.10 or 3.96 pct at 55.10 on technical rebound

Major losers:
   
Lagardere down 0.80 or 1.44 pct at 54.80
   
Carrefour down 0.46 at 46.98
   
BNP Paribas down 0.65 at 81.35
   
Clarins down 1.40 or 2.44 pct at 55.90 as H1 results disappoint

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FRANKFURT - Market data at 10.01 am

Major indices:
   
DAX 30 - 5,786.97, down 11.49 points or 0.20 pct
MDAX - 8,069.70, down 16.58 points or 0.21 pct
TecDAX - 632.45, up 0.04 point or 0.01 pct
DAX future - 5,789.00, down 36.00 points or 0.62 pct

Major gainers:
   
Continental AG, up 0.97 eur or 1.22 pct at 80.65
   
Infineon, up 0.13 eur or 1.40 pct at 9.42, amid expectations that a recent solid increase in DRAM prices could pave the way for record profits, prompting Landesbank Rheinland-Pfalz to upgrade its rating to 'outperformer' from 'marketperfomrmer' and lift its price target on the issue to 12 eur from 10
   
SAP, up 1.33 eur or 0.92 pct at 146.13
   
Volkswagen, up 0.31 eur or 0.51 pct at 61.66, after the IG Metall union said yesterday afternoon it has agreed to enter into talks with the carmaker on the company's demands to extend weekly working hours at its factories in Germany, with the first round scheduled for Sept 18
   
Deutsche Telekom, up 0.04 eur or 0.35 pct at 11.61

Major losers:
   
ThyssenKrupp, down 0.45 eur or 1.72 pct at 25.76, as JP Morgan cut its price target on the stock to 24 eur from 29, reiterating its 'neutral' rating,  on the back of an increasing risk profile
   
E.ON, down 1.45 eur or 1.48 pct at 96.60, amid news the company and peer ENBW are being investigated by Germany's antitrust watchdog, which aims to determine if they offered exceptionally cheap gas to lure big customers, according to dealers
   
Metro, down 0.35 eur or 0.80 pct at 43.50
   
Hypo Real Estate, down 0.35 eur or 0.75 pct at 46.35
   
Lufthansa, down 0.11 eur or 0.71 pct at 15.40, after agreeing a higher than expected 85 mln usd payout to settle pending class action lawsuits in the US relating to an air cargo industry price-fixing investigation.

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AMSTERDAM - Market data at 10.05 am:

Major indices
   
AEX 462.08, down 0.47 point
AMX Midcap 565.93, down 0.48 point
Government bonds unchanged to slightly lower

Major losers:
   
Royal Dutch Shell was down 0.54 pct at 25.82
   
Heineken eased 0.58 pct at 35.69 while fellow brewer Grolsch shed 0.65 pct at 29.21 after reporting line-line results for the first half
   
Reed Elsevier slipped 0.56 pct at 35.70
   
ING gave up 0.45 pct at 32.87

Major gainers:
   
ASML extended its recent run, adding 1.14 pct at 17.76
   
Akzo Nobel put on 0.74 pct at 46.11 while DSM gained 0.32 pct at 31.16 amid news it will invest several tens of mlns of usd in expanding production capacity for its Dyneema fibre
   
ABN Amro benefited from an upgrade to 'overweight' from 'underweight' at JP Morgan, rising 0.42 pct at 31.19

Forex 

US dollar steady vs yen, euro in Singapore afternoon trade

SINGAPORE - The US dollar was steady against the yen and euro in afternoon trading here, although dealers said the release later today of the latest US trade data could weaken the greenback.
   
At 3.31 pm (0731 GMT), the dollar was at 117.56 yen, unchanged from its level in Sydney just over 2-1/2 hours earlier. The euro was at 1.2718 usd, down from 1.2719 usd in Sydney.
   
Earlier today, the IMF, in its Global Financial Stability Report, highlighted global economic imbalances and the possibility of a "disorderly" correction in the US dollar's value as key risks facing financial markets around the world.
   
With the attention that is likely to be given to these global imbalances during the IMF and World Bank meetings here this week, the dollar remains at risk of further decline should the US trade deficit be bigger than expected.
   
The results of a Market News International survey envision the US trade deficit gap having widened to 66.0 bln usd in July from 64.8 bln usd in June.

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