UK/Euro Financial Market Daily Morning Briefing 13-03-2006

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London shares higher at open as Vodafone bid talks excites

Leading shares pushed higher in early deals, building on a strong end to the week on Wall Street, and as bid fever lifted the likes of heavyweight Vodafone and midcap London Stock Exchange, dealers said.
   
At 9.00 am, The FTSE 100 was 25.2 points higher at 5,933.1, reflecting the
positive wider market sentiment.
   
Volume was average, with 315.7 mln shares changing hands in 30,314 deals.
   
Meanwhile, US shares closed for the weekend on a positive footing as a strong jobs report focused investors on the current strength of the economy, and helped brush aside interest-rate concerns that plagued the market for much of the week.
   
The Dow Jones Industrial Average was up 104.06 points at 11,076.34, the first triple-digit gain for the benchmark index in more than three weeks.
   
The Nasdaq Composite climbed 12.32 points to 2,262.04 and the S&P 500 rose 9.35 points to 1,281.58.
   
Overnight in Asia, Japan's Nikkei 225 index closed 245.88 firmer at 16,361.51, while the Hang Seng ended the morning up 42.01 at 15,487.06.
   
Still in Asia, oil prices continued to ease, hovering below the 60 usd mark as the market concentrated on strong US inventories instead of worries about supplies from Nigeria and Iran.
   
Earlier this morning, New York's main contract, light sweet crude for delivery in April, was down 0.08 usd at 59.88 usd a barrel from its close of 59.96 usd in the US on Friday.
   
Back in London, Vodafone was the top blue chip performer, up almost 4 pct, after the Mail on Sunday claimed private equity groups including Apax Partners and CVC Capital are mooting a 100 bln stg bid for the world's largest mobile-phone operator.
   
Sentiment was further lifted by reports Verizon has made an informal approach to buy Vodafone's stake in Verizon Wireless, worth around 40 bln usd, while US private equity firms are said to be set to counter-bid Softbank Corp's planned acquisition of the Japanese unit of Vodafone.
  

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The stock was further in focus after embattled CEO Arun Sarin appeared to stamp his authority on the telecoms group over the weekend.
   
Chairman Lord MacLaurin has offered Sarin his backing in a move designed to draw a line under a bitter boardroom rift which has also seen Chris Gent resign as life president.
   
In response, one London-based fund manager dismissed the venture capital talk as "rubbish".
   
She said:" How could they ever afford it? It has a 78 bln stg market cap and they would have to offer a premium. I think the stock has been boosted by more reports of sale of Verizon wireless".
   
Vodafone took on 4-1/4 to 129.
   
Consolidation hopes also helped to underpin the drug sector, on confirmation this morning German Merck KGaA has bid 77 eur per share takeover offer for Berlin-based pharmaceutical Schering.
   
AstraZeneca was given a further shot in the arm on news that Crestor, its key anti-cholesterol drug has passed a US trial, sending the shares 67 firmer at 2,944.
   
And newspaper talk that GlaxoSmithKline has shelved plans to bid for biotech firm Serono lifted the UK pharma group by 5 pence to 2,947.
   
M&A gossip also provided the take-off for BAA, 16 higher at 830, after FT reported Macquarie Bank is in talks with Blackstone and the Ontario Teachers' Pension Plan on a possible joint bid for airport operator.
   
The airport operator is also being courted by Spanish construction group Ferrovial.
   
Blue-chip new boy Corus took on a penny at 75 after The Observer reported the steel group is to announce this week that it is looking to sell its aluminium business this year in a deal that could fetch 400 mln stg.
   
In leisure, InterContinental Hotels gained 15 at 850-1/2 after the group said it sold 24 hotels with 4,903 rooms in continental Europe for 352 mln eur to a unit of Westbridge Hospitality Fund.
   

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On the downside, HBOS was off 3-1/2 at 996 after the bank was downgraded to 'underperform' from 'neutral' by Credit Suisse in review of the UK banking sector.
   
The Swiss broker said investigations into banking charges are likely to weigh as the Office of Fair Trading looks set to issue a statement on penalty charges in the next couple of months.
   
Elsewhere, AB Foods lost 6-1/2 and Tate & Lyle lost 3-1/2 at 863 and 594 respectively after midcap peer Northern Foods warned on profits.
   
Northern Foods which supplies all supermarkets with products such as ready meals, sandwiches and soups, warned that underlying pretax profit in the current year will fall to about 45 mln stg from 62.2 mln stg a year earlier as a result of a downturn in sales and pressure on margins.
   
In response, Merrill Lynch reiterated its 'sell' recommendation on the stock, which fell 22-3/4 at 107-1/4.
   
Still on the second line, HMV lost 4-1/2 at 190-3/4 after the retailer confirmed it has rejected an increased indicative offer of 210 pence per share for the group from Permira.
   
On the second-line, London Stock Exchange soared over 21 pct as the likelihood of a bidding war hotted up after the bourse operator rejected a pre-conditional 950 pence per share takeover proposal from US peer Nasdaq on Friday.
   
According to this morning's Guardian, The New York Stock Exchange is expected to join in the battle for the LSE, with other reports saying Nasdaq is poised to up its offer.
   
In response, Exane BNP upgraded the stock to 'outperform' from 'neutral' and WestLb moved to 'hold' from 'sell'.
   
Shares in the group were up 185 pence at 1,065.
   
Bovis Homes was also supported, 18-1/2 higher at 848, by in-line full-year numbers, albeit lower, and an encouraging outlook statement.
   
In response, ABN upgraded to 'buy' from 'hold'.
   
Finally, in-line numbers provided the spur to Group 4 Securicor after the world's second-largest provider of security services, posted a 16 pct rise in 2005 profit and predicted another healthy performance this year.

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Diary of Events

For a diary of key UK financial and corporate events today, click here

US Summary

For a summary of US stocks at the close of trade, click here

Paris

PARIS - Market data at 08.58 GMT

   
Major indices:
   
CAC-40 up 19.90 points or 0.39 pct at 5,089.17
SBF-80 up 61.77 points or 1.07 pct at 5,0834.39
SBF-120 up 19.40 eur or 0.53 pct at 3,691.00

Volume: 600 mln eur
27 CAC-40 stocks up
13 CAC-40 stocks down

   
Major gainers:
    
Societe Generale, up 2.10 eur or 1.75 pct at 122.10, extending Friday's gains, which followed rumours that Citigroup is mulling a takeover bid.
   
Veolia Environnement, up 0.40 eur or 0.88 pct at 45.90, after reporting mildly disappointing FY net profit, but pleasing investors with its dividend and outlook for 2006.
   
Natexis Banques Populaires, up 7.30 eur or 3.81 at 199.0 on plans that it is to merge with Ixis
   
Euronext, up 3.45 eur or 6.27 pct at 58.45, after Nasdaq'a bid for LSE

   
Major losers:
   
Suez, down 0.29 eur or 0.85 pct at 33.88. Earlier today the Financial Times reported that France will offer Italy's Enel an increased market share in France in order to resolve a standoff following its announcement to merge Suez with Gaz de France, apparently thwarting a takeover bid for Suez by Enel.
   
Thales, down 0.16 eur or 0.42 pct at 37.90 after being cut to "outperform" from CA Cheuvreux's "selected list"
   
Altran down 0.13 eur or 1.12 pct to 11.44, after announcing a 3 mln eur share issue aimed at employee shareholders
   
Havas, down 0.01 eur or 0.25 pct at 3.97, after reporting lower-than-expected EBIT, a drop in dividend and not giving any strategic statement.

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FRANKFURT - Market data at 08.39 GMT

Major indices:
   
DAX 30 - 5,838.58, up 33.66 points or 0.58 pct
MDAX - 8,398.55, up 47.58 points or 0.57 pct
TecDAX - 731.71, up 9.53 points or 1.32 pct
DAX future - 5,840.00, up 21.50 points or 0.37 pct

Major gainers:

Schering, up 15.19 eur or 22.72 pct at 82.05, after Merck KGaA made an unsolicited 77 eur per share bid for the speciality pharmaceutials company, which said the offer seriously undervalued the group, resulting in investors betting on a likely counterbid.
   
Deutsche Boerse, up 5.82 eur or 5.59 pct at 109.87, after Nasdaq's pre-conditional 950 pence per share takeover proposal for the London Stock Exchange PLC on Friday night revived speculation the New York Stock Exchange may team up with its German peer.

Some dealers also said a potential takeover of the LSE would increase the prospects of a tie-up between Euronext and Deutsche Boerse.
   
Hypo Real Estate, up 1.17 eur or 2.23 pct at 53.60
   
Altana, up 0.94 eur or 2.00 pct at 48.00, as news of Merck's takeover bid for Schering boosted sentiment towards the stock
   
Allianz, up 1.26 eur or 0.96 pct at 132.99

Major losers:
   
Adidas-Salomon, down 1.09 eur or 0.69 pct at 157.40
   
BASF, down 0.29 eur or 0.46 pct at 62.53
   
Deutsche Post, down 0.08 eur or 0.36 pct at 22.44
   
BMW, down 0.14 eur or 0.35 pct at 40.42
   
Henkel, down 0.26 eur or 0.28 pct at 93.14

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