UK/Euro Financial Market Daily Morning Briefing 13-03-2007

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London shares lower as talk of UK hedge fund collapse adds to US data jitters

Leading shares turned lower in opening deals as vague talk a UK hedge fund has hit financial trouble dragged on financials and added to jitters ahead of key US retail data, dealers said.

At 9.13 am, the FTSE 100 was down 12.1 points at 6,221.2, off an opening high of 6,240.7, mirroring the weaker wider market.

Volume was average, falling back from recent heavy levels, as investors were distracted by the start of the Cheltenham Festival and Cricket World Cup.

Meanwhile, Wall Street began the week on a firm footing after initial fears over the subprime lending market were calmed by a flurry of mega-mergers.

Markets opened the session under pressure after New Century, the distressed mortgage group, warned all its lenders are cutting off credit.

But news private equity group KKR struck a deal to buy budget retailer Dollar General for around 6.87 bln usd and UnitedHealth Group is set to buy health care services provider Sierra Health for 2.6 bln usd lifted the mood.

The DJIA ended the day 42.30 points higher at 12,318.62, the S&P 500 index gained 3.75 to 1,406.60, and the Nasdaq added 14.74 to 2,402.29.

And today, US investors will look to February retail data in a bid to gauge the health of the world's biggest economy, with most pundits looking for sales to rise 0.3 pct month-on-month.

Nervousness ahead of the data sent most Asia markets lower with the Nikkei 225 index closing down 113.55 points at 17,178.84, while the Hang Seng was off 48.86 at 19,393.56 by midday.

Back in London, financials led the broader market lower following rumours a UK hedge fund is facing financial difficulties.

Other dealers, however, said investors were just edgy following news last night that leading US subprime lender New Century Corp could file for liquidation.

Man Group fell 10-1/4 pence at 522, and Amvescap lost 4 at 599 in response.

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The banking sector fell in sympathy, still knocked by better-than-expected producer price index data yesterday which raised worries the Bank of England will hike interest rates once again in the not too distant future.

Barclays lost 7-1/2 at 720,  Royal Bank of Scotland eased 22 at 2,070 and Standard Chartered was down 19 at 1,411, further hit by the weak showing in Asian markets overnight.

However, Old Mutual bucked the negative trend, up 3/4 at 171-1/4 after the insurer was upgraded to 'buy' from 'neutral' by UBS with an unchanged price target of 205 pence.

The broker pointed out it sees the recent weakness in the Old Mutual share price as a buying opportunity.

But M&A hopes limited gains, with Imperial Tobacco the top riser, up 32 at 2,148, after La Vanguardia reported the UK group is sounding out the idea of a friendly merger with Altadis to avoid a hostile move from mooted suitor KKR.

Likewise, Alliance Boots added 18-1/2 at 1015 on hopes of a bidding war for the health and beauty retailer following its rejection yesterday of a 1,000 pence per share from KKR and Stefano Pessina, its executive deputy chairman.

According to The Times, the rebuff could draw rival buyers out of the woodwork, including other private equity firms or trade buyers.

And The Independent said sources close to Pessina's camp noted the muted tone of the rebuff, which was couched in far softer language than comparable rejections of other recent private equity bids.

Cadbury Schweppes was also courted, up 15 at 2,131, on talk of stake building, possibly from activist investor Nelson Peltz.

According to the Financial Times, Peltz amassed a 5.5 pct stake in Heinz last year and sold Snapple to Cadbury in 2000.

And ICI added a further 3-1/2 at 493 after The Times reported Dutch peer Akzo Nobel has not ruled out a bid for the UK chemicals group.

Speculation Akzo might make a bid for ICI intensified yesterday after the Dutch group sold its Organon unit, prompting some brokers to say any bid could be pitched at around 600 pence per ICI share.

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Elsewhere, Antofagasta was up 3-1/2 pence at 478 thanks to a solid set of full year results and further strength in the copper price overnight.

The Chilean copper miner posted an 87 pct jump in full-year net profit this morning, as record high copper prices outweighed lower production and an increase in mining costs.

Net profit increased to 1.354 bln usd, up from 725.8 mln usd in 2005 and beating consensus expectations of 1.327 bln usd as it announced a special dividend, for the third consecutive year, of 38 cents a share.

Peers Kazakhmys was 6 better at 1,139, Anglo American rose 4 at 2,513, and Xstrata rose 2 at 2,417.

On the second-line, HMV Group slumped 20-3/4 at 132 after issuing another full year warning on profits blaming a further deterioration in trading conditions since January.

Earlier, the troubled music and books retailer said year to end-April 2007 underlying pretax profit forecasts will fall to about 50 mln stg against consensus forecasts of 61 mln stg.

In earnings, Cookson Group lost 12 at 614-1/2 on profit taking as solid results prompted investors to cash in on recent gains.

This morning, Cookson reported a 30 pct rise in headline pretax profits to 131.2 mln stg.

On the upside, Group 4 Securicor added 2-3/4 at 194-3/4  after the international security company posted solid full year results alongside a reassuring outlook.

This morning, the group said full year pretax profit rose to 200 mln stg from 163.4 mln stg last time, with EBITA up 10 pct at constant exchange rates to 277 mln.

In response, Deutsche Bank reiterated its 'hold' advice and said EBITDA of 277 mln topped expectations of 274 mln and its own forecast of 275 mln.

But, Interserve toped the risers, up 13-3/4 at 503-1/4 after upgrades from both Citigroup and Altium Securities following full year results yesterday.

UK 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 Friday's close of trade, click here

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Paris shares market data at 10.16 am; Lagardere falls after FY results

Major indices:

CAC-40 down 0.43 points or 0.01 pct at 5,495.64
SBF-80 down 18.68 or 0.27 pct at 6,817.19
SBF-120 down 3.04 or 0.08 pct at 4,026.11

Volume: mln eur
21 CAC-40 stocks up
18 CAC-40 stocks down
1 CAC-40 stock unchanged

Major gainers:

-EADS up 0.37 or 1.65 pct at 22.73, reclaiming some of its losses since reporting full-year results and guidance on Friday.

-Electricite de France (EDF) up 0.75 or 1.34 pct at 56.86

-Danone up 0.93 or 0.78 pct at 120.20

Major losers:

-Iliad down 2.48 or 3.14 pct at 76.50 after the company said CEO Michael Boukobza has decided to leave by the summer. Maxime Lombardini has been  named development director and the board will propose his appointment as new CEO.

-Lagardere down 1.76 or 2.98 pct at 57.24 after the group's below-consensus full-year numbers last night. Group net profit was 291 mln eur, down from 670 mln a year earlier. Excluding the stake in troubled group EADS, net profit in the core media business was also down, to 268 mln eur from 404 mln.

-Gaz de France down 0.38 or 1.12 pct at 33.49 after disappointing investors with a cautious outlook. The group said it expects 2007 to be "a year of consolidation" under the impact of the warm 2006-2007 winter, and it forecast a flat gross operating profit.

Most active stocks:

-BNP Paribas, down 0.05 or 0.06 pct at 79.45, on volume of 60 mln eur

-Vallourec, down 0.04 or 0.02 pct at 171.94, 35 mln

-Total, up 0.11 or 0.22 pct at 50.14 , 34 mln

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AMSTERDAM - Market data at 10.45 am

Major indices
   
AEX                 488.34, down 1.20 points
AMX Midcap          695.72, up 1.52 points
Government bonds    narrowly mixed
   
Major decliners:
   
DSM shed 1.21 pct to 33.34
   
Fortis fell 0.9 pct to 32.04, ING eased 0.79 pct to 31.25 and ABN Amro was 0.22 pct lower at 27.74
   
Reed Elsevier gave up 0.85 pct to 12.80, Wolters Kluwer dipped 0.72 pct to 22.07
   
Major gainers:
   
Univar put on 3.28 pct to 41.31 as ABN Amro reiterated a 'buy' on the chemicals distribution group and raised its price target to 53.5 from 51
   
Vopak climbed 2.81 pct to 41.29 after UBS upgraded the stock to 'buy' from 'neutral' with a raised target of 48 eur, up from 40
   
Fugro advanced 1.97 pct to 36.73
   
Akzo Nobel extended yesterday's surge on news it is to sell its Organon Biosciences unit to Schering Plough for 11 bln eur, today rising 1.56 pct to 54.52 as Citgroup and ING both upgraded the stock to 'buy' from 'hold'  
  
Draka firmed 2.67 pct to 24.60 as ING upgraded the cabling company to 'buy' from 'hold' with an increased price target of 28 eur, up from 21, after last Friday's "strong" 2006 results

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German shares market data at 10.18 am

Major indices:

DAX - down 9.17 points or 0.14 pct to 6,706.32
MDAX - up 9.69 points or 0.10 pct to 9,738.53
TecDAX - down 5.72 points or 0.69 pct to 829.30
DAX futures - down 26.50 points or 0.39 pct to 6,710.50
 
Major Decliners:

Volkswagen down 1.65 eur or 1.59 pct to 102.20

Continental down 0.99 eur or 1.05 pct to 93.63, on profit taking, dealers said

Hypo Real Estate down 0.34 eur or 0.73 pct to 46.44 as

Commerzbank down 0.30 eur or 0.94 pct to 31.47

TUI down 0.11 eur or 0.62 pct to 17.75

  
Major Advancers:

MAN, up 1.75 eur or 2.06 pct to 86.85, as shares were upgraded to 'buy' from 'neutral' with a raised price target of 97 eur a share from 90 eur at UBS

DaimlerChrysler, up 0.17 eur or 0.32 pct to 53.30, still profiting from a potential sale of its Chrysler unit, dealers said.

EON up 0.43 eur or 0.43 pct to 99.30

Henkel up 0.05 eur or 0.05 pct to 101.45

Other major movers:

SGL Carbon up 0.54 eur or 2.60 pct to 21.32 as WestLB raised the target  for the stock to 30 eur from 26 and reiterated its 'buy' stance

AWD Holdings down 0.96 eur or 2.76 pct to 33.80

Qiagen down 0.21 eur or 1.69 pct to 12.20

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