UK/Euro Financial Market Daily Morning Briefing 13-06-2006

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London shares down again in early deals as interest rate fears continue

Leading shares remained sharply lower in early deals, following on from Wall Street's drop last night and heavy falls in Asia, as panic over interest rates continued to batter global markets, dealers said. 
    
By 9.00 am, the FTSE 100 index was down 87.7 points at 5,533.2, a new low for 2006, while the FTSE 250 index was down 213.0 points at 8,768.2.
    
Wall Street extended its month-long retreat last night as inflation fears kept investors on edge, dragging blue-chips down almost 100 points and putting the Nasdaq at a seven-month low.
    
Downbeat inflation comments from Federal Reserve Bank of Cleveland President Sandra Pianalto yesterday were another reminder for an already uneasy market.
   
The Dow Jones industrial average closed 99.34 points lower at 10,792.58, while the Nasdaq ended 43.74 points lower at 2,091.32.
   
Today's UK CPI data and US May PPI data will be closely followed, with a 0.2 pct increase in the core CPI figure expected, while May US retail sales data should also keep investors on their toes.
   
Overnight across Asia, the Nikkei 225 index closed 614.41 points lower at 14,218.60, while the Hang Seng was down 278.56 points at midday.
   
Crude oil prices were weaker again this morning because the first named storm of the Atlantic hurricane season was expected to miss the Gulf of Mexico's petroleum infrastructure, dealers said.
   
New York's main contract, light sweet crude for July delivery, was down 58 cents at 69.78 usd a barrel from its close of 70.36 usd in the US overnight.       

Metal prices were also under pressure as speculators continued to unwind positions, fearful of the impact of rising interest rates and the threat of easing demand.
   
The price of gold slipped more than 2 pct to below 600 usd an ounce in Asia, while copper and silver prices were also weaker.

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Miners again bore the brunt of the early selling in London, with Kazakhmys down 40-1/2 pence to 981 pence, Antofagasta down 74 pence to 1,837 pence, Anglo American 80 pence lower at 1,863 pence and Xstrata falling 70 pence to 1,825.
   
Oil shares were also weaker, with BP down 6-1/2 pence to 601 pence, Royal Dutch Shell off 13 pence at 1,769 pence and Cairn Energy down 47 pence to 1,938 pence.
   
Royal Bank of Scotland shares came under pressure early on, and fell 42 pence to 1,730 pence, after an unexciting trading statement.
   
In a pre-close trading update, the bank said it expects results for the first half to the end of June, which will be released on Aug 4, to be in line with expectations.
   
It added that highlights of the interim results are expected to include good organic growth in income, expense control and a small improvement in overall credit metrics.
   
Merrill Lynch, however, repeated its 'buy' recommendation and raised its target to 2,328 pence.
   
Yell was another faller, down 13 pence to 493 pence, after news that the UK Competition Commission has recommended that price caps should remain to counter the group's domination of the printed directories market.
   
But Merrill Lynch welcomed the regulator's recommendations as preferable to a more draconian approach to dealing with the issue.
   
Alliance & Leicester was the top blue-chip faller, down 61 pence at 1,093 pence, reflecting disappointment that widely rumoured suitor Credit Agricole has launched a 3.1 bln eur offer for Greece's Emporiki Bank.
   
Cautious broker comment also weighed, with HSBC reiterating its 'underweight' recommendation and 893 pence notional price target after yesterday's trading statement.   

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"The trading update reaffirms our view that A&L is a weak franchise. As such we'd be surprised if Credit Agricole were prepared to pay a premium price," the broker told clients.
   
WestLB was also negative and repeated 'sell' recommendation and 850 pence target.
   
Wolseley, meanwhile, fell 25 pence to 1,093 pence after Deutsche Bank cut its target on the group to 1,530 pence from 1,771 pence, noting the slowing US housing market and falling lumber prices.
   
However, it reassured clients that it remains 'totally convinced' by the group's longer-term prospects.
   
There were only two blue-chip risers, BAA and BOC, up 1 pence to 929 pence and 2 pence to 1,570 pence respectively, after their respective agreed bids.
   
On the second line, First Choice Holidays fell 6-3/4 pence to 211-3/4 after  reporting increased losses in the first half of 78.2 mln stg compared with a fall of 66.7 mln the year before.
   
The travel group said the outlook for the high season in July and August remains strong and it is confident of the outcome for the full year.
   
Panmure Gordon and ABN Amro both repeated their 'buy' recommendations.

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FRANKFURT - Market data at 9.36 am
   
Major indices:
   
DAX 30 - 5,311.24, down 84.31 points or 1.56 pct
MDAX - 7,352.45, down 197.51 points or 2.62 pct
TecDAX - 597.75, down 19.26 points or 3.12 pct
DAX future - 5,314.00, down 37.00 points 0.69 pct

Major gainers
   
Schering, up 0.54 eur or 0.63 pct at 86.79, as Bayer said it does not rule out buying Schering shares for above its takeover offer of 86 eur per share, adding that the highest price would be valid for all shareholders who have tendered their shares to the company
   
Altana, down 0.14 eur or 0.31 pct at 44.86
   
TUI, down 0.06 eur or 0.39 pct at 15.38
   
Metro, down 0.25 eur or 0.59 pct at 42.20
  
Deutsche Telekom, down 0.09 eur or 0.70 pct at 12.78

Major losers:
  
MAN, down 1.56 eur or 3.05 pct at 49.62
   
Deutsche Boerse, down 2.95 eur or 2.96 pct at 96.72, as the Financial Times Deutschland reported that the German exchange operator is considering raising its bid for Euronext
   
Bayer, down 0.88 eur or 2.73 pct at 31.40, amid news that Merck KGaA has lifted its stake in Schering to 20.71 pct, which market participants believe could lead to Merck preventing Bayer's takeover of Schering. Bayer was in focus as it said it does not rule out buying Schering shares for above its offer price of 86 eur per share
   
ThyssenKrupp, down 0.60 eur or 2.49 pct at 23.51
   
Linde, down 1.41 eur or 2.33 pct at 59.10

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AMSTERDAM - Market data at 10.24 am

Major indices:

AEX index             415.42, down 6.30 points
AMX Midcap index      525.24, down 14.92 points
Govt bonds            broadly higher

Major losers:
   
Hagemeyer slumped 4.78 pct to 3.19, Buhrmann was down 2.71 at 10.40, with SNS Securities upgrading the stock to 'buy' from 'add'
   
Vedior fell 3.47 pct to 15.30, Getronics was 3.04 pct lower at 8.28, TomTom slipped 3.22 pct to 31.60
   
Philips lost 2.67 pct to 22.27
   
Among financials, ING gave up 2.01 pct to 28.25, ABN Amro shed 2.04 pct to 20.63 and Fortis was off 2.01 pct at 25.35 while Aegon eased 1.55 pct to 12.04 
       
Major gainers:
   
Heineken was the only AEX gainer, up 0.25 pct at 31.57, while CSM was the sole midcap stock to trade higher, up 0.27 pct at 22.02.

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