UK/Euro Financial Market Daily Morning Briefing 13-09-2007

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London shares trading lower early on, tracing NY decline on oil surge

Leading shares were trading a little easier in quiet, directionless early trade as investors opted to take a back seat amid a surge in the price of crude oil and uncertainty ahead of next Tuesday's FOMC meeting.
   
By 9.05 am, the FTSE 100 was off 16.8 points at 6,289.4 after finishing Wednesday's session 25.5 points higher at 6,306.2. The broader FTSE 250 was off 49.0 points at 11,170.7.
   
Early volume was modest with 137 mln shares changing hands in 39,460 deals.
   
"The market seems to be taking stock but I'm still surprised by the markets' resilience given the growing unease surrounding the wider implications of the liquidity squeeze," Mark Priest at TradIndex said. "The market seems to have discounted a rate cut next week, but if the Fed fails to deliver we could see a significant sell-off," he added.
   
Last night on Wall Street, US stocks finished essentially flat, with investors treading cautiously as oil prices crossed 80 usd a barrel threshold for the first time and the dollar extended its decline.
   
Investors still widely expect the central bank next Tuesday to lower the benchmark federal funds rate by a quarter percentage point although the decision is not guaranteed.
   
The Dow Jones industrial average fell 16.74, or 0.13 pct, to 13,291.65, after weaving in and out of positive territory throughout the session.
   
Broader stock indexes were narrowly mixed. The Standard & Poor's 500 index rose 0.07 to 1,471.56, and the Nasdaq composite index fell 5.40 to 2,592.07.
   
Over in Asia, Japan's Nikkei closed up 23.59 points at 15,821.19, while in Hong Kong the Hang Seng was up 27.36 points at 24,337.50.

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Crude oil futures were holding above 79 dollars a barrel in Asian trade Thursday after breaking above 80 dollars a barrel in New York Wednesday for the first time ever. The spike, which came after US data showed a surprise decline in inventories in the latest week, revived concerns about inflation pressures in the US.
   
Early on in London, financial stocks paced declining issues as concerns over mortgage arrears among UK borrowers hit Northern Rock, down 21 at 651-1/2 and Alliance & Leicester off 29 at 934.
   
Sentiment was further hit after a report showed UK house prices fell during August for the first time in nearly two years, while new buyer enquiries dropped at their fastest rate for three years.
   
In its monthly survey of the housing sector, the Royal Institution of Chartered Surveyors found a balance of 1.8 pct of its members reported house prices fell in the three months to August rather than rose -- the first time since October 2005 that a fall in prices has been recorded.
   
Scottish & Newcastle also slipped, off 19 at 595, in reaction to a downgrade to 'neutral' by Merrill Lynch as the broker cited the growing unlikelihood of a near-term bid from Danish peer Carlsberg.
   
Meanwhile, ITV dipped 1.4 to 109.6 after Goldman Sachs removed the commercial broadcaster from its Conviction Buy List and cut its target on the broadcaster to 125 pence from 140, although it opted to maintain its 'buy' rating.
   
Elsewhere, BAE Systems eased 8 to 470-1/4 after the Times reported that the UK government is trying to reduce, delay or entirely cancel a 5 bln stg order for 88 Eurofighter Typhoon jets.
   
Turning to gainers, oil stocks dominated the leaderboard after crude oil futures surged to a record high last night following a bigger-than-expected drop in US crude oil reserves.
   
Royal Dutch Shell gained 13 to 2,027 while BP added 3 to 571.
   
Elsewhere Unilever took on 5 to 1,590 after Lehman Brothers upped its rating on its Dutch sister company to 'equal weight' from 'underweight'.
   
And investors cheered National Grid, up 4 at 741, after a report in today's Times that it is planning to sell its 800 mln stg property arm.

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The land, mainly consisting of redundant gasworks, is likely to appeal to one of the large housebuilders such as Berkeley or Barratt Developments or a commercial developer such as Quintain Estates & Development or St Modwen.
   
Defensive issues were also prominent with Scottish & Southern Energy up 15 at 1,424, British Energy up 4-1/2 at 499-1/2 and Kelda gaining 6-1/2 to 882.
   
Among midcaps, Charter fell 38 to 1,142 early on after UBS cut its stance in the industrial machinery group to 'neutral' from 'buy', while in line results from industrial supply group SIG failed to stimuate any buying interest with the shares trading 39 lower at 1,237.
   
Turning to the midcap risers, Aggreko topped its peers, up 22 at 581, after reporting a 60.3 pct rise in first-half pretax profit boosted by the strength of its international division.
   
Kier Group also showed early strength, up 75 at 1,995, after reporting construction and support services orders were at record levels as it announced a 30.5 pct rise in full year pretax profits before amortisation but after deducting joint venture tax to 79.6 mln stg.

    
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PARIS - Market data at 10.06 am:

Major indices:
    
CAC-40 down 29 points or 0.53 pct at 5,479.01
SBF-80 down 31.77 or 0.48 pct at 6,557.39 
SBF-120 down 23.64 or 0.59 pct 3,990.39

16 CAC-40 stocks up
24 CAC-40 stocks down

Major gainers:
   
Vallourec up 6.34 or 3.47 pct at 188.80 on rumours of Russian takeover interest
   
Lagardere up 1.61 or 2.79 pct at 59.24 after reporting better-than-expected first half earnings in its press and radio division
   
ArcelorMittal up 0.45 or 0.98 pct at 46.55 

Major decliners:
   
Alcatel-Lucent down 0.67 or 9.24 pct at 6.58 after fresh warning on profits
   
STMicroelectronics down 0.39 or 3.14 pct at 12.04 after Lehman Brothers cut its rating on the stock to 'underweight' in a sector review
  
Peugeot down 0.99 or 1.76 pct at 55.14
 
Most active stocks:
   
Alcatel-Lucent down 0.67 or 9.24 pct at 6.58; 26.1 mln shares
   
STMicroelectronics down 0.39 or 3.14 pct at 12.04; 2.2 mln shares

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MILAN - Market data at 10.00 am:

Main indices:
   
Mibtel at 30,311, down 0.45 pct
   
S&P/Mib at 38,791, down 0.55 pct

Main S&P/Mib losers
   
STMicro down 2.49 pct at 12.13 after Lehman Brothers cut the stock to 'underweight' from 'overweight' as part of its sector review. It also trimmed the price target from 15 eur to 14 eur. 
   
Finmeccanica down 1.86 pct at 20.62 after the release of first half results, with some analysts saying that sales missed their forecasts and that they were disappointed by the weakness of the helicopter division.
   
Lottomatica down 1.62 pct at 25.43 ahead of the release of second quarter results. These should show a net profit versus a loss last year, with sales boosted by scratch-and-win cards that should offset a flat Italian lottery division.
   
Banca Popolare di Milano down 1.68 pct at 10.37, correcting after an end-of-session rally yesterday on M&A hopes, after UBI Banca said it was open to tie-ups with other cooperative banks. BPM is currently in the process of choosing a partner.
   
Unicredito Italiano down 1.23 pct at 5.76.

Main S&P/Mib gainers
   
Alitalia up 1.81 pct at 0.81 after announcing that its net loss narrowed marginally in the first half of the year and that it still has enough cash reserves to keep flying for another year. It also denied reports that it is in
takeover talks with the Air France-KLM group
   
Tenaris up 1.02 pct at 16.77
   
Banco Popolare up 0.65 pct at 16.34
   
Telecom Italia up 0.57 pct at 2.13
   
Pirelli up 0.49 pct at 0.8255

Other stocks in the news
   
Tod's down 3.79 pct at 57.84 as SG Securities cut the stock to 'sell' from 'hold'
   
Eni up 0.28 pct at 25.32 in spite of reports that the Kazakh parliament is studying legislation that would give it the right to nationalise the oil fields managed by foreign companies. Eni is the operator of the giant Kashagan oil field.
   
Campari down 3.21 pct at 7.245, continuing to slide after first half results in which the company announced that from the end of this year it will lose the rights to distribute the Gran Centenario and Tequila 1800 brands.

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AMSTERDAM - Market data at 10.09 am
   
Major indices

AEX 522.09, down 1.29 points
AMX Midcap 702.87, up 0.22 points
Government bonds mixed

Major decliners
   
ASML down 2.06 pct at 21.88 eur with analysts citing profit taking after recent gains, while midcap peer ASMI shed 1.67 pct at 19.40 eur
   
TomTom falls 1.33 pct at 51.95 eur
   
Aegon 1.06 pct lower at 13.02 eur
   
Philips falls 0.69 pct at 30.06 after selling 2.5 pct stake in US-based Nuance communications for 60 mln eur
   
DSM slips 0.25 pct at 36.25 eur after announcing a new product aimed at increasing stability during the processing and storage of feed products within the aquaculture sector
   
Heineken down 0.13 pct at 45.23 as Theodoor Gilissen upped its price target to 53 eur but held it at 'buy'
   
Crucell down 1.21 pct at 14.71 eur
   
USG people off 1.13 pct at 21.08 eur

Major gainers
   
Arcelor Mittal up 0.98 pct at 46.55 eur as it announced further details of its previously announced buyback of 27 mln shares
   
KPN up 0.67 pct at 12.06 eur
   
Unilever up 0.13 pct at 22.45 eur after upgraded to 'equal weight' at Lehman with a target to 23.1 eur and amid reports it is mulling divesting Maille, Alsa units
   
CSM surges 3.59 pct at 24.23 eur after announcing 100 mln eur share buyback
   
Corio puts on 1.72 pct at 53.97 after upgraded to 'buy' from 'neutral' by UBS, target 63 eur
   
Grolsch gains 1.45 pct at 28.00 as Theodoor Gilissen cut its price target to 28 from 29, maintaining it at 'sell'

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