UK/Euro Financial Market Daily Morning Briefing 14-02-2007

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London shares higher, Wolseley in focus on Cinven bid talk, miners rise

Leading shares were trading firmer this morning following strong gains on Wall Street last night, while M&A talk surrounding Wolseley, solid earnings from Liberty International and a resurgent resource sector were seen underpinning early sentiment, dealers said.
   
At 9.00 am, the FTSE 100 was up 13.0 points at 6,394.5 having earlier broken through the 6,400 level. The broader indices were also higher. Early volume was moderate with 191 mln shares trading in 33,117 deals.
   
Last night on Wall Street, the DJIA climbed 102.30 points or 0.81 pct to 12,654.85 as a report that two UK listed mining groups were reported to be trying to buy Alcoa Inc stoked investors' hopes for a pickup in takeover activity. It was the biggest one-day jump since Dec 27.
   
The Standard & Poor's 500 index increased 10.89 to 1,444.26, and the Nasdaq composite index rose 9.50 to 2,459.88.
   
Meanwhile over in Asia, Japan's Nikkei 225 index ended up 131.19 points at 17,752.64, while in Hong Kong the Hang Seng finished its morning session up 85.34 points at 20,217.59.
   
Looking at commodities, oil prices retreated on profit-taking in early Asian trade after surging 2.2 pct in New York during US trading hours.
   
New York's main oil futures contract, light sweet crude for delivery in March, was 19 cents lower at 58.87 usd a barrel from 59.06 usd in late US trades overnight. Brent crude for April delivery was off 33 cents at 58.50 usd.
   
Meanwhile, copper rose 5.1 pct in London, the most in seven months, on signs of rising demand for raw materials in China.
   
In London this morning, mining stocks dominated the leader board after Asian counterparts advanced overnight on strong commodity prices with Xstrata up 51 pence at 2460 and Rio Tinto up 51 at 2804.
   
Oil stocks also gained with Royal Dutch Shell up 5 at 1706, BP up 2 at 536 and Cairn Energy up 18 at 1638.
   
However, Wolseley topped the board after press reports linked the building and plumbing materials supplier with a possible 10 bln stg plus bid from private equity group Cinven.

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Financial daily City AM said Cinven, advised by Goldman Sachs, has for three months been eyeing a bid to take the FTSE 100 company private. Wolseley shares gained nearly 7 pct or 84 pence to 1,396.
   
In earnings news, Liberty International, which converted to a real estate investment trust (REIT) on Jan 1, took on 4 pence to 1,294 after posting a rise in full-year net asset value and pretax profit, and said it is well placed to prosper on the strength of its underlying business.
   
Merrill Lynch said the adjusted NAV of 1,327p came in below its flagged 1,395p, adding it was "expecting a better uplift" at its Covent Garden and Manchester Arndale sites.
   
Nevertheless, the broker reiterated its 'buy' advice and said it thinks the outlook for UK regional shopping centre market remains positive.
   
In broker-driven news, Barclays gained 5 to 780 after UBS reiterated its 'buy' advice on the stock and hiked the price target to 900 pence from 825 ahead of the bank's full-year results due next Tuesday.
   
UBS pointed out to clients that the bank indicated with its November trading statement that it remained comfortable with the market's 22 pct EPS growth forecast for 2006.
   
Meanwhile, high street fashion retailer Next took on 20 to 2,044 after UBS hiked its price target for the group to 2,350 pence from 2,150 as the broker sees an improvement in the content of the group's recovery plan.
   
Centrica added 1 to 366-1/4 after Lehman Brothers raised its target to 320 pence from 275 with an unchanged rating of 'underweight'.
   
On the downside, BSkyB slipped 2-1/2 to 558 after Teather & Greenwood downgraded its stance to 'reduce' from 'buy' to reflect continual long term investment in its network and operations.
   
Drax was also lower, off 15 at 658 after Credit Suisse reiterated its 'underperform' rating and 690 pence price target saying forward sales will not only will be hit by lower gas and carbon prices but also higher coal prices.
   
Cadbury Schweppes slipped 11 to 560 after news Morgan Stanley cut forecasts on the confectionary giant added to ongoing jitters over the group's recent series of product recalls.
   
The broker also lowered its 2006 and 2007 estimates to account for an expected hit from foreign exchange, and nagging problems in Nigeria.

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Among midcaps, Luminar rose 13 to 777 after being initiated as a 'buy' - with a target of 860 pence - by Dresdner Kleinwort.
   
The broker said that Luminar is currently the leading independent late-night venue operator in the UK.
   
Elsewhere, Northern Foods took on 5-1/2 to 138 after ABN Amro raised its target for the food processor to 140 from 125 and reiterated its 'buy' stance.
   
In economic news, today's Bank of England quarterly inflation report due at 10.30 am is expected to show January's increase in interest rates to 5.25 per cent will not be the last.
   
The inflation report will provide the BoE with the latest forecasts on growth and inflation. Official figures indicate that gross domestic product and inflation are already running above the central bank's previous round of predictions in November.
   
Elsewhere on the economic calendar, today's labour market data due at 9.30 am is expected to show only limited gains in average earnings growth even as crucial wage negotiations get underway.
   
Later today, US retail sales are seen rising 0.4 pct in January after rising 0.9 pct in the prior month. Excluding autos, sales are seen rising 0.4 pct in the month, after having risen 1.0 pct previously.
   
Finally, US business inventories are seen remaining flat in December after having risen 0.4 pct in November.

UK Diary of Events

For a diary 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 9.53 am:

Major indices:

CAC-40 up 14.86 points or 0.26 pct at 5,697.55
SBF-80 up 28.05 points or 0.40 pct at 7,071.89
SBF-120 up 12.21 points or 0.29 pct at 4,176.04

Volume: 830 mln eur
30 CAC-40 stocks up
8 CAC-40 stocks down
2 CAC-40 stocks unchanged

Major gainers:
   
Michelin, up 1.35 eur or 1.89 pct at 72.80, ahead of tomorrow's full-year results. Analysts expect the company to give guidance pointing to a rebound in profitability in 2007.
   
Total, up 0.80 eur or 1.52 pct at 53.30, after full-year results and reserve replacement data beat expectations.
   
Thomson, up 0.22 eur or 1.44 pct at 15.52

Major losers:
   
Societe Generale, down 3.90 eur or 2.79 pct at 135.70, after fourth-quarter results fell short of analysts' expectations.
   
L'Oreal, down 0.35 eur or 0.43 pct at 81.45, ahead of tomorrow's full-year results.
   
BNP Paribas, down 0.40 eur or 0.46 pct at 86.20, as financial shares in general followed SocGen lower.

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AMSTERDAM - Market data at 10.36 am
   
Major indices
   
AEX                 506.90, up 0.24 points
AMX Midcap          714.25, up 0.73 points
Government bonds    Lower

Major gainers
   
Vedior was up 2.78 pct to 16.61 eur after an upgrade to 'buy' at Deutsche Bank
   
ASML added 2.21 pct to 19.42 eur after it said it will organise new share buybacks
   
TomTom put on 1.57 pct to 31.11 eur
   
Crucell added 1.03 pct to 20.65 eur amid bargain-hunting following yesterday's deep losses, dealers said
   

Major losers
   
DSM fell 7.87 pct to 35.50 eur following an opg profit warning for 2007 and lower-than-expected earnings
   
Akzo Nobel dropped 0.96 pct to 46.60 eur ahead of earnings tomorrow
   
Pharming lost 1.05 pct to 3.76 eur
   
CSM shed 1.28 pct to 28.50 eur

According to The Times newspaper, one of our products rose in value by 90%* last year and our market outstripped the FTSE 100 by 36.1 %.*

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*Source The Times, December 15th 2006

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