UK/Euro Financial Market Daily Morning Briefing 15-03-2007

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London shares open higher as Cadbury, Prudential help lift the blues
 
Leading shares opened higher, clawing back much of yesterday's sharp losses, as M&A news in Cadbury Schweppes and forecast-busting results from Prudential added to a rebound in US and Asian markets overnight.
   
At 9.00 am, the FTSE 100 was 77.7 points firmer at 6,078.4, but failed to break through the key 6,100 level, mirroring the positive wider market, with the FTSE 250 recovering over 189 points.
   
"The FTSE may have collapsed just ahead of the close last night, but a strong afternoon session on Wall Street and bullish performances across Asian markets look set to give the main European indices a significant boost in early trade," said Matt Buckland, trader at CMC Markets.
   
Meanwhile, Wall Street rebounded from early lows to end the session higher, having dropped below the key 12,000 mark, as bargain hunters took advantage of ongoing fears over sub-prime mortgage lending.
   
Stocks were also supported by a spike in crude prices towards the end of the session which provided a fillip to energy companies. The Dow closed 57.44 higher at 12,133.40, The S&P 500 index gained 9.22 to 1,387.17, and the Nasdaq rose 21.17 to 2,371.74.
   
Today investors will look to the release of the US producer price index in a bid to gauge the health of the world's biggest economy with core factory gate prices seen rising 0.2 pct.
   
The defiant mood spilled over into Asia with the Nikkei 225 stock index closing up 183.50 at 16,860.39 and the Hang Seng Index ended the morning 158.14 firmer at 18,995.07.
   
Back in London, Cadbury Schweppes led blue chips higher, up 33 pence at 635, after the food and drink group confirmed reports it intends to separate its confectionery and Americas Beverages businesses.
   
In a statement to the stock exchange, the group said: "The board is evaluating the options for separation to maximise shareowner value."  Further information will be provided at the time of the trading update on 19 June.
   
Sentiment was further boosted after The Times reported Lion Capital and Blackstone are weighing up possible bids for Cadbury's drinks business and may ultimately make a joint bid.
   
In response, Merrill Lynch said the Beverages assets will prove tempting to a host of various private equity players and could be an "expedient option provided there are no adverse tax consequences".

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Prudential was also in demand, 21 better at 664, after the life insurer unveiled details of its long-waited review into its underperforming UK operations and reported forecast-busting results.
   
This morning, the group confirmed reports it has nominated a policyholder advocate, Peter Bloxham, to represent policyholders as it considers unlocking 9 bln stg in surplus assets that have built up in its life funds.
   
It also revealed it is to buy Equitable Life's 1.8 bln stg with-profits annuity portfolio as it focuses its UK division on its annuity business.
   
As for the figures, the UK's second-biggest insurer, said operating profit for the year came in at 1.976 bln stg under European Embedded Value accounting rules, up from 1.712 bln stg previously.
   
Analysts had expected a profit of 1.823 bln stg, according to a consensus forecast supplied by the company. In response, Goldman Sachs reiterated its 'buy' advice.
   
On the high street, William Morrison Supermarkets added 9-3/4 at 315-1/4 thanks to a pleasing set of full-year results from the food retailer, dealers said.
   
This morning, the group reported full-year earnings at the top end of market expectations and committed to investing a further 450 mln stg in the business over the next three years following a strategic review.
   
In reaction, Citigroup repeated its 'buy' recommendation and said the food retailer posted good results, issued a positive strategic review, although disappointed with current trading.
   
Still in retail, Kingfisher extended yesterday's gains, 11-1/2 higher at 265-1/22 after the Daily Mail said private equity group Apax is heading a consortium looking at the DIY chain.
   
Sentiment in the stock was further lifted by a positive read-across from Home Retail Group's Homebase DIY unit yesterday.
   
And M&A hopes also lit a fire under Imperial Tobacco, up 80 at 2,127 on news shares in much mooted Spanish suitor Altadis have been suspended.
   
Elsewhere, selected miners also lent support, lifted by recovering metal prices overnight, but Kazakhmys bucked the positive mood on the back of underwhelming full-year results.
   
The group said pretax profits leapt to 2.17 bln usd from 0.85 bln, on the back of revenues up 94 pct to 5.05 bln usd, but EBITDA excluding special items rose to 2.3 bln from 1.07 bln, slightly below consensus forecasts of 2.4 bln.

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In reaction, Merrill Lynch noted that earnings per share was up 132 pct year-on-year but 4.4 pct light of its forecasts.
   
On the second line, Charter surged 58-1/2 at 865 after Panmure Gordon and KBC Peel hunt both upgraded the engineer to 'buy' following full-year results this morning, dealers said.
   
This morning, Charter reported a 40 pct rise to 144.6 mln stg in its full-year pretax profit, adding it views its 2007 trading prospects "with increased confidence".
   
Still in earnings, Cobham took on 9-3/4 at 199-3/4 after the aerospace engineer said the outlook in defence and civil markets is good as it posted a 9.5 pct rise in full-year pretax pre-exceptional profits to 182.9 mln stg.
   
In response, Merrill Lynch reiterated its 'buy' advice and said the results came in about 2 pct ahead of its forecasts, despite a 1 pct hit from currency headwind and a 1 pct hit from higher R&D costs.
   
Finally, Aegis Group firmed 6-3/4 at 143 after the media group pledged to outperform its competitors in 2007 after announcing the departure of its chief financial officer.
   
At the same time, revenues surged 14.5 pct to 996.9 mln stg on an underlying basis, boosting pretax profits by 16.0 pct to 116.2 mln -- slightly better than the consensus forecast.
   
In response, Bridgewell Securities upgraded the stock to 'overweight' from 'neutral'.

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PARIS - Market data at 10.24 am:           

Major indices:
   
CAC-40 up 69.11 points or 1.30 pct at 5,365.33
SBF-80 up 96.86 or 1.47 pct at 6,6992.91
SBF-120 up 52.08 or 1.34 pct at 3,935.49

Volume: 1.12 bln eur
40 CAC-40 stocks up
   
Major gainers:
   
Atos Origin, up 9.47 eur or 23.94 pct at 49.02 on rumours that the company has received a takeover approach from investment funds
   
Casino Guichard, up 3.49 or 5.30 pct at 69.29 on the back of higher-than-expected full-year operating profits
   
Cap Gemini, up 2.04 or 3.93 pct at 53.73
   
Vallourec, 4.66 or 2.86 pct ahead at 167.69

Major losers:
   
Natixis, down 1.02 or 5.38 pct at 17.93 after the banking group unveiled pro forma net profit for 2006 that fell short of analysts' expectations

Most active stocks:
   
Atos Origin, in 215.48 mln eur
   
BNP Paribas, up 1.26 or 1.67 pct at 76.69, in 103.66 mln eur

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FRANKFURT - Market data at 10.32 am

Major indices
   
DAX - up 89.74 points or 1.39 pct to 6,537.44
MDAX - up 215.44 points or 2.30 pct to 9,587.30
TecDAX - up 16.58 points or 2.10 pct to 806.38
DAX futures - down 18.00 points or 0.27 pct to 6,538.00

Major advancers
   
Bayer up 1.15 eur or 2.69 pct to 43.89, as the company posts impressive FY results
   
Allianz up 3.34 eur or 2.25 pct to 151.60, as banking sector recovers from slump in previous days due to potential liquidation of New Century Financial
   
Hypo Real Estate up 0.88 eur or 1.97 pct to 45.65
   
Deutsche Bank up 1.65 eur or 1.80 pct to 93.15
   
MAN up 1.70 eur or 2.05 pct to 84.70 on rumours that VW is buying Scania and accelerating merger of companies' truck ops
   
Siemens up 1.36 eur or 1.77 pct to 78.14 as co confirms Nokia joint venture to get underway April 1 

Underperformers
   
Altana down 0.03 eur or 0.06 pct to 46.96 as FY results in line with expectations 
   
TUI up 0.02 eur or 0.12 pct to 17.13
   
Deutsche Post up 0.06 eur or 0.26 pct to 22.98
   
EON up 0.50 eur or 0.52 pct to 97.06 as utilities weaken due to alleged manipulation on German market 
   
RWE up 0.46 eur or 0.62 pct to 75.18

Other major movers
   
Gea Group up 1.00 eur or 6.05 pct to 17.52 as Morgan Stanley initiates stock with an "overweight" stance, target of 22 eur
   
Aixtron up 0.48 eur or 9.96 pct to 5.30 with FY results exceeding market expectations   

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