UK/Euro Financial Market Daily Morning Briefing 15-06-2006

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London shares higher in early deals after Wall Street bounce, Asian rally

UK blue chips rallied higher in early deals this morning after a strong bounce overnight on Wall Street and in Asia today as investors took a sanguine view on US interest rates, with miners leading the recovery, dealers said.
   
At 9.09 am, the FTSE 100 index was up 58.2 points at 5,565.0, with all the broader FTSE indices also rallying.
   
Early volume was strong with 329 mln shares changing hands in 48,140 deals.
   
Overnight on Wall Street, the DJIA closed 110.78 points higher at 10,816.92, while the Nasdaq composite index rose 13.53 points to 2,086, and the S&P 500 index added 6.35 points at 1,230.04.
   
US stocks bounced higher as the market appeared to come to terms with the near certainty of a further Fed rate increase after the May CPI report showed inflation running at an annualised rate of 2.4 pct.
   
Federal Reserve chairman Ben Bernanke and a number of Fed governors have already said that anything above a 1 to 2 pct rate of inflation is outside their "comfort zone".
   
Asian markets rebounded today after the Wall Street rally. The Nikkei 225 index closed 161.20 points higher at 14,470.76, while the Hang Seng ended 187.16 points firmer at 15,435.08.
   
In London, strength in heavyweight oils and mining issues once again fuelled the blue chip rally in early deals.
   
Oil majors moved higher as crude prices continued to rise in Asian trade on news of a fall in US crude stockpiles, with China's strong industrial growth figures also boosting demand expectations.
   
In reaction, BP shares took on 6 pence at 592, Royal Dutch Shell gained 14 pence at 1,749, and BG Group took on 9 pence at 644, the latter helped by news that the firm has acquired a 30 pct stake in a Madagascar exploration field via  a farm-in deal.
   
Meanwhile the hard-hit mining sector was lifted by stronger metal prices and positive comment from Credit Suisse.
   
The Swiss broker said it feels the sell-off of the mining sector has been overdone because underlying demand from metals remains strong and stockpiles are falling.
   
BHP Billiton shares topped the FTSE 100 leaders board, up 37 pence to 953, while Kazakhmys took on 36-1/2 pence at 976, and Anglo American firmed 66 pence at 1,923, aided by a Merrill Lynch upgrade to 'buy'.

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And Xstrata added 60 pence at 1,882 helped by news that said it has won clearance from the Canadian Competition Bureau for its all-cash offer for Falconbridge.
   
Away from commodities, British Airways also saw strong demand today, up 12-3/4 pence at 351 on vague talk that Emirates Airlines could be considering a bid for the UK flag carrier, although traders were sceptical and other reports suggested the UAE airline has denied the rumour.
   
Commentators noted that the rumours were serving to put the sector back in focus and draw attention to the strength of BA's underlying business.
   
Elsewhere, after yesterday's vague bid speculation gains, AstraZeneca shares gained another 79 pence at 3,096 after its ADRs set a new 52-week high last night, after marketing research firms said the drug maker's heartburn medication Nexium saw a significant rise in sales.
   
Prescription drug information firm Verispan reported that total May sales of Nexium rose 20.2 pct to 350.7 mln from a year ago, and IMS Health said that Nexium led sales growth worldwide for the 12 months ended in April, rising 16 pct over the comparable year-ago period.
   
Meanwhile vague talk of possible bid interest again helped Lloyds TSB shares take on 13 pence at 528, with the FT's Market Report suggesting interest from a consortium of Middle Eastern investors.
   
Other financial issues also rallied higher with the market rebound -- Prudential added 13-1/2 pence at 553-1/2, Schroders firmed 26 pence at 988, and Man Group gained 55 pence at 2,335.
   
Defensive issues featured heavily on the FTSE 100 fallers board, headed by British Energy, down 7-1/2 pence at 638-1/2, while United Utilities lost 3 pence at 642, BAT shed 3 pence at 1,317, and Imperial Tobacco was off 2 pence at 1,611.
   
On the second line, AB Ports jumped 40-1/2 pence higher at 867 amid talk that Dresdner Kleinwort Wasserstein was once again busy buying shares in the market for Australia's Macquarie Bank, aiming to trump Goldman Sachs' raised offer of 840 pence.
   
The consortium led by Goldman Sachs this morning announced it has raised its offer for AB Ports in an attempt to thwart a possible counter-offer from a Macquarie-led consortium.
   
Last night Macquarie announced that it was considering launching a counter-offer, and advised shareholders in a separate statement this morning to take no action in response to the revised offer from Goldman.
   
Dresdner Kleinwort was rumoured to be buying shares in the market yesterday at up to 830 pence on behalf of Macquarie.
   
And shares in Aggreko climbed 16-1/4 pence higher to 261-1/4 after a 'strong' trading update from the temporary power supplier.
   
In an update, Aggreko said trading in the first half has been very strong. The company announced it is about to enter its peak summer season and expects a strong underlying performance in the second half.

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Reacting to the news, Bridgewell Securities reiterated its 'overweight' rating, noting the statement points to further upgrades in its numbers.
   
Among the few FTSE 250 fallers, MyTravel Group shares stood out, dropping 10-1/2 pence lower to 216 - a 4.6 pct fall in value - after news of narrowed first half losses from the tour operator were offset by weaker bookings visibility for the summer season.
   
MyTravel saw its first-half losses narrow to 70.3 mln stg, compared to a loss of 119.5 mln a year earlier. Analysts were expecting a pretax loss in the range of 84.7-88.3 mln stg.
   
However, the group said that summer 2006 bookings continue to be behind last year.
   
Reacting to the news, Credit Suisse said while the results were 8.3 pct better than it expected, but warned the low visibility in bookings outlook for the peak summer level could affect the stock price.
   
On the macro front, UK house prices increased by their largest amount in two years during May despite the volatility in stock markets and mounting expectations of another interest rate hike from the Bank of England, according to the latest RICS house price survey released overnight.
   
The RICS May house price balance reading was +20 pct, up from April's +15, and well above expectations for a decline to +11 pct.
   
The main domestic focus later today will be on May retail sales numbers with analysts predicting a 0.5 pct month-on-month rise, after a 0.6 pct increase in April.
   
The year-on-year increase is seen at 3.6 pct, up from the 3.0 pct annualised rise at the same stage last year.
   
In the US, after this week's key inflation reports, another big batch of economic data will be picked over today, including the June Empire State manufacturing survey, the June Philly Fed report, May Industrial production and capacity utilization numbers, and the latest initial weekly jobless claims.
   
Boston Federal Reserve president Cathy Minehan will also speak today, with any pronouncement from a Fed member seen as key at the moment.

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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AMSTERDAM - Market data at 10.05 am

Major indices
   
AEX 417.30, up 4.32 points
AMX Midcap 535.33, up 11.04 points
Government bonds broadly down

Major gainers
   
Buhrmann added 4.17 pct to 10.74 eur
   
Hagemeyer put on 2.45 pct to 3.35 eur
   
Ahold gained 2.23 pct to 6.43 eur
   
Philips was up 0.91 pct at 22.09 eur after news it's to acquire Intermagnetics for 1.3 bln usd in cash.
   
Stork rose 1.24 pct to 40.70 as impact of Airbus delays seen as limited
   
ING put on 1.70 pct to 28.65 eur following an upgrade to 'buy' from 'neutral' by UBS
   
Fortis was up 1.71 pct at 25.58
   
Royal Dutch Shell gained 0.86 pct to 24.69
   
Major losers
   
Numico shed 0.33 pct to 33.53 eur
   
Heineken dropped 0.16 pct to 30.90 eur
   
Reed Elsevier lost 0.27 pct to 11.24 eur

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FRANKFURT - Market data at 9.28 am
   
Major indices:
   
DAX 30 - 5,357.46, up 51.47 points or 0.97 pct
MDAX - 7,269.25, up 117.07 points or 1.64 pct
TecDAX - 600.96, up 12.58 points or 2.14 pct
DAX future - 5,369.50, up 60.00 points or 1.13 pct

Major gainers
   
ThyssenKrupp, up 0.92 eur or 4.02 pct at 23.82.
   
MAN, up 1.86 eur or 3.63 pct  at 53.10
   
Commerzbank, up 0.69 eur or 2.68 pct at 26.47; Morgan Stanley reiterates overweight and targets a price of 40 eur.
   
Deutsche Boerse, up 2.50 eur or 2.64 pct at 97.25
   
Fresenius Medical Care, up 1.91 eur or 2.32 pct at 84.41; Goldman Sachs reiterates Outperform and ups its estimates on the stock.
   
Major losers:
   
Altana, down 0.09 eur or 0.20 pct at 43.90
   
Schering, down 0.09 eur or 0.10 pct at 88.91
   
Hypo Real Estate, up 0.11 eur or 0.25 pct at 43.89
   
E.ON, up 0.38 eur or 0.46 pct at 82.60
   
RWE, up 0.31 eur or 0.50 pct at 62.93

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