UK/Euro Financial Market Daily Morning Briefing 15-08-2006

London shares remain down as market prepares to tackle inflation data
 
London shares remained lower in early deals, with Wall Street's late pull-back, weak miners and caution ahead of today's all-important UK inflation data providing investors with an excuse to take profits after yesterday's gains, dealers said.

At 09.13 the FTSE 100 index was down 18.3 at 5,852.6, with the wider market, bar the FTSE small cap index, all in the red.

Early volume was tame with 148.5 mln shares traded in 23,680 deals.

In London, UK CPI data is expected to show that inflationary pressures moderated somewhat during July, though the respite is likely to be short-lived as higher university fees and a further rise in energy costs push inflation up later in the year.

The annual rate of CPI inflation, which the Bank of England targets at 2.0 pct, is expected to have fallen slightly in July to 2.4 pct from June's 2.5 pct.

Overnight in the US, the DJIA closed 9.90 points higher at 1,097.90, while the NASDAQ finished the session up 11.33 points at 2,069.04, both sharply below their early highs.

Wall Street's attempted rally on news of the Middle East ceasefire lost traction and left stocks only slightly higher as investors awaited economic data later in the week.

Across the pond, investors will have wholesale inflation figures and PPI figures to digest today.

US producer prices are expected to have risen by 0.5 pct in July from June.

The 'core rate', which excludes volatile food and energy prices, is expected to have risen 0.2 pct during the month.

Over in Asia, Japan's Nikkei index closed down 40.92 points at 15,816.1 while in Hong Kong the Hang Seng rounded up morning trade down 6.25 points at 17,283.76.

Remaining in Asia, oil prices were lower after the UN-brokered ceasefire in Lebanon went into effect and news that BP will maintain half of its output in Alaska, dealers said.

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New York's main contract, light sweet crude for September delivery, was down 0.04 usd at 73.49 usd a barrel from its close of 73.53 usd in the US overnight.

Again in London, the miners led the blue-chips lower as commodity prices eased and Lehman trimmed its estimates across the sector on the back of a mediocre performance in recent months. Rio Tinto was the biggest faller, down 36 pence at 2,675, BHP Billiton dropped 9 at 987, Vedanta eased 11 to 1,250 and Lonmin dipped 21 to 2,656.

News that Antofagasta has launched a 11.20 aud per share cash offer for Equatorial Mining also dented the stock, lighter by 3 pence at 422-3/4.

Meanwhile Xstrata tumbled 34 to 2,186 amid caution ahead of the group's expected rights issue to fund its Falconbridge acquisition. Today the company announced that it has acquired an additional 67.8 pct stake in the Canadian miner.

Investec, however, upgraded Xstrata to 'buy' this morning, with a 2,600 pence target.

BA was lower again, down 4 at 373, on news that a spokeswoman said the company was "seriously considering" legal action against UK airport operator BAA for lost earnings, estimated by analysts to have cost the airline 50 mln stg so far.

Airlines had their schedules severely disrupted as airports stepped up security after British police last Thursday foiled an alleged plot to blow up US-bound planes.

In media news, punters appeared nonplussed with the notion that Roger Parry, the media executive who considered a private equity bid for ITV PLC this year, has thrown his hat into the ring to succeed Charles Allen as the broadcaster's chief executive, the Financial Times reported.

The stock fell 1 pence to 102-1/2.

British Land made a U-turn, down 6 pence at 1,366, as punters appeared to take profit after it said the current year has started well for both the company and the property markets, and that it remains confident of its prospects as it reported underlying pretax profits rising 33 pct in the first quarter from the fourth to 73 mln stg.

On the upside, Shire was the top riser, stronger by 50-1/2 pence at 932, after the pharmaceutical company said it has settled its pending lawsuits with Barr over its Adderall XR hyperactivity medicine, and agreed to sell the older version of the drug to Barr for 63 mln usd.

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As part of the settlement, Shire will also pay up to 165 mln usd over eight years for licences for at least five of Barr's women's health products.

International Power was also in focus, better by 1-1/4 at 320-1/2, following bullish comment from Morgan Stanley following last week's interim results.

The US broker reiterated its 'overweight' stance and hiked its target to 350 pence from 285, noting that the results highlighted that the business is doing very well in many areas.

Upbeat comment from the same broker also lifted shares in Intercontinental Hotels 12 pence higher to 861.

Morgan Stanley reiterated its 'overweight' recommendation and expects the group to report a solid Q2 next week, adding that it feels the market is overly worried about the US consumer, which it estimates only accounts for 15 pct of group revenues.

Elsewhere, the financial sector reacted well to news that Swiss bank UBS reported a better-than-expected second quarter net profit of 3.147 bln sfr, up from 2.147 bln one year ago, citing a high level of invested assets and record underwriting fees.

Barclays firmed 0-1/2 pence to 649-1/2, RBoS improved 8 to 1,768 while HBOS put on 3 pence at 983.

On the second tier, Dana Petroleum reacted badly to a downgrade to 'underweight' from Bridgewell Securities, lighter by 34-1/2 at 1,242, with positive drilling news doing little to help the explorer.

Bridgewell said it has lowered its recommendation on the midcap explorer from 'neutral' owing to the fact that investor attention has moved away from the risk aspect attached to some of the group's largest projects, in particular the Flamant-1 well, in offshore Mauritania.

The lower oil price also hit Tullow Oil, down 9 pence at 380-3/4 in spite of upbeat drilling news, while across the sector JKX Oil & Gas was also off 4-3/4 at 325-1/4.

Among the gainers, Countrywide improved 3-1/4 to 405, as the UK's biggest estate agent chain, posted a jump in 2006 first-half pretax profits to 62.5 mln stg from 3.5 mln stg in 2005, beating analysts' expectations.

Profits in the six months to June 30 were helped in part from the sale of Rightmove, which added an extra 16.4 mln stg of earnings.

Analysts had expected a pretax earnings range of 42 mln-44 mln stg.

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Paris shares AFX market data at 10.17 am; Sanofi-Aventis lifted by Plavix hopes
 
Major indices:

    CAC-40 down 6.70 points at 5,040.23
    SBF-80 up 0.03 at 5,516.31
    SBF-120 down 3.69 at 3,633.25

    Volume: 289 mln eur
    27 CAC-40 stocks up
    8 CAC-40 stocks down
    4 unchanged

Arcelor has been removed from CAC-40 following takeover by Mittal Steel, no replacement yet.

Major gainers:

Sanofi-Aventis, up 1.45 eur or 2.1 pct at 70.05 after filing for an injunction against the launch of generic Plavix in the US by Canada's Apotex, which appeared to indicate a good chance of success, dealers said.

Altran Technologies, up 0.12 at 6.81 as technology stocks continue to rebound from the sharp declines seen since June, in line with overnight strength on the bellwether Nasdaq composite, dealers said.

Major losers:

L'Oreal, down 0.80 or 1.0 pct at 78.80 and leading declines among blue chips on profit-taking; the stock hit a 4-year intraday high of 80.85 eur earlier this month.

Rodriguez Group, down 0.64 or 1.7 pct at 37.86 after the yacht builder revealed sales down 5 pct in the third quarter to June from a year earlier, dealers said.

Most active stocks:

Sanofi-Aventis, 99.6 mln euros of volume
Total, 25.4 mln eur, down 0.10 at 52.95
BNP Paribas, 17.8 mln eur, down 0.40 at 81.40

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Amsterdam shares AFX market data at 10.47 am - AEX down, Akzo Nobel shines

Major indices:

    AEX                455.32, down 0.73 point
    AMX Midcap         567.96, up 0.28 point
    Government bonds   narrowly mixed
 
Major decliners:

Vedior shed 0.75 pct at 13.26, USG People slipped 0.81 pct at 49.10

Buhrmann was down 0.61 pct at 9.77, Reed Elsevier was 0.64 pct lower at 12.33

ABN Amro gave up 0.43 pct at 20.69 as it started its 750 mln eur share buyback programme

Among local market stocks, Imtech was off 0.51 pct at 38.80 as analysts complained about a lack of figures in the Dutch engineering group's full year guidance after first half EBITA came in below some estimates

Major gainers:

Akzo Nobel was in focus in an otherwise quiet session, rising 2.3 pct to 43.61 after unveiling long-awaited details on the planned stock market flotation of its pharmaceuticals business

Other stocks in the biotech and chemicals sector were also lifted by the news, with Pharming jumping 3.71 pct at 3.63, Crucell gaining 2.4 pct at 15.79 and DSM up 0.07 pct at 29.19

Getronics led blue chip risers, adding 2.91 pct at 5.31

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German shares AFX market data at 10.20 am

Major indices:

    DAX 30 - 5,675.45, down 16.37 points or 0.27 pct
    MDAX - 7,902.28, down 2.84 points or 0.04 pct
    TecDAX - 634.71, up 0.82 points or 0.13 pct
    DAX future - 5,690.95, up 20.0 points or 0.35 pct
    Bund future - 116.05, down 0.03 points or 0.03 pct

Major risers/outperformers:

RWE, up 71.01, or 0.4 pct at 71.01: Thames Water bid deadline today

Linde, up 0.38 eur, or 0.57 pct at 67.48

MAN, up 0.01, or 0.02 pct at 56.85

Deutsche Post, flat at 18.72

Henkel, down 0.2 eur, or 0.2 pct at 98.74

  
Major fallers:

TUI, down 0.4 eur, or 2.67 pct at 14.21: Ongoing weakness

Altana, down 0.37, or 0.83 pct at 44.11

ThyssenKrupp, down 0.13 eur, or 0.5 pct at 26.48: Citigroup cuts to 'sell'

Continental, down 0.65 eur, or 0.83 pct at 77.98: profit taking  

DaimlerChrysler, down 0.27 eur, or 0.67 pct at 40.14: Sector weakness    

Other movers:

Hochtief, down 0.32 eur, or 0.6 pct at 41.08: Upgraded to 'add' from 'hold' at WestLB, lowers price target to 46 eur from 50.

Salzgitter, down 0.2 eur, or 0.03 pct at 63.50: cut to 'hold' from 'buy' at WestLB, 'stock's near-term performance was limited'.

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