UK/Euro Financial Market Daily Morning Briefing 15-09-2006

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London shares open lower as oil, miners weigh; US data eyed UPDATE

LONDON - Leading shares edged lower in opening deals as continued weakness in oil and mining heavyweights added to caution ahead of key US data and 'triple witching' expiries in the UK, dealers said.  

At 9.04 am, the FTSE 100 was off 3.2 points at 5874.0, in contrast with the positive wider market.

Volume, however was low with 174 mln shares changing hands in 25,011 deals.

Meanwhile, Wall Street finished largely lower as a stronger-than-expected import price data rekindled inflation fears and prompted investors to cash in on recent gains.

Investors grew uneasy after the Labor Department reported import prices rose a larger than expected 0.8 percent in August.

The DJIA fell 15.93 to 11,527.39, the S&P 500 eased 1.79 to 1,316.28, while the Nasdaq gained 1.06 to 2,228.73.

And today, all eyes will be on the key August consumer price index as the market attempts to gauge the future direction of interest rates.

CPI prices are seen rising 0.1 pct after increasing 0.4 pct in July, and excluding volatile food and energy prices, the index is seen rising 0.2 pct for the second straight month.

Investors will also scrutinise industrial production figures and University of Michigan consumer sentiment.

And the downbeat mood spilled over into Asia, with the Nikkei 225 down 100.16 at 15,842.23 by midday, while the Hang Seng closed for lunch 5.28 easier at 17,178.17.

Still in Asia, oil prices continued to slide as supply concerns eased further following the release of the latest figures on US stockpiles.

Earlier this morning,  New York's main contract, light sweet crude for October delivery, was down 0.16 usd at 63.06 usd a barrel.

And back in London, the weak crude price unsurprisingly knocked oil heavyweights with BG off 3 at 655, Royal Dutch Shell was down 7 at 1782 and BP
lost 8 at 576-1/2.

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BP was further hit by a report in the Financial Times claiming some of the group's major shareholders are pressing for assurances that recent security failures in the US will not be repeated.

Miners also weighed as commodity prices continued to slide, with gold slumping to its lowest level in three months.

Kazakhmys was off 23 pence at 1220, Xstrata fell 27 at 2205, Anglo American was down 21 at 2,144, Rio Tinto was off 18 at 2,503 and Antofagasta eased 3-3/4 at 451.

In contrast, Standard Chartered topped the risers board, 20 higher at 1,345 after UBS upgraded the bank to 'buy' from 'neutral' due to strength in emerging  economies and solid organic growth.

The broker said Standard Chartered has invested 4 bln usd in establishing a foothold in economies such as Korea, Pakistan, Indonesia and Thailand.

Broker comment also provided a lift to the property stocks as Lehman Brothers hiked its price targets by an average of 5 pct across the European real state sector to account for the introduction of REITs in the UK.

Hammerson took on 8 at 1,299, Liberty International gained 7 at 1,167, Slough Estates rose 3-1/2 at 644-1/2 and British Land firmed 8 at 1,356.

And in retail, Marks & Spencer Group and Kingfisher were boosted by another bullish note from Lehman Brothers as the broker reiterated 'overweight' ratings on both stocks.

The broker said spending fears following the Bank of England's interest rate hike seem overdone as consumer data suggest sales are healthy, albeit boosted slightly by weak comparatives.

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Peer William Morrison firmed 2-1/2 at 228-1/4 after UBS and SG Securities reiterated their 'buy' ratings ahead of next week's interim trading update.

Elsehere, ongoing vague M&A hops also underpinned gains in Hanson, Wolseley,
and Corus -- up 4 at 672, 8 at 1,117 and 2-1/4 at 371 respectively.

And the lower oil price provided the spur for cruise operator Carnival, 17 higher at 2,376 and national carrier British Airways -- 2-1/2 to the good at
428-1/4.

On the second-line, oil stocks mirrored their blue chip peers with Burren Energy down 15 at 885, Tullow Oil fell 4-1/4 at 362, Dana Petroleum slipped 11-1/2 at 1,170 and Expro International was off 6 at 660.

But on a more positive note, housebuilders were in focus after the Independent said investors are looking for the next take-over target in the sector.

The paper said both Bellway and Crest performed strongly yesterday, while the Financial Times highlighted talk of corporate interest in Redrow from a private equity house.

In response, Bovis gained 21-1/2 at 943-1/2, Bellway took on 11 at 1278, and Crest Nicholson rose 3 at 549-1/2.

Finally, Woolworths Group took on 3/4 at 35 after UBS upgraded the retailer to 'neutral' from 'reduce'.

UK Diary of Events

For a calendar of key financial and corporate events in the UK this week, click here

UK Small Cap Report

For a summary of today's trading on the FTSE Small Cap and the AIM, click here

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Paris shares at a glance outlook

PARIS - Shares are expected to open flat to slightly higher, with
little direction from Wall Street and relatively few new French company results,
dealers said.

Yesterday, the CAC-40 index finished down 14.08 points at 5,123.85, on
volume of 4.2 bln euro.

September CAC-40 futures were trading up 2.5 points or 0.05 pct at 5,128.0
ahead of the official opening.

The euro was trading at 1.2724 usd, against 1.2736 late yesterday.

FORTHCOMING EVENTS TODAY
-Partouche Q3 sales
MONDAY
-Biomerieux H1 result

TODAY'S PRESS
-Saint-Gobain sees medium-term sales coming 20 pct from developing nations
(La Tribune)

COMPANY NEWS
-Veolia H1 opg profit up 17.8 pct, beating expectations; keeps FY guidance
-Zodiac FY sales up 28.6 pct; cuts EPS guidance, keeps opg profit guidance
-Renault Aug European car registrations down 12.3 pct year-on-year
-Peugeot Aug European car registrations down 3.6 pct year-on-year
-Saint-Gobain confirms possible sale of speciality bottles business
-EU's Kroes says GDF, Suez must take many actions to win EU merger approval
-Air France-KLM to drop Paris-Nancy/Metz flights when TGV competition hits
-BP, Shell, E.ON, EDF commit to new UK energy institute

MACROECONOMIC/POLITICAL/MISCELLANEOUS NEWS
-France calls for new policy toward Palestinian govt
-French PM confirms Al-Qaeda terror threat

MARKET SENTIMENT
-Bouygues downgraded to 'neutral' vs 'overweight' at JP Morgan
-JC Decaux cut to 'reduce' vs 'neutral' at UBS

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German shares market data at 9.11 am; Continental AG sparkles

FRANKFURT - German shares market data at 9.11 am

Major indices:
DAX 30 - 5,917.85, up 10.48 points or 0.18 pct
MDAX - 8,264.84, down 1.62 points or 0.02 pct
TecDAX - 649.31, down 0.07 point or 0.01 pct
DAX future - 5,918.50, up 2.00 points or 0.03 pct

Major risers:
-Continental AG, up 1.81 eur or 2.12 pct at 87.30, as JP Morgan initiated coverage of the stock with an 'overweight' rating and a 105 eur price target and added the stock to its Analyst Focus List
-SAP, up 1.66 eur or 1.09 pct at 154.14, shrugging off a downgraded to 'hold' from 'add' at WestLB
-ThyssenKrupp, up 0.23 eur or 0.88 pct at 26.22
-Munich Re, up 0.69 eur or 0.58 pct at 119.80
-Commerzbank, up 0.13 eur or 0.48 pct at 27.39

Major fallers:
-TUI, down 0.13 eur or 0.83 pct at 15.54
-BMW, down 0.30 eur or 0.74 pct at 40.15, as the European automobile
association Acea said European new car registrations, comprising the EU member
states, Iceland, Norway and Switzerland, fell 1.4 pct in August from a year
earlier, with BMW posting a 13.2 pct decline
-Infineon, down 0.06 eur or 0.62 pct at 9.62
-Deutsche Boerse, down 0.64 eur or 0.53 pct at 119.36
-DaimlerChrysler, down 0.20 eur or 0.48 pct at 41.29, amid the fall in
European new car registrations in August, with DaimlerChrysler new registrations
falling by 2.7 pct

Other movers:
-Fraport, up 1.40 eur or 2.33 pct at 61.60, after Morgan Stanley hiked its
price target on the stock to 80 eur from 63.50 and reiterated its 'overweight'
rating

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Forex - US dollar firmer vs yen in Singapore afternoon trade ahead of G7 meeting

SINGAPORE  - The US dollar was firmer against the yen in late afternoon trading ahead of tonight's release of August US consumer price index data and the G7 meeting here tomorrow, dealers said.

They said while many perceive the yen to be undervalued, it is unlikely that the G7 will come out with a strong statement on the yen this weekend.

They noted that attention has been more on the yuan ahead at of International Monetary Fund and World bank annual meetings over the weekend until Wednesday.

At 3.25 pm (0725 GMT) here, the dollar was at 117.61 yen, up from 117.52 in Sydney three hours earlier, while the euro was at 149.51 yen, up from 149.48.

"There is no indication that the G7 communique will shift attention from the Chinese yuan to the yen. The US Treasury reaffirmed that prodding China towards a flexible exchange rate to help address global imbalances, remains the priority of the G7 nations," DBS Bank said in a note.

The IMF also wants to see China follow through on exchange rate reforms.

"[China's] decision to change [its] exchange rate mechanism last year was the right one, but that decision has to be implemented. We believe it is in the interest of China -- not only in its exchange rate [policy] but in general -- to let [the] market determine the allocation of its resources more effectively," IMF managing director Rodrigo de Rato told a media briefing here.

Dealers said the US dollar may also gather strength ahead of the US Federal Open Market Committee (FOMC) next Wednesday.

The FOMC had kept key US interest rates unchanged at their last meeting but there are no clear indications what its next moves will be, given recent remarks by Fed officials that inflation remains a concern despite slowing economic growth.

Singapore (0725 GMT) Sydney (0420 GMT)

US dollar
yen 117.61 up from 117.52
sfr 1.2537 up from 1.2521

Euro
usd 1.2716 down from 1.2725
sfr 1.5936 up from 1.5935
stg 0.6737 down from 0.6744
yen 149.51 up from 149.48

Sterling
usd 1.8867 down from 1.8869
yen 221.78 up from 221.62
sfr 2.3646 up from 2.3623

Australian dollar
usd 0.7543 down from 0.7556
stg 0.3996 down from 0.4003
yen 88.740 down from 88.750

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