UK/Euro Financial Market Daily Morning Briefing 15-11-2006

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London shares open higher as Vodafone upgrade adds to Wall St rally

Leading shares opened higher, building on another record breaking performance on Wall Street overnight, with Vodafone gaining over 2 pct on the back of a broker upgrade.
  
At 9.10 am, the FTSE 100 was 33.2 firmer at 6219.8, mirroring the positive broader market sentiment. Volume was solid with 362 mln shares changing hands in 38,841 deals.
   
Meanwhile, Wall Street staged a late rally, sending the DJIA to an all time high, on the back of a benign producer price report and growing optimism over the end of inflationary pressures. Sentiment was further boosted by well received earnings news from big retailers Wal-Mart and Home Depot.
   
The DJIA rose 86.13 points to 12,218.01, above the previous record close of 12,176.54 reached last Wednesday, with the S&P up 8.80 to 1,393.22 and the Nasdaq gaining 24.28 to 2,430.66.
    
Turning to Asia, the the mood was mixed, as the Nikkei 225 index closed 46.08 points lower at 16,243.47 and the Hang Seng was up 112.26 at 18,990.68 by midday.
   
Still in Asia, oil prices clawed back some of its recent losses with New York's main contract, light sweet crude for December delivery, 17 cents higher at 58.45 usd a barrel.
   
Back In London, Vodafone took on 3 at 138-1/2, the top blue chip performer, after the mobile phone giant was upgraded to 'buy' vs 'neutral' at Deutsche Bank after better than expected results yesterday.
   
The broker said following robust reporting from Vodafone's associate assets, results in the core businesses were slightly ahead of expectations, further buoyed by lower tax and tax liability deferrals.
   
Wolseley was another winner, 21 to the good at 1211, mirroring a strong performance from US peers yesterday, following better-than-expected figures from North America's largest housebuiler Dr Horton.
   
Sentiment in the stock was further boosted by comments from Fed Bank of St Louis president saying that central bank interest rate stance is "about right". Hanson also was lifted by the news, 7 firmer at 768-1/2.
   
Insurers were also courted as sector consolidation hopes refused to fade with Royal & Sun 2-3/4 higher at 151, Prudential took on 7-1/2 at 657-1/2 and Old Mutual rose 3 at 175-1/4, further lifted by news Baer Stearns hiked its target on the South African group to 215 pence from 200.
   
And peer Legal & General was 2 better at 151 as investors hope it could announce a return of cash to shareholders when its updates the market on its capital management strategy this afternoon. Analysts at Deutsche Bank estimate the group could return up to 1.6 bln stg of capital to shareholders.

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In M&A, BAE added 4-3/4 at 423-1/2 on a report the UK government is once again putting pressure on VT Group to agree the framework of a deal to merge its shipbuilding assets with the defence giant.
   
The Times says the groups are now in talks to consolidate what remains of the British shipbuilding industry, though rival Babcock is  not thought to be involved.
   
In contrast, Lonmin topped the faller boards as hopes of a 3,800 pence per share bid for the platinum miner failed to materialise alongside disappointing full year results.
   
The group said full year pretax came in at 633 mln usd, up 98 pct but Merrill Lynch said earnings were 13 pct below its expectations and about 11 pct lower than consensus.
      
Lonmin lost 74 at 3007, Rio Tinto fell 2 at 2754, BHP slumped 5 at 979, Vedanta was down 7 at 1385 and Anglo American was off 14 at 226, shrugging off talk JP Morgan is trying to put together a bid for the group.
   
Broker comment also weighed with Kingfisher down 5-1/4 at 266-1/2 after being downgraded to 'neutral' from 'buy' on valuation by both UBS and Merrill Lynch.
   
UBS told clients the shares have almost reached their 280 pence price target and with UK interest rates rising and expected to impact on funding costs and possibly on demand, it prefers to downgrade the retailer's shares rather than raise the price target.
   
Likewise, Cadbury Schweppes was  9 lower at 523-1/2 with Goldman Sachs downgrading the confectionary giant to 'sell' from 'neutral' as the broker expects a challenging trading environment in the next six months.
   
And Intercontinental Hotels also fell foul to broker comment with Deutsche Bank cutting its stance to 'hold' from 'buy' on valuation following yesterday's third-quarter results. Shares were off 10 at 1055-1/2.
   
In earnings, Sainsbury lost 2-3/4 at 409-1/4 as mixed reaction to the grocer's interim results sparked profit taking.
   
This morning, the UK's third-largest food retailer said pretax profit before exceptionals rose to 189 mln stg from 118 mln the previous year compared to market expectations in the 180-200 mln range.
   
But in response, Citigroup reiterated its 'sell' advice and said pretax was below its forecast of 193 mln and highlighted disappointing margin growth and tougher comparatives to come.
   
On the second line, Luminar added 38 at 652 as news of a sale and leaseback agreement and the divestment of its Entertainment unit raised hopes of a return of cash and overshadowed the group's mixed interims.

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Still in earnings, Inmarsat rose 16 at 391 after the satellite services group's core earnings rose 20 pct to 89.4 mln usd and said it was "well-positioned" to deliver full-year results in line with expectations.
   
And Hays took on 9-1/4 at 159-1/2 following the release of a reassuring AGM statement from the recruitment firm, with UBS maintaining its 'neutral' stance and 150 pence price target. Peer Michael Page gained 17 at 429-3/4 in sympathy.
   
On the downside, Photo-Me International slumped 3-1/2 at 88 after the digital imaging company revealed it  terminated talks to sell the company as a single entity.
   
Sentiment was further hit as it also it issued a profit warning for the first half because of delays in deliveries of minilabs.
   
The London Stock Exchange was also under pressure, off 46 at 1263, on reports Deutsche Bank is considering pulling the plug on Euronext, denting consolidation hopes.
   
Competition worries also weighed amid talk 7 US investment banks should today announce plans to build a platform for trading the shares of Europe's biggest companies in an effort to go head to head with the region's stock exchanges.
   
Turning to economics, The Bank of England's quarterly Inflation Report will provide a major insight into whether the rate-setting MPC thinks its hikes in August and November are enough to rein in inflationary pressures.
   
Most analysts think the GDP projection will be broadly similar to August, while the inflation profile will be somewhat lower.

UK Diary of Events

For a diary of key corporate and financial 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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FRANKFURT - Market data at 10.00 am   

Major indices:
   
DAX - up 36.65 points or 0.57 pct at 6,424.03
MDAX - up 21.26 points or 0.24 pct at 8,898.86
TecDAX - up 2.17 points or 0.38 pct at 709.42
DAX future - up 35.5 points or 0.55 pct at 6,440.00  

Major gainers
   
Infineon, up 0.31 eur or 3.27 pct at 9.78. The company's memory chip unit Qimonda said that net income for its financial fourth quarter more than quadrupled from a year earlier on strong demand and a more profitable product mix.
   
Deutsche Telekom, up 0.26 eur or 1.92 pct at 13.83
   
Continental, up 1.66 eur or 1.92 pct at 87.96
   
SAP, up 1.84 eur or 1.16 pct at 160.65
   
Deutsche Post, up 0.21 eur or 0.97 pct at 21.75
   
Major losers:
   
Deutsche Boerse, down 2.08 eur or 1.59 pct at 128.92. The German stock market operator has withdrawn its takeover offer for pan-European rival Euronext.
   
Metro, down 0.05 eur or 0.11 pct at 46.29
   
ThyssenKrupp, down 0.01 eur or 0.03 pct at 29.17

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AMSTERDAM  - Market data at 10.18 am
   
Major indices
   
AEX                495.95, up 2.26 points
AMX Midcap         639.84, up 2.16 points   
Government bonds   Mixed

Major gainers
   
Philips rose 2.05 pct to 28.93 eur
   
ASML added 0.96 pct to 18.93 eur
  
Crucell rose 1.31 pct to 19.31 eur after a price target hike at Rabo Securities
   
Arcadis soared 4.77 pct to 41.28 eur after raising its full-year profit guidance
   
Royal Dutch Shell lifted 0.47 pct to 27.80 eur
   
Major losers
   
Getronics fell 6.34 pct to 5.61 eur after a newspaper reported that its CFO resigned over a dispute concerning the full-year earnings report, dealers said
   
Numico shed 1.57 pct to 37.50 eur
   
Van der Moolen lost 1.13 pct to 4.36 eur in continuation of yesterday's sharp drops following disappointing third quarter results

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