UK/Euro Financial Market Daily Morning Briefing 16-06-2006

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London shares open higher, in step with US and Asia; miners lead gainers

Leading shares were markedly higher in early deals, led by the mining sector, after Wall Street posted its highest jump in over a year last night and Asian indices also enjoyed substantial gains this morning, dealers said.
   
At 9.07 am, the FTSE 100 index ran up 60.0 points at 5,679.3 after initially breaching the 5,700 mark, extending yesterday's 112.5 point rise which saw the leading shares close at 5,619.3.
   
London's broader indices were also positive, with the FTSE 250 index jumping up 116.9 points at 9,218.7.
   
Overnight on Wall Street, the DJIA ended the session up 198.3 points at 11,015.2, while the Nasdaq composite index added 58.15 at 2,144.15 and the S&P 500 index gained 26.1 at 1,256.15.
   
The market turned sharply higher Thursday afternoon after Fed Chairman Ben Bernanke said record energy and commodity prices could account for some of the recent up-tick in core prices but that inflation expectations have remained within historical ranges.
   
Asian markets were also in upbeat mood today. The Nikkei 225 index closed up 408.58 points at 14,879.34, while Hong Kong's Hang Seng index ended its morning session 371.82 firmer at 15,806.90.
   
In Asia, metal and oil stocks extended yesterday's gains following a strong rise in commodity prices overnight.
   
The story was similar in London this morning.
   
Oil prices traded almost a dollar higher, above the 70 usd a barrel mark, while gold prices jumped over 16 usd an ounce to 587 usd and silver and copper prices were also higher.
   
This led to another strong start from the UK mining sector, adding to yesterday's substantial gains.
   
Kazakhmys climbed 48 pence at 1,056, while Antofagasta was 65 firmer at 1,991 and Rio Tinto gained 79 at 2,826.
   
BHP Billiton was also higher, up 22 at 1,004, after European Nickel said BHP had exercised its product supply option for 100 pct of the output of the Caldag nickel project near Izmir, Turkey.

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Among oils, Cairn Energy added 31 at 1,991, while BP and Royal Dutch Shell also rallied, up 7-1/2 at 607-1/2 and up 9 at 1,786 respectively.
   
Elsewhere, Centrica was also in positive terrain, climbing 2 pence at 274 after its pre-close trading update this morning revealed that the gas supplier continues to trade in line with recently-provided guidance.
   
The utility group also announced it is to invest 400 mln stg in a new gas-fired power station in Langage, Devon, which should come on line during Winter 2008/09.
   
On the broker front, Marks & Spencer Group was boosted by upbeat comment from Deutsche Bank, which reiterated its 'buy' advice and 655 pence price target on the retailer's shares.
   
The broker told investors it sees material upside in Marks & Spencer's earnings both in the next 12 months and over the next three years.
   
M&S shares were up 19-1/2 at 574.
   
Meanwhile, positive broker comment also fuelled shares in Travis Perkins and George Wimpey.
   
Citigroup upgraded Travis Perkins' shares, which rose 11 at 1,501, to 'buy' from 'hold' due to a more attractive trading environment.
   
The broker noted that lead indicators suggest an improved trading environment over the next 6 to 12 months with growth also supported by weak comparatives.
   
George Wimpey was raised to 'overweight' from 'underweight' by Morgan Stanley as the broker now sees short-term upside potential following the stock's 27 pct share price decline since March.
   
Morgan Stanley also said that Wimpey's valuation once again looks more attractive and said it expects a relatively upbeat trading update from the group on July 5.
   
Wimpey climbed 6-1/2 at 435-1/2.
   
On the downside, Brambles Industries was a rare negatively-traded stock, losing 2 at 421-3/4 as the tender offer period for its Cleanaway and Industrial Services divisions closes today.
   
Privately-owned Visy Industries pulled out of the bidding last month, leaving the forerunner as a partnership between private equity firms Castle Harlan Australian Mezzanine Partners and Transpacific.

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On the second line, Tullow Oil was in demand, climbing 17-1/2 at 338 on news of a North Sea gas discovery, although this was tempered by news that another well was dry.
   
Tullow said the K4 exploration well in the UK has encountered reservoir quality gas bearing sands in the targeted Lower Ketch Carboniferous interval and significant upside potential has been identified.
   
The success of K4 also provides further encouragement for the remaining exploration potential of this area.
   
In step with the blue chips, mid-cap miners Vedanta Resources and Lonmin were also higher, thanks to rising commodity prices.
  
Vedanta added 70 at 1,325 while Lonmin also firmed 70 at 2,515.
   
Among the fallers, AMEC was the main casualty, dropping 9-1/2 at 336 after announcing that the UK construction industry remains weak.
   
Bridgwell Securities said this underlines its argument that AMEC's new construction arm is clearly a weak competitor to favoured plays Balfour Beatty, Kier Group and Carillion.
   
The broker added that today's unexpected trading statement from AMEC outlined further cost writedowns that amount to a post-tax figure of 65 mln stg.
   
Bridgewell saw no reason to change its 'underweight' rating on the stock.
   
Finally, SThree was a new addition to the FTSE 250 as of today, trading up 13-1/4 at 297-1/2, replacing Pilkington which has been delisted.

Diary of Events

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US Summary

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PARIS - Market data at 10.02 am:

Major indices:
   
CAC-40 up 62.09 points or 1.3 pct at 4,786.67
SBF-80 up 103.91 or 1.9 pct at 5,528.30
SBF-120 up 47.91 or 1.4 pct at 3,474.03

Volume: 1.05 bln eur
38 CAC-40 stocks up
2 CAC-40 stocks down

Major gainers:
   
Capgemini, up 1.40 eur or 3.4 pct at 42.21 as several analysts welcomed a positive management presentation at the group's analyst day yesterday, including a confirmation of the 8 pct operating margin target for 2008.
   
Vinci, up 2.10 or 2.7 pct at 80 after Veolia reiterated its goal of pursuing a friendly share exchange deal, even though Vinci has already signalled that a merger has no strategic interest.
   
EADS, up 0.38 at 20.38 and continuing to bounce from the massive sell-off seen on Wednesday, when the company warned that production delays for the Airbus A380 programme would weigh on profits until at least 2010.

Major losers:
   
Veolia, down 0.49 or 1.3 pct at 37 and extending declines seen throughout this week after it announced plans to pursue a merger deal with Vinci. Several analysts have expressed caution on the deal, since the two companies operate in different businesses. The stock has fallen nearly 14 pct over the last 5 sessions.
   
Elior, down 0.69 or 4.8 pct at 13.61 as profit-taking followed yesterday's 7.4 pct surge.

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FRANKFURT- Market data at 10.35 am
   
Major indices:
   
DAX 30 - 5,481.37, up 59.15 points or 1.09 pct
MDAX - 7,571.81, up 94.13 points or 1.26 pct
TecDAX - 636.86, up 15.80 points or 2.54 pct
DAX future - 5,480.00, up 5.50 points or 0.10 pct

Major gainers:
   
ThyssenKrupp, up 0.79 eur or 3.27 pct at 24.94
   
Hypo Real Estate, up 1.37 eur or 3.06 pct at 46.12
   
SAP, up 3.90 eur or 2.46 pct at 162.40, after strong gains on the Nasdaq overnight and boosted by US software group Oracle which traded up 6.6 pct after hours on the back of its strong fourth quarter sales and EPS forecasts
   
Continental, up 1.88 eur or 2.37 pct at 81.28
   
MAN, up 1.08 eur or 2.02 pct at 54.49

Major losers:
   
Altana, down 0.13 eur or 0.29 pct at 44.04
   
TUI, down 0.03 eur or 0.19 pct at 15.74
   
Deutsche Post, down 0.03 eur or 0.15 pct at 20.38
   
Schering, down 0.09 eur or 0.10 pct 89.05

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AMSTERDAM - Market data at 10.09 am:

Major indices:   

AEX index             427.65, up 3.92 points
AMX Midcap index      560.65, up 10.69 points
Govt bonds            unchanged to slightly lower

Major gainers:
   
Hagemeyer climbed 4.78 pct to 3.19, Buhrmann was up 2.71 at 10.40
   
Staffing stocks were also in demand. Vedior rose 2.21 pct to 16.21, USG People jumped 4.62 pct to 58.90 and Randstad put on 3.55 pct at 46.44
   
TomTom firmed 2.59 pct to 32.10, SBM Offshore was 2.0 pct higher at 19.87
   
Philips advanced 1.86 pct to 23.05, ASML climbed 1.13 pct at 16.18
   
Among financials, ING added 1.88 pct to 29.80, ABN Amro put on 1.38 pct to 21.27 and Fortis was up 1.0 pct at 26.21
   
Biggest second-line gainers were Aalberts, surging 5.39 pct at 57.70 and Univar, jumping 4.51 pct to 34.07
   
Endemol was the sharpest overall riser, 5.78 pct higher at 13.36 amid hopes of an imminent bid for the Dutch TV production company

Major losers:
   
VNU was the only blue chip decliner, off 0.2 pct at 29.50, while the midcap only saw Oce lower, down 0.6 pct at 11.66

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