UK/Euro Financial Market Daily Morning Briefing 16-07-2007

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London shares higher in early deals, Lonmin slumps after sales warning

Leading shares were trading modestly higher in quiet early deals with the markets lacking any clear direction, although a sales warning from Lonmin and a disappointing trading update from Wolseley were
negating any M&A premium.
   
At 9.15 am, the FTSE 100 was up 13.2 points at 6,730.4 with broader indices also higher. Early volume was moderate with 253 mln shares trading in 65,673 deals.
   
On Friday, the Dow rose 45.52, or 0.33 pct, to 13,907.25 after reaching a new trading high of 13,932.29.
   
Broader stock indicators also advanced Friday. The Standard & Poor's 500 index rose 4.80 to 1,552.50 and the Nasdaq composite index gained 5.27 to 2,707.00.
   
Over in Asia, and the Hang Seng ended its morning session off 9.34 points at 23,089.95 with Japan closed today for a public holiday.
   
Back in the UK and among early movers, Lonmin slumped 359 pence to 3,918 after warning of a fall in full-year sales of platinum and related metals due to production problems, and raised its full-year guidance on costs.
   
In a statement, the UK-listed miner warned that it was continuing to experience poorer recoveries at its concentrators principally due to the ongoing change in the mix of ore types.
   
In swift reaction, Citigroup downgraded its rating to 'hold' from 'buy' and cut its target to 4,000p from 4,300.
   
And in another update, Wolseley fell 15 to 1,140 after posting an 11 month trading statement which warned that it continued to be adversely affected by the slowdown in the US housing market.
   
It said there are no signs of any upturn in the US housing market and the timing of any recovery remains "uncertain".

In the UK, recent sales trends have been positive although the market signals are difficult to interpret following the recent interest rate rises, the company said.
   
In reaction, Citigroup maintained its 'neutral' rating and said Wolseley's trading statement highlights that trading is generally below consensus expectations due to weakness in their US building materials division.
   
It said that it expects downgrades to consensus estimates of around 4-5 pct for 2007 and possibly more for 2008 given weakness in the US dollar recently.
   
On the upside, positive broker comment lifted GlaxoSmithKline 27 to 1,316 after JP Morgan raised its rating to 'neutral' from 'underweight'.
   
The broker said that while a negative outcome from the FDA's Advisory Committee on its Avandia diabetes drug would almost certainly send shares in Glaxo lower, it has already removed US Avandia sales from its embedded value model.
   
And Barclays ticked up 12 to 737 as traders speculated the bank may be forced to pull out of its bidding war with the Royal Bank of Scotland-led consortium seeking to buy ABN-Amro, after its rival unveiled a fresh bid for the Dutch bank which would be paid almost entirely in cash.
   
The RBS consortium said it is still offering 38.4 eur per share for ABN, unchanged from its previous offer, though with the cash component raised to 93 pct from 79 pct under the earlier offer.
   
Barclays, whose acquisition of ABN would generate fewer cost savings than the RBS consortium's, has been warned by some of its shareholders not to raise the level of its offer.
   
"I don't think Barclays are the highest value owner so I don't see them being able to win a bidding war," said Sanford Bernstein analyst Antony Broadbent
   
"Also, I don't think they have much shareholders support for a higher bid. So logic says they should withdraw. But the personalities involved may bring that into question."

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And Vodafone ticked up 2.7 to 165.8 after the Sunday Times reported that influential American investor group Glass Lewis has publicly voiced support for radical proposals from another rebel shareholder for the communications giant to break itself up.

Last month activist investor Efficient Capital Structures called on Vodafone to return 38 bln stg to shareholders, and Glass Lewis' support for ECS will be seen as a setback for Vodafone chief executive Arun Sarin, the newspaper said.
   
Elsewhere, Land Securities took on 27 to 1,777 after saying it has made a strong start to its financial year with high levels of achievement against its targets for development lettings, asset sales and the acquisition of public-private partnership (PPP) contracts.
   
In reaction, JP Morgan said it remains of the view that Land Securities is well positioned with its high-quality assets, believing that the stock is currently oversold, but that the market needs bolder statements to result in a bounce.
   
On the second rung, Emap ran up 7 to 844 after selling its Ireland radio stations to Communicorp Group Ltd, an Irish and European radio group, for 200 mln eur (135 mln stg) in cash at the upper end of market expectations.

UK 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 Friday's close of trade, click here

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PARIS - Market data at 9.44 am:

Major indices:
   
CAC-40 up 9.05 points or 0.15 pct at 6,127.01
SBF-80 up 3.85 or 0.05 pct at 7,334.34
SBF-120 up 5.15 or 0.12 pct at 4,465.26

24 CAC-40 stocks up
16 CAC-40 stocks down

Major gainers:
   
Capgemini up 1.47 eur or 2.66 pct at 56.74
   
Alstom up 1.94 or 1.43 pct at 137.55 
   
Essilor International up 0.57 or 1.23 pct at 46.77, extending its gains since reporting second-quarter results above expectations last Thursday.
   
EADS up 0.18 or 0.75 pct at 24.16. Ahead of today's Franco-German summit at Airbus headquarters, La Tribune and Frankfurter Allgemeine Zeitung each reported that the two sides have agreed on a new governance structure, with Louis Gallois to be sole EADS CEO and Thomas Enders Airbus chief.

Major losers:
   
ArcelorMittal down 0.76 or 1.56 pct at 47.84
   
Gaz de France down 0.53 or 1.43 pct at 36.47. La Tribune claimed that the French government is planning to give the utility another six months to study different strategic options as a way out of the current stalemate in the utility's planned merger with Suez.

Lagardere SCA down 0.52 or 0.83 pct at 62.17 as UBS downgraded the shares to 'neutral' from 'buy', with the broker saying it does not expect, as hoped previously, that the French group will sell its stakes in EADS and pay-TV operator Canal Plus in the near future.

Technip down following a downgrade to 'reduce' at UBS. Separately, Technip said its share of the order for a new refinery placed last month by Poland's Grupa Lotos SA is worth 472 mln eur.

Most active stocks:
   
Alcatel-Lucent, down 0.04 or 0.39 pct at 10.24 pct, in volume of 1.3 mln shares
   
Total, down 0.45 or 0.71 pct at 62.60, 1.1 mln shares

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BRUSSELS - Market data at 10.16 am;

Bel 20 flat, Fortis down on revised ABN offer

Main index
   
Bel 20 at 4,646.51, up 1.43 points or 0.03 pct

Bel 20 gainers
   
Delhaize up 1.44 eur or 1.96 pct at 74.80.
   
Colruyt rises 0.99 eur or 0.61 pct to 162.82.

Bel 20 losers
   
Fortis down 0.28 eur or 0.90 pct at 30.95 after consortium offers 38.4 eur per share for ABN, unchanged from its previous offer, though with the cash component raised to 93 pct from 79 pct under the earlier offer.
   
Dirk Peeters at KBC notes "reducing the share issue to 13 bln eur from 15 bln increases the chance that Fortis EGM will vote in favour". Keeps 'accumulate' rating and 34 eur TP.
   
UCB off 0.25 eur or 0.61 pct at 41.00, names Schwarz Pharma CEO Detlef Thielgen as chief financial officer with effect from Sept 1.
   
Citigroup has initiated coverage with a 'sell' recommendation and price target of 35 eur, takes view that short-term risks will outweigh the long-term potential of the drug company's new products.
   
Mobistar loses 0.55 eur or 0.87 pct to 62.31.

Frankfurt 

FRANKFURT - Market data at 10.35 am

DAX - up 24.05 points, or 0.30 pct, at 8,116.82
MDAX -  up 37.21 points, or 0.33 pct, at 11,393.65
TecDAX - down 1.64 points, or 0.17 pct, at 965.34
DAX futures - up 15.00, or 0.18 pct, at 8,174.50

Major Advancers:
   
BASF, up 0.71 eur or 1.73 pct at 100.64, higher on continued M&A speculation as the company is considered by many to be one of the most likely takeover targets on the DAX
   
Fresenius Medical Care, up 0.49 eur or 1.48 pct at 33.70, higher after the stock recovers from past losses
   
Allianz, up 1.94 eur or 1.12 pct at 174.97, higher as financials and insurance companies are benefiting from the recent pick-up in the German stock market
   
Deutsche Bank, up 1.04 or 0.97 pct at 108.51, also higher due to the rebound in the stock market
   
Munich Re, up 1.29 eur or 0.96 pct at 135.50, also gaining due to investors assumptions that financials will benefit from improved market conditions

Major Decliners:
   
Continental, down 0.42 eur or 0.40 pct at 105.89, with traders pointing to negative effects from strong dollar and rising oil prices
   
DaimlerChrysler, down 0.22 eur or 0.32 pct at 68.53, also due to effects from a weak dollar and on continued speculation that the Automaker might have difficulties with its sale of Chrysler to Cerebus
   
RWE, down 0.25 eur or 0.31 pct at 81.60
   
Henkel, down 0.08 eur or 0.19 pct at 41.13
   
EON, down 0.15 eur or 0.12 pct at 124.39
   
Other Major Movers:
   
Wacker Chemie, up 5.40 eur or 3.01 pct at 184.52, after it said it intends to build a new production facility for granular solar polysilicon production in Burghausen for a cost of around 40 mln eur

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AMSTERDAM - market data at 10.01 am

Major indices
   
AEX 563.07, up 0.38 pct
AMX Midcap 767.08, up 0.29 pct
Government bonds mostly higher.
   
Major gainers
   
ABN Amro jumps 4.21 pct to 37.36 eur as the Royal Bank of Scotland's consortium renews its bid for the Dutch bank, upping cash component
   
Heineken 1.51 pct higher at 42.89
   
KPN 0.91 pct higher at 12.18
   
BAM up 1.30 pct at 22.59
   
Tele Atlas firms 1.26 pct at 16.90
   
Ordina 1.15 pct stronger at 15.80
   
Arcadis ascends 3.64 pct to 68.00 eur after upgrade to 'buy' at ING on strength of recent US acquisition
   
Major decliners
   
Arcelor Mittal off 1.46 pct at 47.90 eur
   
Philips 0.86 pct lower at 32.14 after the company presented second-quarter results that were mixed, but largely in-line with expectations
   
Fortis, part of the RBS consortium bidding for ABN Amro, falls 0.80 pct to 30.98
   
USG People sheds 1.12 pct at 35.30

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