UK/Euro Financial Market Daily Morning Briefing 16-10-2006

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London shares tad lower in early deals amid profit taking, miners gain

Leading shares were modestly lower in early trade as profit takers emerged following a new record close on Wall Street Friday with resource stocks pushing ahead on higher metal prices, while financials faded amid profit concerns.
   
At 9.00 am, the FTSE 100 was off 4.0 points at 6,153.3, while the FTSE 250 was off 33.7 points at 10,365.9.
   
On Friday, the Dow Jones industrial average inched to another record close, marking the third straight week of triple-digit increases in the blue chip index.
    
The DJIA rose 12.81, or 0.11 pct, to 11,960.51, while the Standard & Poor's 500 index was up 2.79, or 0.20 pct, at 1,365.62 and the Nasdaq composite index was up 11.11, or 0.47 pct, at 2,357.29.
   
Over in Asia, the Nikkei 225 Index closed up 156.22 points at 16,692.76, while in Hong Kong the Hang Seng was up 1.80 points at 17,990.66.
   
Among shares on the move this morning, mining issues dominated the leader board after a strong performance from Asian peers amid rising base metal prices.
   
BHP Billiton gained 13 pence to 1,011 while Antofagasta rose 5-1/4 pence to 505 and Lonmin put on 25 to 2728.
   
A firmer tone to oil prices lifted oil producers ahead of this week's extraordinary OPEC meeting to discuss a production cut to check a price decline.
   
Royal Dutch Shell moved 7 pence higher to 1824, while BP took on 6 to 598.
   
Elsewhere, ITV topped the leader board, up 2-1/4 to 102-3/4, after being upgraded to 'overweight' from 'equalweight' with a raised objective of 112 pence at Morgan Stanley this morning.

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In a separate development, Sir Peter Burt has dismissed speculations that he might stand down as chairman of ITV.
   
"I have no intention of going until the board and I decide it is in the interests of shareholders that I go," he told the Financial Times newspaper.
   
Meanwhile M&A speculation gave a lift to Severn Trent, up 12 pence at 1,489, after The Observer yesterday reported that Guy Hands, who runs private equity group Terra Firma, could fire off a bid for the UK water group if he fails to acquire Thames Water.
   
In other M&A news, shares in Lloyds TSB edged higher after weekend press reports that rivals are considering bids for the UK bank's life assurance arm, Scottish Widows.
   
According to The Sunday Telegraph, French insurer Axa SA and Swiss Re have made a joint bid for Scottish Widows in a move that values the business at around 8 bln stg.
   
And this morning, The Times said insurer Resolution would also bid for Scottish Widows' life assurance business if it were put up for sale, quoting Paul Thompson, Resolution's chief executive. Lloyds TSB gained 0-1/2 to 581.
   
Standard Chartered gained 7 to 1,450 after the Sunday Telegraph reported that Dubai investment company Istithmar had paid 1 bln usd earlier this month for a 2.7 pct holding and intends to raise its stake to about 10 pct.
   
Meanwhile BAE Systems took on 5 to 425-3/4 after a report in Saturdays Times that it was in talks with VT Group over a possible merger of their shipbuilding operations.
    
The assets that are expected to be merged include BAE's yards at  Barrow-in-Furness, Scotstoun and Govan on the Clyde, and VT's dock in  Portsmouth, the newspaper said, without citing sources.
  
On the downside, Cadbury Schweppes was off 5-1/2 at 552 after Merrill Lynch downgraded its stance to 'neutral' from 'buy'.
   
Financial issues were also lower amid jitters ahead of a raft of US earnings numbers due later this week.
   
Barclays eased 8 to 715, HBOS fell 6 to 1093 and HSBC dipped 3 to 1013. Prudential also fell, off 10 at 639 ahead of third quarter new business data due later in the week.

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On the second line, shares in Benfield Group dropped severely in early deals  after the reinsurance broker cut its full-year profit forecast by 10 mln stg,  and with Merrill Lynch saying it will have to lower its forecasts.
   
Benfield was the main mid-cap casualty, down 42 pence at 335 -- a drop of 11.1 pct.
   
The reinsurance firm said recent resignations by senior members of its facultative reinsurance team could reduce the division's fourth-quarter revenues, denting full-year group earnings.
   
In response, Merrill Lynch said the direct impact to its estimates for Benfield would be a 14 pct reduction to its adjusted EPS forecast for 2006.
   
The broker noted that the charge includes some one-off legal costs and it therefore sees the impact on 2007-2008 estimates as being somewhat lower.
   
Elsewhere, PartyGaming eased 0-3/4 to 33-3/4 after UBS cut its price objective on the on-line gaming group to 26 pence from 75 pence after the closure of its US site.
   
Finally, EMI Group slipped 3-1/2 pence at 266-1/2 after the UK music label issued a first-half trading update that failed to meet market expectations.
   
EMI announced that it expects to report an underlying pretax profit of about 27 mln stg for the first half, with sales likely to fall about 3 pct on a constant currency basis.
   
The company attributed the decline in sales in the six to September 30 to the phasing of its release schedule which has a greater weighting to the second half.

UK Diary of Events

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US Summary

For a summary of US stocks at Friday's close of trade, click here

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AMSTERDAM - Market data at 9:51 am:

Major indices
   
AEX               492.03, down 0.65 pct        
AMX Midcap        627.15, down 1.16 pct
Government bonds  Mixed 

Major losers
   
Philips was down 2.22 pct to 27.30 eur after reporting disappointing third-quarter earnings, dealers said. Net profit surged, aided by a book gain due to the sale of the Semiconductors division, but sales were lower due to lower results at the Consumer Electronics division
   
Ahold shed 1.69 pct to 8.13 eur amid reports that it and Delhaize have put merger talks on hold
   
Reed Elsevier shed 0.52 pct to 13.40 eur
   
Stork shed 1.39 pct to 41.23 eur amid reports that shareholders Centaurus and Paulson are willing to compromise on a break-up of the company
   
Van der Moolen was off 1.07 pct to 4.64 eur after the resignation of its CFO
   
Major gainers
   
Getronics was up 1.87 pct to 5.46 eur after reports this weekend that the company and KPN held aborted talks about a sale of Getronics' divisions to KPN. KPN was up 0.38 pct to 10.48 eur
   
ASMI was up 0.48 pct to 14.76 eur after shareholder Mellon said it has hired advisors to assist with the upcoming shareholders vote on a break-up of the company
   
Vedior rose 0.58 pct to 15.57 eur after the company extended the CEO's term until February 2009.

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PARIS - Market data at 9.59 am:

Major indices:
   
CAC-40 up 0.75 points at 5,352.48
SBF-80 up 4.15 at 6,113.86
SBF-120 down 0.05 at 3,875.88

Volume: 343 mln eur
22 CAC-40 stocks up
16 CAC-40 stocks down
2 unchanged

Major gainers:
   
Arcelor-Mittal, up 0.40 or 1.3 pct at 30.89 and extending run of gains on speculation of further steel sector consolidation
   
Euronext, up 0.65 at 80.50 as investors anticipate a possible bidding war between the NYSE and Deutsche Boerse for the bourse operator.

Major losers:
   
Credit Agricole, down 0.30 or 0.9 pct at 33.70; analysts at UBS, fearing a dilutive earnings impact from its purchase of a major Italian retail banking network, cut their share price objective to 35 eur from 38 today.
   
Societe Generale, down 1 or 0.8 pct at 131.70 and BNP Paribas, 0.75 lower at 86.35; both stocks touched all-time highs last week amid talk that Citigroup could be interested in a major European acquisition.
   
Axa, down 0.23 or 0.7 pct at 30.90 after the Sunday Telegraph reported the company is considering a joint bid with Swiss Re for Scottish Widows, the life insurance arm of Lloyds TSB.

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FRANKFURT - Market data at 9.59 am   

Major indices:
   
DAX 30 - up 0.07 point or 0.00 pct at 6,173.75
MDAX - up 14.98 points or 0.17 pct at 8,678.12
TecDAX - up 3.73 points or 0.55 pct at 681.44
DAX future - down 2.00 points or 0.03 pct at 6,206.50

Major gainers:
   
TUI, up 0.43 eur or 2.50 pct at 17.60, on media reports the tourism and shipping giant is seeking to secure friendly investors to help fend off a possible hostile takeover, and that core shareholders have presented TUI with an ultimatum demanding the break-up of the company
   
BMW, up 0.75 eur or 1.74 pct at 43.88, extending Friday's gains
   
Linde, up 0.75 eur or 1.02 pct at 74.45
   
Infineon, up 0.10 eur or 1.00 pct at 10.13, after Deutsche Bank raised its objective on the stock to 11.70 eur from 10.70 and reiterated its 'buy' rating
   
Continental, up 0.86 eur or 0.94 pct at 92.78
   
Major losers:
   
MAN, down 1.36 eur or 1.94 pct at 68.90, as news that its takeover target Scania has signalled it will pay a special dividend of up to 35 skr per share before the end of the year prompted concerns this may make it more difficult for MAN to succeed with its bid
   
Metro, down 0.47 eur or 1.01 pct at 45.88
   
Commerzbank, down 0.28 eur or 1.00 pct at 27.70
   
Henkel, down 0.88 eur or 0.83 pct at 105.49
   
Deutsche Bank, down 0.41 eur or 0.42 pct at 98.22

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