UK/Euro Financial Market Daily Morning Briefing 17-03-2006

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London shares push through 6,000 barrier in early trading

UK blue chips were higher in opening deals, pushing through the key 6,000 barrier for the first time in five years, dealers said.
   
However, some volatility can be expected as the market sees the expiration of options, index options and futures contracts in a phenomenon known as triple witching.
   
At 9.07 am, the FTSE 100 was up 43.7 points at 6,036.9, with the broader indices all higher.
   
Volume was solid, with 458 million shares changing hands in 34,623 deals.
   
Insurers led the gainers, with Legal & General adding 6-1/2 at 140-1/2, after turning in a better-than-expected 43 pct increase in annual profit, helped by strong sales in the UK.
   
L&G, the UK's third-biggest listed life insurer, said 2005 operating profit came in at 1.092 bln stg, up from 752 mln stg the previous year, and ahead of the 938 mln stg consensus analyst forecast.
   
The sector was also boosted by consolidation hopes, following a Wall Street Journal report that St Paul Travelers is discussing the possibility of a merger with Zurich Financial.
   
Bid talk also surrounds Royal & Sun Alliance, with The Independent reporting that Warren Buffett's Berkshire Hathaway is considering a bid at 160 pence a share, while the Daily Telegraph speculates that Axa is a possible bidder.

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Royal & Sun shares rose 4-3/4 to 143, while Prudential added 31 at 658-1/2, Friends Provident were up 7 at 217-1/4, and Aviva took on 28 at 855.
   
Elsewhere, Vodafone added 3 at 133 after confirming the sale of its Vodafone Japan business to SoftBank for a cost of 8.9 bln stg. Vodafone will return 6 bln stg of cash to shareholders.
   
Oil stocks gained on the spike in crude prices, with BP 9 higher at 668, Royal Dutch 'B' up 14 at 1,864, Cairn Energy gaining 3 at 2,148, and BG rising 5 at 696.
   
Kingfisher was the biggest blue chip faller, losing 3-3/4 at 244-1/4, after Deutsche Bank downgraded to 'sell' from 'hold' as the broker downplayed the chances of a bid for the UK DIY chain.
   
The shares have risen 9 pct in the last few days, thanks to bid fever as a result of the approach for electrical retailer Kesa.
   
Marks & Spencer dropped 3 to 567-1/2 on profit taking after a strong run on the back of new bid rumours.
   
Among the mid-caps, Luminar was the top riser, up 60 at 630, on confirmation that Mintgate, the investment vehicle of retail entrepreneur Tom Hunter, is contemplating making an offer approach to the company.
   
Mintgate already has a 4.6 pct stake in the nightclubs operator and could bid for the whole.

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Meanwhile, Body Shop added 27-1/2 at 295-1/2 after L'Oreal announced a 300 pence per share agreed cash offer, valuing the group at just over 650 mln stg.
   
Among the other gainers, Premier Oil added 41 at 946, after Teather & Greenwood changed its rating on the stock from 'sell' to 'buy'.
   
On the downside, restaurant group Gondola dropped 10 to 365, after Merrill Lynch downgraded the stock to 'neutral' from 'buy' on valuation grounds.
   
Enodis fell 2 to 151 following Citigroup downgraded the stock to 'hold' from 'buy' on valuation grounds.
   
Overnight on Wall Street, US stocks were mixed, after a spike in oil prices due to political tensions in Iran took some of the shine off inflation data that suggested the Federal Reserve could stop raising interest rates sooner rather than later.
   
The Dow Jones Industrial Average closed up 43.47 points at 11,253.24. The S&P 500 rose 2.31 points to 1,305.33, while the Nasdaq Composite Index fell 12.28 points to 2,299.56.
   
April crude futures climbed 1.41 usd, or more than 2 pct, to close at 63.58 usd a barrel, gaining on international political tensions, following a massive US-led assault against insurgents in Iraq.
   
Asian markets were strong, with the Nikkei 225 index closing up 243.52 points at 16,339.73, while the Hang Seng closed 72.62 points higher at 15,793.07.

Diary of Events

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US Summary

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FRANKFURT - Market data at 09.12 GMT

Major indices:
   
DAX 30 - 5,932.82, up 35.03 points or 0.59 pct
MDAX - 8,573.97, up 39.28 points or 0.46 pct
TecDAX - 730.55, up 3.51 points or 0.48 pct
DAX future - 5,932.00, up 39.00 points or 0.66 pct

Major gainers:
   
Commerzbank, up 1.04 eur or 3.52 pct at 30.61, as Morgan Stanley initiated coverage of the stock with an 'overweight' rating and a 40 eur price target
   
Adidas-Salomon, up 4.35 eur or 2.79 pct at 160.34, as Credit Suisse reinitiated coverage of the issue with an 'outperform' rating and a 218.50 eur price target, welcoming its takeover of Reebok International and arguing that the shares look significantly underestimated.  
   
Volkswagen, up 1.36 eur or 2.34 pct at 59.51, as Morgan Stanley upgraded its stance on the issue to 'overweight' from 'underweight' and hiked its price target to 65 eur from 48
   
Munich Re, up 1.82 eur or 1.62 pct at 114.25
   
BMW, up 0.63 eur or 1.47 pct at 43.35, as WestLB upgraded its stance on the stock to 'add' from 'hold' and hiked its price target to 48 eur from 38, on the back of the automaker's full-year results and 2006 outlook earlier this week

Major losers:
   
Henkel, down 0.77 eur or 0.81 pct at 94.50
   
Infineon, down 0.06 eur or 0.72 pct at 8.27
   
DaimlerChrysler, down 0.19 eur or 0.40 pct at 47.60, as Financial Times reported that Chrysler has launched a new wave of customer incentives to push up retail sales and reduce inventories in the ferociously competitive US car market
   
Altana, down 0.14 eur or 0.28 pct at 49.17
   
ThyssenKrupp, down 0.05 eur or 0.22 pct at 22.82, following yesterday's 3 pct gain on the back of Anglo-Dutch peer Corus's full-year results

Paris

PARIS - Market data at 09.09 GMT

Major indices:
  
CAC-40 up 29.80 at 5,155.81
SBF-80 up 22.71 at 5,961.35
SBF-120 up 20.88 at 3,742.72

Volume: 1.1 bln eur
30 CAC-40 stocks up
10 CAC-40 stocks down

Major gainers:
  
L'Oreal, up 0.55 eur or 0.7 pct at 75.15 after it unveiled a 652.3 mln stg cash bid for the Body Shop, a deal expected to begin boosting profits from 2007. The shares also found support from L'Oreal's announcement of a 22 pct dividend increase to 1 eur per share.
   
Soitec, up 1.05 at 28.24.
   
Vinci, up 3.05 or 3.9 pct at 80.60 and leading gains among CAC-40 stocks after JP Morgan raised its share price target to 105 eur from 100 eur on expected benefits from its full acquisition of motorway operator ASF.

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Major losers:
   
Suez, down 0.77 or 2.2 pct at 34.01 as investors consolidate gains while awaiting possible takeover bid from Enel, though any attempt could be hampered by new French legislation that would allow a company to issue equity warrants to shareholders in case of a hostile bid.
   
Veolia Environnement, down 0.47 at 44.64.
   
Eiffage, down 2.30 at 123.70 as investors took profits from yesterday's 5 pct surge, seen after CEO Jean-Francois Roverato set a 150 eur price level for any takeover offer, after Spain's Sacyr Vallehermoso said it may keep buying Eiffage shares after building up a 10 pct stake.

Amsterdam

AMSTERDAM - market data at 09.00 GMT

Major indices:

AEX index             466.30, up 2.13 points
AMX Midcap index      613.21, up 1.30 point
Government bonds      unchanged
      
Major gainers:
   
Aegon was up 3.90 pct to 14.91 and ING added 1.25 pct to 32.44 after the latter's Wholesale Banking unit entered into a corporate finance cooperation with Vietcombank Securities Company Ltd (VCBS).
   
On the midcap index, Univar put on 4.02 pct to 45.50 after ING upgraded the issue to 'buy' from 'hold' and raised its target price on the chemicals distribution company to 52.5 eur from 36, following yesterday's "rock solid" full-year results.
   
SBM Offshore added 1.25 pct at 81.30 and Royal Dutch Shell went 0.23 pct higher to 25.78.
   
Corus gained 1.34 pct to 1.24, still boosted by yesterday's news the Anglo-Dutch steelmaker will sell some its aluminium operations to Aleris International. ING upgraded the issue to 'hold' from 'sell' and set a new target price of 0.79 pence.
   
BAM was up 1.49 pct to 81.50.
   
Local stock Imtech soared 4.73 pct to 40.52 after the company said it intends to buy Radio Holland Group for around 47 mln eur cash, prompting Delta Lloyd Securities to up its target price on the issue to 47.0 eur from 44.0 and reiterate its 'buy' rating.
   
Endemol lifted 0.94 pct to 14.03 after the TV producer cut a 2-yr deal with Channel 4 of the UK for its 'Deal or No Deal' game show. Rabo Securities put its target price of 14.0 eur under review and repeated its 'buy' rating.

Major losers:
   
ASML shed 2.17 pct to 16.70, ASMI was off 1.09 pct to 15.39 and Philips was 0.44 pct lower to 26.99.
   
USG was down 2.22 pct to 52.80 on profit taking after recent sharp gains seen ahead of the release today of in-line full-year results. Petercam downgraded the issue to 'add' from 'buy' on valuation reasons.
   
Heijmans was off 0.70 pct to 38.25 after the company said its in-house magazine "mistakenly" gave the impression that 2006 net profit would reach 2005
levels. The company reiterated it was too early to give a concrete profit forecast for 2006.
   
KPN slid 0.66 pct to 9.05.
   
TNT lost 0.62 pct to 27.45.

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