UK/Euro Financial Market Daily Morning Briefing 17-11-2006

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London shares fall in early deals as oils, miners track commodities lower

Leading shares fell back in early deals, with further weakness across commodity prices dragging oils and miners lower, offsetting another record-breaking performance by Wall Street last night, dealers said.
   
By 9.05 am, the FTSE 100 index was down 19.3 points at 6,235.6, while the broader indices were also under pressure.
   
Wall Street scored a fifth straight gain and the DJIA achieved its third straight record close last night, helped by some soothing inflation data and falling oil prices, traders said.
   
The DJIA closed 54.11 points higher at 12,305.82, while the Nasdaq gained 6.31 points to a six-month high of 2,449.06.
   
Overnight across Asia, the Nikkei 225 index closed 72.14 points lower at 16,091.73, while the Hang Seng closed 28.64 points higher at 19,182.71.
   
Crude prices plunged to their lowest levels in 17 months in Asian trade as market sentiment worsened over OPEC's production cuts, dealers said.
   
New York's main contract, light sweet crude for delivery in December, slipped 21 cents lower at 56.05 usd a barrel after sinking 2.50 usd to 56.26 in late US trade as the markets reviewed conflicting reports from consulting firms that attempt to track shipments of OPEC crude, traders noted.
   
Metal prices were also under pressure, with gold, silver and copper all falling back amid a firmer dollar and continuing demand concerns.
   
Oil stocks opened lower in London, with BP off 12-1/2 pence to 586, Royal Dutch Shell losing 24 pence to 1903 and BG Group dropping 10-1/2 pence to 709.
   
Mining stocks were also weaker, making up 7 of the top 10 FTSE fallers, led by Lonmin with a drop of 5 pence to 2,955, while Antofagasta eased 7 pence to 472-1/2, BHP Billiton fell 12 pence to 984 and Rio Tinto dipped 28 pence to 2,756.

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Vedanta Resources however, recovered 12 pence to 1302, clawing back some of yesterday's heavy losses following its surprise move into power generation.

Numis told clients to take profits in the metals and mining sector ahead of Christmas, although said its long-term view remains unchanged.
   
"Mining Equities have had a good run recently and some profit taking is to be expected ahead of the Christmas break." The broker said.
   
Elsewhere, British Energy was down 3-1/2 pence at 465, after the group said its output in the first half had declined by 3.6 pct due to higher losses from planned station shutdowns as it reported a 126 pct rise in adjusted pretax earnings to 481 mln stg.
   
The group reiterated its announcement last month that it expects ongoing work on boiler problems at its Hinkley Point B and Hunterston B plants to significantly affect output for the financial year.
   
On the upside, ITV shares gained 1-1/4 pence to 116 after the Financial Times reported that RTL, Europe's largest broadcaster and owner of Channel 5, is working with private equity backers on a possible 5 bln stg-plus offer for the UK broadcaster.
   
ITV is currently waiting for NTL, the US-listed cable company, to formalise a bid approach it made last week.
   
Shares in Cadbury Schweppes were also higher in early deals, up 7-1/2 pence to 539-1/2 as Sanford Bernstein reiterated its 'outperform' recommendation, although cut its target to 610 pence from 640.
   
"We do not consider that 2006 diminishes the fundamental strength of the business and the operating and stock appreciation opportunity that exists." The broker told clients.

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Cadbury announced yesterday that its subsidiary Cadbury Nigeria has appointed independent accountants to investigate an overstatement of its financial position in respect of the current and prior years.
   
On the second line, Northern Foods gained 4 pence to 104-3/4 as ABN Amro became the latest broker to upgrade its recommendation on the group, lifting its rating to 'buy' from 'hold'.
   
"While it still has to get through Christmas and complete planned disposals, we believe the risk/reward balance is becoming more favourable." The broker told clients.
   
On the economic front, October US housing starts are expected to continue their decline, falling to 1.7 mln units in October from 1.77 mln units in the prior month. Permits however, are seen rising slightly to 1.635 mln from 1.62 mln units.

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FRANKFURT - Market data at 10.00 am
   
Major indices:
   
DAX - up 5.83 points or 0.09 pct at 6,448.85
MDAX - down 3.45 points or 0.04 pct at 8,939.86
TecDAX - down 1.78 points or 0.25 pct at 709.42
DAX future - up 0.5 points or 0.01 pct at 6,462.0  

Major risers:
   
Infineon, up 0.16 eur or 1.67 pct at 9.73. Citigroup and ABN Amro upgraded the stock to 'buy' from 'hold' with new targets at 11.80 eur and 12.00, respectively.   
   
Hypo Real Estate, up 0.71 eur or 1.55 pct at 46.38
   
E ON, up 0.64 eur or 0.67 pct at 96.52 a day after Spain's CNMV approved the company's bid for Endesa.
   
Volkswagen, up 0.58 eur or 0.68 pct at 86.08 following a Goldman Sachs upgrade to 'buy' from 'neutral'.
   
Deutsche Boerse, 0.74 eur or 0.60 pct at 124.80

Major decliners: 
   
ThyssenKrupp, down 0.41 eur or 1.41 pct at 28.64
   
Commerzbank, down 0.21 eur or 0.73 pct at 28.43 following a Morgan Stanley downgrade to 'equal-weight' vs 'overweight'.
   
Fresenius Medical Care, down 0.74 eur or 0.71 pct at 103.90. JP Morgan initiated coverage on the stock with a 'neutral' rating.
   
BMW, down 0.28 eur or 0.62 pct at 44.87
   
Bayer, down 0.16 euro or 0.40 pct at 39.94  

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AMSTERDAM - Amsterdam market data at 10.02 am

Major indices

AEX                  496.04, up 0.05 point
AMX Midcap           640.51, down 0.26 point
Government bonds     broadly lower

Major decliners:
   
Oil stocks led fallers amid a further slide in crude prices. SBM Offshore dropped 1.29 pct at 24.50, Royal Dutch Shell gave up 0.76 pct at 27.49, Fugro fell 0.79 pct at 36.35
   
ASMI shed 1.58 pct at 16.18
   
Hagemeyer was 0.5 pct lower at 4.02, Buhrmann lost 0.35 pct at 11.38

Major gainers:
   
TNT rose 1.68 pct to 32.06 amid renewed takeover speculation after the Dutch government late yesterday gave up its golden share in the company
   
ASML climbed 0.95 pct at 19.15
   
Crucell put on 1.38 pct at 19.04, recovering some of yesterday's losses after its analysts' meeting failed to excite investors. Broker Kempen called the share price drop "unjustified" and deemed it a buying opportunity 
  
SNS Reaal gained 0.82 pct at 16.02 as analysts noted the bancassurer's third-quarter trading update showed no further deterioration of its net interest income
   
Laurus jumped 6.12 pct at 2.95 amid news hedge fund Amber Capital has increased its stake in the retailer to almost 19 pct, increasing takeover speculation

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Paris shares AFX at a glance outlook

Forthcoming Events

Today
   
Q3 employment, 8.45 am
   
Sept current account, 8.45 am

Today's Press
   
GDF near gas supply deal with Russia, decision on production in Norway (La Tribune, Les Echos)
   
Airbus not short of would-be investors (La Tribune)
   
Air France to launch dedicated airline for tourism flights in 2007 (La Tribune)

Company News
   
Citigroup-led group wins bid against Societe Generale for China's Guangdong Development Bank
   
Technip wins contract to build major production facility for Shell in US Gulf
   
Air France-KLM confirms mulling creation of medium-haul tourist airline
   
Havas wins Sanofi-Aventis budgets for corporate communications, several drugs
   
Aeroports de Paris Oct passenger traffic up 6.1 pct
   
Court finds Michelin guilty on asbestos
   
Lagardere has made final offer to buy Sportfive - source
   
Pernod Ricard credit outlook raised to stable vs negative
   
Vivendi says TPS merger to hit 2007 growth, margins likely to rise on BMG deal
   
Gecina agrees to buy 40 hectare site at Douaisis, France
   
GDF to hold board meeting on planned Suez merger Nov 22

Forex

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