UK/Euro Financial Market Daily Morning Briefing 18-01-2007

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London shares climb in early deals as commodities regain poise

Leading shares remained higher in early deals, with recovering commodity prices helping the mining and oil sectors regain some poise, dealers said.
   
A strong performance across Asian bourses had also lifted sentiment, the dealers said. By 9.00 am, the FTSE 100 index was up 22.6 points at 6,227.1, while the broader indices were also higher. Volume was moderate, with 158.7 mln shares changing hands in 24,578 deals.
   
US stocks closed lower last night, pausing for breath after a record breaking run. The technology sector was hit by Intel's disappointing quarterly earnings report on Tuesday night and a higher-than-expected producer price index re-igniting interest rate worries, traders said.
   
The DJIA closed down 5.44 at 12,577.15, while the Nasdaq ended 18.36 points lower at 2,479.42. After the bell, Apple shares were volatile, initially climbing 4 pct in the wake of forecast busting quarterly numbers, but slipped back on disappointing guidance.
   
Across Asia overnight, the Nikkei 225 index closed 109.6 points up at a new nine-month high of 17,370.90, helped by the Japanese central bank's decision to leave interest rates unchanged.
   
The Hang Seng also enjoyed a bullish session, closing 212.94 points higher at 20,277.51.
   
Oil prices firmed in Asian trading hours as a blast of wintry weather in the US helped support a market struggling at 19-month lows, dealers said. Light sweet crude for delivery in February, was up 0.36 usd at 52.60 usd a barrel in Asia, continuing a recovery seen in the US last night after the contract neared 50 usd a barrel.
   
Metal prices also recovered, with gold, silver, copper all regaining some of their recent losses.
   
Back in London today, mining stocks led the market higher in early deals, with Antofagasta adding 9 pence to 456-1/2, Rio Tinto gaining 38 pence to 2,589, Vedanta climbing 20 pence to 1,111, and Xstrata taking on 46 pence to 2,289.
   
Across the commodities floor, oil stocks were also in demand, with Cairn Energy adding 29 pence to 1,698, BG Group gaining 9 pence to 653-1/2, and BP climbing 6 pence to 642-1/2.

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Elsewhere, Amvescap and ICAP were in demand, following a bullish note on diversified financials by Citigroup. "We anticipate that the outperformance of the Diversified Financials will continue in 2007," Citigroup told clients.
   
The broker repeated its 'buy' ratings on both stocks and lifted its respective targets to 740 pence from 606, and to 570 pence from 565.
   
Carnival topped the FTSE 100 risers amid reports of a bullish survey of cruise lines and travel agents, which pointed to a strong "wave season". Carnival shares added 54 pence to 2,792.
   
On the downside, Smiths Group shares were down 10 pence at 1086 on profit taking after recent gains, despite an upgrade to 'buy' from 'hold' by Citigroup. BAE Systems and Rolls-Royce also dropping after recent outperformance.
   
Standard Chartered was slightly weaker, down 1 pence at 1,456, amid vague talk of a share placing and acquisition of Turkey's Oyak Bank.
   
There has been speculation of an overseas takeover of Oyak, valued at a around 2 bln usd, since November, with France's Credit Agricole also named as a potential buyer.
   
On the second line, the recent whirl of retail trading statements continued with Kesa Electricals updating the market on its latest sales performance.
   
Europe's third largest electricals retailer this morning topped market expectations for Christmas trading, with like-for-like (lfl) sales rising 6.4 pct in the period from Nov 1, 2006, to Jan 8, 2007. This was ahead of analysts' expectations of a 3.8 pct rise.
   
Total group sales on a reported basis rose 7.3 pct, and were up 8.1 pct in local currency.
   
In reaction, Merrill Lynch repeated its 'buy' recommendation and said, although sales growth slowed on toughening comparisons, the two key divisions, Darty and Comet, outperformed its expectations, with respective lfl sales growth of 4.6 pct and 7.5 pct.
   
Kesa Electricals shares added 1 pence to 344, recovering after yesterday's losses following DSG International's disappointing update.
   
Misys was also in demand, adding 10-1/4 pence to 237-1/2 after the software group accompanied its interim results with news of sweeping changes to its senior management, including the resignation of the head of its under-performing healthcare business.

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Colt Telecom topped the midcap risers with a jump of 9-1/4 pence to 171-3/4 after Goldman Sachs upgraded its recommendation to 'buy' from 'neutral' as part of a telecom services sector note.
   
On the downside, shares in Hikma Pharmaceuticals fell back after preliminary figures for 2006 missed some brokers' estimates and the group reiterated that generic sales will be slightly lower than last year.
   
Hikma shares were down 9-1/4 pence at 378-3/4.
   
On the economic front, US jobless claims are expected to have risen to 315,000 last week, from 299,000 the previous week.
   
Of more interest however, will be US CPI data, with inflation expected to have risen by O.3 pct in December, after an unchanged reading in November.
   
The core CPI rate is seen rising to +0.2 pct after an unchanged rate in November.
   
Elsewhere, US housing starts are expected to total 1.55 mln units in December, against 1.588 mln in November, while building permits are expected to dip to 1.50 mln units, after totaling 1.506 in November.
   
Meanwhile, after the market's opening, the Philly Fed survey of manufacturing activity in the Philadelphia region is expected to have improved to +3.0 in January from - 4.3 in December.

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PARIS - Market data at 10.08 am:

Major indices:
   
CAC-40 up 33.88 points or 0.61 pct at 5,595.66
SBF-80 19.48 or 0.29 pct at 6,838.68
SBF-120 up 23.19 or 0.57 at 4,091.88

Volume: 1.2 bln eur
30 CAC-40 stocks up
10 CAC-40 stocks down

Major gainers:
   
Alstom up 2.60 eur or 2.77 pct at 96.50 after unveiling a 15 pct jump in third-quarter sales and confirming FY guidance
   
Accor up 1.25 or 2.00 pct at 63.90 on back of a 7.4 pct rise in fourth-quarter sales and raised FY earnings guidance
   
Dexia up 0.50 or 2.29 pct at 22.35 after an upgrade to 'outperform' from 'neutral' by Exane BNP Paribas
   
AGF up 2.10 or 1.68 pct to 126.80 as Allianz SE launches offer to buy out minority shareholders

Major losers:
   
Euler Hermes down 2.00 or 1.70 pct at 115.90 after Allianz said it had no plans to buy out the company's minorities
   
Business Objects down 0.76 or 2.62 pct at 28.23
   
Cap Gemini down 0.55 or 1.08 pct to 50.25
   
EADS down 0.34 or 1.36 pct at 24.67, extending yesterday's losses

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FRANKFURT - Market data at 10.06 am

Major indices:
   
DAX - up 24.69 points or 0.37 pct at 6,726.39
MDAX - up 21.61 points or 0.23 pct at 9,571.30
TecDAX - up 4.49 points or 0.57 pct at 794.30
DAX futures - up 18 points or 0.27 pct at 6,766.00
   
Major gainers
   
Deutsche Post AG up 0.32 eur or 1.35 pct to 1.35 amid rumours that TNT is interested in the German logistics company
   
Henkel up 1.78 eur or 1.50 pct to 120.50, after UBS raised the price target to 130 eur from 110
   
Continental, up 1.05 eur or 1.15 pct to 92.22
   
Linde up 0.64 eur or 0.77 pct to 83.70
   
Deutsche Boerse up 1.59 eur or 1.03 pct to 155.55 as Citigroup raises target to 175 eur, dealers said

Major losers:
   
Deutsche Postbank down 0.27 eur or 0.40 pct to 66.49
   
Fresenius Medical Care down 0.35 eur or 0.34 pct to 103.30
   
TUI down 0.03 eur or 0.18 pct to 16.49
   
ThyssenKrupp down 0.06 eur or 0.17 pct to 35.87
   
Altana down 0.02 eur or 0.04 pct to 47.98

Other major movers:
   
Adidas up 0.30 eur or 0.80 pct to 37.83 as it reiterated last year's guidance of sales of 10 bln eur and a 9 pct operating margin for FY 2006
   
Allianz down 0.22 eur or 0.14 pct to 153.99 amid signs it may need to raise its offer for AGF minority holding
   
Merck up 0.87 eur or 0.97 pct to 90.40 after releasing solid Q4 figures today

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