UK/Euro Financial Market Daily Morning Briefing 18-10-2006

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London shares remain up in early deals as miners underpin strength

UK blue chips remained higher in early deals, helped by a solid set of figures from both IBM and Intel after the close on Wall Street, with miners in focus following a solid update from Rio Tinto.
   
At 9.07 am the FTSE 100 was up 43.0 at 6,151.6 with the wider market also in positive territory. The FTSE 100 index ended Tuesday's session down 63.8 points at 6,108.6.
   
Meanwhile, across the Atlantic, Wall Street retreated from attempts to push the DJIA to 12,000, rattled by unfavourable economic data and concerns that earnings from technology companies will be disappointing.
   
Solid results from Intel and IBM should help direct US markets when they open later today.
   
Intel reported a 35 percent decline in third-quarter profits and a 12 percent decline in revenues on Tuesday, but the chip maker beat Wall Street's tepid expectations and shipped record numbers of microprocessors for mobile devices and computer servers.
   
IBM reported revenue growing 5 percent as strong sales of software and hardware helped offset more weak growth in the key computer services business.
   
In Asia, Hong Kong's Hang Seng Index opened down 104.83 points at 17,910.01 while Japan's Nikkei 225 rounded the daily session up 41.41 points at 16,653.00   

In oil play, prices rose in Asian trade but remained below 60 usd a barrel in a market that has already priced in an expected OPEC production cut, dealers said. New York's main contract, light sweet crude for delivery in November, was up 17 cents at 59.10 usd a barrel from 58.93 in late US trade overnight.
   
In London, investors will be looking for a turnaround from yesterday's heavy loses.
   
Among mining stocks, investors focused on Rio Tinto, up 55 at 2,730, after it said production in the three months to September showed a record level of iron ore produced due to expansion in the Pilbara region of Western Australia, but refined copper output fell as a result of a smelter shutdown.
   
The miner said iron ore output rose 11 pct year-on-year to 35.74 mln metric tons as the ramp up of mine and port capacity expansions started to take effect while the expansion projects in the Pilbara remained largely on schedule and within budget.
   
The other major area of increased production was US thermal coal output which climbed 11 pct from the previous corresponding period to 31.3 mln tons.

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Mined copper output fell six pct year-on-year to 182,800 tons, with a 23 pct drop in production at the Escondida mine in Chile due to the workers strike over the month of August.
   
Strong commodity prices also buoyed the sector. Vedanta put on 20 at 1,390, Antofagasta climbed 6-1/4 to 501-1/4, BHP Billiton was up 10 at 1,003 while Anglo American improved 23 at 2,382.
   
Anglo was also lifted by news that the company brought back 330,000 at a range of 23.64 stg and 24.40.
   
There was also good news for UK insurer Legal & General, better by 1-1/2 at 141-1/4, after it reported a 32 pct increase in nine-month sales, helped by sustained growth in its domestic market over the third quarter.
   
L&G, the UK's fourth-biggest insurer by market value, said worldwide new business for the nine months to Sept 30 came in at 1.294 bln stg on an annual premium equivalent basis, up from 979 mln stg in the same period last year.
   
Positive broker comment saw Unilever improve 19 pence to 1,319. Goldman Sachs upgraded the stock to 'buy' from 'neutral', saying the stock still appears attractively valued with news flow improving, dealers said. Goldman also raised its price target by 10 pct to 22 eur and 1,500 pence.
   
On the downside, a lacklustre set of figures from UK news and information provider Reuters Group saw the stock dip 8-3/4 pence to 428-1/2.
   
Turnover in the quarter rose 3.3 pct to 631 mln stg, above analysts' expectations of around 625 mln stg. Net sales in the period have been the strongest so far this year, the company said.
   
In response, Goldman Sachs said following a strong rally in Reuters' shares over the past three months, the market was anticipating an increase in full year guidance by the company today.
   
Investors seemed displeased that Brambles, lighter by 0-1/4 penny at 486-1/4, has agreed to sell part of its Cleanaway Asia business, comprising the landfill gas to energy business in China and Taiwan and the recovered paper business, to Veolia Environmental Service China, part of the Veolia Group, for 25 mln usd.
   
On the second tier investors cheered troubled sports retailer JJB SPorts, higher by 4-1/4 at 199.
   
JJB reported a better-than-expected 0.5 pct rise in first-half pretax profit but cautioned its margins remain under pressure from stiff competition.
   
For the six months to July 30, the group made a pretax profit of 18.2 mln stg. This compares with analyst forecasts of about 16 mln stg, and 18.1 mln stg a year ago.

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In response, Seymour Pierce upgraded JJB to 'underperform' from 'sell' and said that, provisionally, it has increased its full-year pretax profit estimate to 38 mln stg from 31 mln and now looks for 39.5 mln stg rather than 33.5 mln for the following year.
   
Sticking with the losers, HBOS was weaker by 2 pence at 1,083, as Bear Stearns re-initiated coverage of the stock with an 'underperform' recommendation in a review of the UK banking sector.
   
Bear Stearns said the group has, for many years, grown faster than its peer group, sustained by progress in the Retail Banking division.
   
Rumours that Reliance Industries is eyeing Scottish energy services company Wood Group for acquisition helped lift the stock to the FTSE 250 topspot, up 13-3/4 at 253-3/4.
     
Investors were also interested in Stagecoach Group, better by 4 pence at 139-3/4, after it said its first-half trading across the group remains strong, particularly in the UK bus division and that it now expects full-year earnings per share before exceptional items to be ahead of management's expectations.
    
PartyGaming's recent bad spell appeared to ease as vague bid rumours that an Las Vegas based gaming coming is eyeing the stock, helped the online gamer up 1-1/2 pence to 32-1/2. House broker Dresdner Kleinwort reiterated its 'buy' recommendation with a 75 pence price target.
   
Positive broker comment also helped lift the Daily Mail & General Trust, improving 16-1/2 pence to 653-1/2. Morgan Stanley upped the stock to 'overweight'.
   
Finally, on the downside, fading bid rumours dented Premier Oil, off 4 at 1,196.

UK Diary of Events

For a summary of UK financial and corporate events today, click here

US Summary

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

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PARIS - Market data at 10.04 am:

Major indices:
   
CAC-40 up 38.78 points at 5,341.77
SBF-80 up 38.23 at 6,094.66
SBF-120 up 27.54 at 3,867.46

Volume: 487 mln eur
39 CAC-40 stocks up
1 CAC-40 stocks down

Major gainers:
   
Arcelor-Mittal, up 0.68 eur or 2.2 pct at 31.41 and extending recent gains as consolidation hopes continue to boost steel sectors.
   
Renault, up 0.75 eur or 0.9 pct at 88.25 and bouncing from yesterday's strong losses; Societe Generale analysts cut the stock to 'sell' from 'buy', setting an 80 eur fair value price.
   
Faurecia, up 1.29 or 3.1 pct at 43.59 and bouncing from steep losses in recent weeks, after warning on the second half outlook.

Major losers:
   
Spir Communications, down 3.50 or 3.1 pct at 109.80 after the free press group posted a 3.5 pct rise in third quarter sales to 122.5 mln eur, a slower increase than the company expected, though it stuck to the 2006 operating margin target of 12-13 pct.
   
EDF, down 0.16 at 46.06, the only blue chip in negative territory.
   
Latecoere, down 0.40 or 1.1 pct at 24.45 after the aviation equipment group posted a 9.6 pct slide in first half profit to 10 mln eur, but maintained its full year sales growth forecast of 20 pct. It also said that although sales should continue to increase in 2007, delays for the Airbus A380 programme will cut next year's revenues by about 10 pct.

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AMSTERDAM - Market data at 10.08 am:

Major indices
   
AEX 489.79, up 2.78 points
AMX Midcap 622.03, up 4.58 points
Government bonds broadly unchanged

Major gainers
   
Van der Moolen was up 2.27 pct to 4.50.
   
USG People put on 2.11 pct to 30.07.
   
Unilever lifted 1.86 pct to 19.67 and Numico advanced 1.74 pct to 35.67.
   
TomTom was 1.46 pct higher to 30.59.  
   
Royal Dutch Shell added 0.56 pct at 26.79.

Major losers
   
Akzo Nobel tumbled 6.54 pct to 44.45 with investors concerned over the market introduction delay of key product Asenapine, as stated by the chemicals company during the release of its third quarter results. Pharming fell 0.27 pct to 3.69.
   
ASML was down 3.79 pct to 18.29 after the company came out with strong third quarter results but accompanied by an uninspiring outlook, prompting downgrades from Petercam and SNS Securities. ASMI slid 1.10 pct to 14.39.
   
Wolters Kluwer shed 0.10 pct to 20.72.
   
VastNed Retail was off 0.23 pct to 64.90.

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FRANKFURT - Market data at 10.14 am

Major indices:

DAX 30 - up 39.79 points or 0.65 pct at 6,154.89
MDAX - up 70.96 points or 0.83 pct at 8,594.06
TecDAX - up 1.60 points or 0.24 pct at 670.70
DAX future - up 44.00 points or 0.72 pct at 6,187.50

Major gainers:
   
Fresenius Medical Care, up 2.48 eur or 2.47 pct at 102.88, on the back of a positive broker comment from Deutsche Bank, according to dealers
   
Deutsche Boerse, up 2.34 eur or 1.86 pct at 128.29, on a report in the Italian daily Il Corriere della Sera that the private equity fund Carlyle Group is interested in taking over the German exchange
   
TUI, up 0.28 eur or 1.63 pct at 17.48
   
Deutsche Postbank, up 0.92 eur or 1.61 pct at 58.10
   
Continental, up 1.13 eur or 1.24 pct at 92.01
   
Major losers:
   
Infineon Technologies, down 0.16 eur or 1.59 pct at 9.93, after US peer Intel Corp. reported overnight a 35 pct decline in third-quarter profits and a 12 pct decline in revenues
   
RWE, up 0.04 eur or 0.05 pct at 77.18
   
Altana, up 0.05 eur or 0.12 pct at 42.93
   
MAN, up 0.13 eur or 0.19 pct at 68.10

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