UK/Euro Financial Market Daily Morning Briefing 19-05-2006

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London shares open firmer; lifted by good numbers from BA, oil issues

Leading shares opened firm this morning as strong numbers from British Airways and oil issues provide support, offsetting a lacklustre session on Wall Street overnight, dealers said.
   
At 9.12 am, the FTSE 100 traded 35.4 points firmer at 5,707 after closing at 5,690.1 yesterday.
   
Volume was hefty with 291 mln shares exchanging hands in 49,159 deals, ahead of futures and options expiring later today.
   
Meanwhile, the FTSE 250 was 91.4 points to the better at 9,226.3.
   
Last night on Wall Street, US stocks ended weaker on fears the Fed might continue its interest rate hike policy while bond yields dropped as investors migrated to defensive sectors.
   
The Dow Jones Industrial Average fell 77.32 points to 11,128. Over the last two sessions, the benchmark index has fallen nearly 300 points.
   
The Nasdaq Composite Index closed at its lowest level in six months, losing 15.48 points at 2,180.32.
   
Overnight in Asia, Japan's main market the Nikkei 225, ended the morning down 95.80 points at 15,991.38 while the Hang Seng began its afternoon session 52.43 points higher at 16,318.95.
   
Oil prices climbed again towards the 70 usd per barrel mark on continued worries over Iran and Nigeria, while the market weighed the potential impact of hurricane disruption in the US as the summer storm season approaches.   

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Shares in Royal Dutch Shell B edged 14 pence higher at 1,810, while BP was up 9-1/2 pence at 627-1/2.
   
Flag carrier British Airways topped the winners board, adding 21-3/4 pence at 341-3/4, after posting a better-than-expected 21 pct increase in full year pretax profit.
   
BA made a pretax profit of 620 mln stg, compared to analyst expectations of 548-602 mln stg and 513 mln stg last time, while operating profit also topped hopes, increasing 27 pct to 705 mln stg compared to analyst expectations of 666-704 mln stg.
   
In response, Merrill Lynch reiterated its 'neutral' stance and said operating profit of 705 mln, up from 556 mln last year, was close its forecast for 702 mln and slightly above consensus of around 690 mln.
   
Meanwhile, Corus remained in focus, up 21-3/4 pence at 395-1/4, as Mittal refused to comment on press reports it could be planning to increase its offer for Arcelor by 3 bln eur after formally launching an offer yesterday that values Arcelor at around 22 bln eur.   
   
Mining stocks featured heavily as bargain hunters came out following recent weakness.
   
Kazakhmys was 23-1/2 pence higher at 1,118, Anglo American surged by 40 pence to 2,120, Xstrata added 34 pence at 2,040, while Antofagasta was 37 pence higher at 2,129 and BHP Billiton was 18-1/2 higher at 1,057-1/2.
   
In a note this morning, Credit Suisse noted mining stocks have fallen by 23 pct in the past five days, the fastest fall in the past three years, suggesting this is a 'perfect position to strike'. 
   
Broker action also provided some focus, with BAE Systems edging 6 pence higher at 384 after Merrill Lynch upgraded to 'buy' from 'neutral' by Merrill Lynch, ahead of the sale of its Airbus stake.
   
On the downside, Centrica was the main casualty, shaving off 9-1/2 pence at 260, after the utility group said full year earnings are likely to be at the lower end of market expectations.

The group revealed trading to date has been below estimates, hit by sky-high commodity costs.
   
Ladbrokes fell by 1-3/4 pence to 398, after SG Securities downgraded the stock to 'sell' from 'hold', saying the World Cup impact has been overplayed and speculation seems to be overdone.
   
Profit-taking weighed on defensive issues, with the utilities sector broadly under the cosh.
   
Scottish Power was 4-1/2 pence down at 529, while Scottish & Southern slipped 8 pence at 1,100, Severn Trent fell by 8 pence at 1,107 and Kelda Group shed 1 pence at 725-1/2.
   
On second tier, MFI Furniture was the biggest riser after disclosing it has received expressions of interest for its UK furniture retailing division.
   
Meanwhile, Panmure Gordon also upgraded the stock to 'hold' from 'sell' with an improved price target of 100 pence.   
   
Berkeley Group also edged higher, up 30 pence at 1,087 after being upgraded to 'buy' from 'neutral' by UBS on valuation grounds, with an improved price target of 1,375 pence from 1,211.
   
On the downside among the midcaps, John Laing shaved 4-3/4 pence at 283 after reporting its Chiltern Railways franchise has lost a year of growth after the collapse of a tunnel being built at Gerrards Cross caused disruption on its London-Birmingham route in 2005.

Diary of Events

For a diary of key financial and corporate events in the UK today, click here

US Summary

For a summary of US stocks at the close of trade, click here

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PARIS - Market data at 9.50 am:

Major indices:
   
CAC-40 up 43.21 points at 4,951.90
SBF-80 up 59.56 at 5,632.03
SBF-120 up 30.36 at 3,585.41

Volume: mln eur
28 CAC-40 stocks up
12 CAC-40 stocks down

Major gainers:
   
BNP Paribas up 1.75 or 2.42 pct at 73.95 after strong Q1 results
   
Societe Generale up 2.50 or 2.15 pct at 118.80
   
Vivendi Universal up 0.33 or 1.19 pct at 28.16
   
Soitec up 1.90 or 8.44 pct at 24.16 sharply as Dell opts to use AMD server chips

Major losers:
   
Vinci down 0.90 or 1.16 pct at 76.45
   
Veolia Environnement down 0.42 or 0.93 pct at 44.60
  
Sanofi-Aventis down 0.70 or 0.95 pct at 73.00

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German shares AFX at a glance outlook

Forthcoming Events
   
Today
   
DaimlerChrysler holds press conference with CEO Dieter Zetsche to open museum in Stuttgart (10.30 am)
  
Man AGM

Company News
   
Bayer places bonds totaling around 3 bln eur
   

Macroeconomic/Political News
   
German April PPI up 1.0 pct from March; up 6.1 pct yr-on-yr

Market News/Sentiment
   
Deutsche Boerse upgraded to 'buy' from 'neutral' at UBS
   
ThyssenKrupp price target lifted to 34 eur from 30 at UBS
   
Henkel upped to 'overweight' vs 'neutral' at HSBC, new target 103 eur
   
Hypo Real Estate initiated as 'neutral' at JP Morgan, target 56.4 eur
   
MAN, SCANIA CUT TO 'NEUTRAL' VS 'OVERWEIGHT' AT HSBC

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Amsterdam shares AFX at a glance outlook

Forthcoming Events
  
Today
   
Dutch Q1 job vacancies (8.30 am)
   
SBM Offshore AGM
   
LogicaCMG AGM
   
VNU acceptance period for Valcon offer ends

Today's Press
   
VNU deal likely as Knight Vinke ends opposition campaign to Valcon bid

Euronext 'working hard' on NYSE deal; also talked to CME

Company News
   
VastNed Retail still sees slight rise in FY direct result after flat Q1
   
Vastned O/I still sees FY direct investment result approx equal to last yr's as Q1 falls
   
Eurocommercial Properties 9 mths result up 16 pct on higher rental income
   
Euronext shareholders set Tuesday deadline for NYSE bid
   
SBM Offshore raises FY net outlook to 185 mln usd from 165 mln
   
Nutreco sets 1-for-36 final optional stock div
   
Shell to buy out BP's 50 pct stake in Kenya JVs for undisclosed sum

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