UK/Euro Financial Market Daily Morning Briefing 19-10-2006

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London shares open down after NY retreat; oil majors weigh, Prudential up
       
Leading shares opened lower following the Dow's retreat overnight and amid negative trade in Asian indices this morning, with oil majors weighing on the back of a drop in crude prices but Prudential up on a mixed Q3.
   
At 9.03 am, the FTSE 100 index was 26.2 points lighter at 6, 124.2, after closing up 41.8 points at 6,150.4 on Wednesday, while the broader indices were also weaker. Volume was firm, with 211 mln shares changing hands in 28, 894 deals.
   
Across the pond last night, the Dow Jones initially broke through the 12,000 point barrier in early deals, thanks to strong numbers from components IBM and Intel, but Wall Street failed to hold onto gains and retreated in later trade, with US indices closing mixed in the end.
   
However, the Dow still managed to close at a new record high on Wednesday, up 42.70 points at 11, 992.70, while the S&P 500 index added just 1.90 points at 1, 365.95 and the Nasdaq Composite slipped 7.80 points at 2, 337.15.
   
A fall in oil prices of over 1 usd a barrel for the second day in a row fuelled sentiment after US government data showed a large increase in domestic inventories of crude.
   
Light sweet crude for November delivery fell 1.28 usd to settle at 57.65 usd a barrel on the New York Mercantile Exchange.
   
In Asia this morning, Japan's Nikkei 225 index began its afternoon session 10.09 points lower at 16, 642.91, weighed down in part by a sluggish performance from the technology sector, and Hong Kong's Hang Seng was also weak, down 45.37 points at 18, 002.72.
 
In London, meanwhile, oil majors were under pressure following the overnight drop in crude prices. BP fell back 5 1/2 pence at 595 1/2 and Royal Dutch Shell slipped 9 pence at 1, 816.
   
And the financial sector also weighed as banks declined further as the US reporting season continues. HSBC dipped 11 pence at 1, 002 1/2 Bradford & Bingley was 4 1/2 pence lower at 468 1/2 and Royal Bank of Scotland lost 17 pence at 1, 866.
   
However, Cadbury Schweppes was the main casualty, down 9 pence at 534 , on the read across from Swiss food manufacturer Nestle which this morning unveiled third-quarter sales that were a tad below some analyst's forecasts.

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Similarly, Vodafone featured among the fallers, 1 1/4 pence lighter at 127 1/2, following a press report that its rival O2 has abandoned roaming charges.
   
O2 has paved the way for a new price war by abandoning charges for receiving calls while abroad, according to a report in The Times this morning.
   
On the broker front, shares in Imperial Tobacco lost 15 pence at 1,815 after Goldman Sachs downgraded the tobacco firm to 'neutral' from 'buy' in a European sector note. The broker also removed Imperial Tobacco from its 'Conviction Buy' list, telling clients that it sees limited upside to its 1,890 pence target.
   
Among the blue chip risers, Prudential reversed its initial drop to trade 6 pence firmer at 635 1/2 in early deals as investors digested a mixed third-quarter report from the UK's second-largest insurer.
   
The Pru this morning delivered stronger overall nine-month sales, but said revenues fell in the UK and warned online banking unit Egg is set for a loss in the second half.
   
In response, UBS said: "Difficulties in the UK continue to overshadow progress elsewhere. With management under pressure to deliver value following the rejection of the offer by Aviva, downside in the shares is limited, in our view."
   
Also on the upside, the pharmaceutical sector benefited on the read-across from Swiss peer Novartis's better-than-expected quarterly results.
   
The UK's AstraZeneca and Shire climbed up 8 pence at 3,430 and 3 1/2 pence at 947 respectively, after Novartis reported consensus beating third-quarter earnings and sales with net profit rising to 1.870 bln usd from 1.666 bln in the year earlier period, driven by continued strong growth in the pharmaceuticals division.
   
Among M&A news, four new acquisitions for WPP Group sent the stock up 5 1/2 pence at 664. The media group announced this morning that it has expanded further into Asia through the purchase of businesses in India, China and South Korea.
   
Still in takeover news, Sage Group rose 2 1/2 pence at 247 1/4 after shares in French firm Atos Origin surged in opening deals following a report in City AM newspaper that US private equity firm Blackstone is in talks to take over the IT services group in a deal worth up to 3.4 to 3.6 bln eur.
   
The paper cited a source close to the talks as saying Blackstone entered friendly talks with Atos almost four weeks ago and that discussions centred on a bid premium of 35 to 40 pct, pitching the offer at around 51 to 54 eur per share.
   
Midcap peer LogicaCMG also gained -- taking on 0 to 3/4 pence at 171.

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On the second line, an in-line interim report from home shopping and educational supplies business Findel failed to impress investors, with the shares sliding 12 pence at 552 after the group announced sales are currently running some 7 pct ahead of last year.
   
Meanwhile, Colt Telecom Group fell back 2-3/4 pence at 141 after reporting a drop in revenues and underlying profits in its fiscal third quarter.
   
In response, Bridgewell Securities reiterated its 'underweight' stance and said these results were in line with its expectations, but the operational progress was weaker than expected.
   
On the broker front, Dairy Crest Group's shares were hit by a Goldman Sachs downgrade to 'sell' from 'neutral', pushing the stock 11 pence lower at 609.
   
In a note to clients published this morning, the broker said its recommendation has been lowered on valuation grounds, while a review of its estimates has led to a price target increase to 550 pence from 520.
   
And Wilson Bowden was also damaged by a broker downgrade, down 27 pence at 1,731, this time from Morgan Stanley which cut its stance to 'equal-weight' from 'overweight' as the broker now regards the shares as fully valued.
   
Another valuation call hit Inmarsat's shares, 10-1/4 pence lighter at 382 after Credit Suisse downgraded its recommendation to 'neutral' from 'outperform' on valuation grounds and because the broker sees risks increasing over the next few months.
   
On the upside, Informa was the clear winner, soaring over 10 pct after it confirmed a preliminary bid approach from Springer Science & Business Media, whose principal shareholders are private equity groups Cinven and Candover. Informa shares jumped 51-3/4 pence at 550-1/2 on the news.

UK Diary of Events

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US Summary

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PARIS - Market data at 9.50 am:

Major indices:
   
CAC-40 down 20.89 or 0.39 pct at 5,340.40
SBF-80 up 8.81 or 0.14 pct at 6,136.16
SBF-120 down 11.59 or 0.30 at 3,870.26

Volume: 460 mln eur
8 CAC-40 stocks up
32 CAC-40 stocks down

Major gainers:
   
Atos Origin up 6.35 or 16.41 pct at 44.62 on reported takeover approach from Blackstone; Atos declines comment
   
Altran Technologies up 0.26 or 3.72 pct at 7.25. IT services stocks rise on Atos report, strong IBM, SAP results
   
GFI Informatique up 0.22 or 3.99 pct at 5.74
   
Ingenico up 0.51 or 3.07 pct at 17.10
   
Capgemini up 1.12 or 2.49 pct at 46.01
   
Michelin up 0.70 or 1.17 pct at 60.40. Co says raw material prices falling, confirms FY margin target

Major losers:
   
Haulotte down 1.10 or 5.01 pct at 20.86, Q3 sales miss consensus
   
Danone down 1.80 or 1.54 pct at 115.10 on profit-taking
   
Axa down 0.23 or 0.75 pct at 30.33

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AMSTERDAM - Market data at 10.05 am:

Major indices
   
AEX 488.44, down 1.67 points
AMX 623.14, down 1.87 points
Government bonds were unchanged to slightly higher

Major losers
   
ASML led decliners, off 1.30 pct at 17.52 eur, as Morgan Stanley cut the stock to 'equal-weight' from 'overweight'
   
TNT was 1.26 pct off at 30.49
   
ASMI was 0.49 pct down at 14.24 eur, in-line with other tech stocks after North American suppliers of chip-making equipment reported that September orders fell 6 pct from the previous month
   
Shell was 0.68 pct down at 26.37 eur, as investors wait for the outcome of today's extraordinary OPEC meeting
   
Oil-services group SBM Offshore was 0.70 pct down at 22.86

Major gainers
   
Akzo Nobel, trading ex-dividend, rose 2.42 pct to 44.40, reversing some of  yesterday's losses, after saying it aims to achieve a return on capital of more than 20 pct, as well as cost cuts of 100 mln eur, in new strategic targets
   
Getronics was 1.46 pct up at 5.57 eur
   
Hunter Douglas rose 0.85 pct to 59.0
   
Laurus gained 7.11 pct to 2.11 eur after saying it will appoint former Schuitema NV CEO Jan Brouwer as its new chief executive officer

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