UK/Euro Financial Market Daily Morning Briefing 20-04-2007

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London shares higher, Alliance Boots up on improved offer, WPP slips

Leading shares were higher this morning in the first hour of trading with Alliance Boots rising after Stefano Pessina and KKR improved its offer, although WPP slipped as Q1 revenue figures disappointed, dealers said.
   
By 9.00 am, the FTSE 100 was up 30.20 points at 6,470.8, with the broader FTSE 250 up 89.5 points at 11,888.7. The other UK indices were also firmer.
   
Early volume was swelled by above average trading in Alliance Boots and Vodafone, with 329 mln shares changing hands in 32,238 deals.
   
On the other side of the Atlantic, Wall Street closed essentially flat yesterday after struggling to resume a modest upward trend while investors juggled upbeat economic data, divergent earnings reports and a pullback in Chinese stocks.
   
The Dow rose 4.79, or 0.04 pct, to 12,808.63 -- its sixth straight gain. On Wednesday, the Dow reached fresh trading and closing highs, perhaps signalling a recovery from a late February pullback that was in part triggered by a sell-off on the Chinese market.
   
The Standard & Poor's 500 index fell 1.77 to 1,470.73, a day after the S&P hit a six-and-a-half year high. The Nasdaq composite index fell for the third straight session, slipping 5.15 to 2,505.35.
   
Over in Asia, the Nikkei 225 Index finished 80.65 points higher at 17,452.6, while the Hang Seng ended the morning up 180.94 points at 20,480.65.
   
Oil prices were mixed in Asian trading hours in a market driven by healthy fundamentals and a focus on US refineries' return to production.
   
Among issues registering gains, Alliance Boots topped the early leader board, up 58-1/2 to 1,108, after its board said it had recommended an improved 10.90 stg a share takeover offer from Stefano Pessina, executive deputy chairman and 15 pct shareholder, and Kohlberg Kravis Roberts, the US private equity group.

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The improved offer, which is inclusive of any final dividend to be declared for the year to March 2007, values the group at 10.6 bln stg. A previous indicative offer of 10.40 stg a share valued the group at 10.1 bln stg.
   
However, a rival consortium stalking the group, Guy Hands' Terra Firma private equity group and the Wellcome Trust medical charity, announced that HBOS has joined its team and said that on Tuesday it made an indicative offer to Alliance Boots' board of 10.85 stg a share.
   
Reacting to the news, Dresdner Kleinwort raised its target for Alliance Boots to 10.90 stg from 970 pence and repeated its 'hold' stance, arguing the situation "looks like a done deal".
   
Analysts at Seymour Pierce also retained a 'hold' recommendation, noting there is still a "small chance" another bidder could get involved.
   
The new record on Wall Street helped fund mangers Old Mutual and hedge fund group Man Group rise 2.8 to 175.6 and 7-1/2 to 569-1/2 respectively.
   
Elsewhere, Persimmon ticked up 14 to 1,418 as news emerged that it was preparing to gatecrash the proposed 5.5 bln stg merger of George Wimpey and Taylor Woodrow.
   
The paper said rival suitors for Taylor Woodrow have asked several leading City investment banks over the past week to weigh up the housebuilder, which has a 2.95 bln stg market value. Second tier-listed Taylor Woodrow was up 13-1/2 to 510-1/2 with George Wimpey up 5 at 621.
   
Vodafone moved 3.5 better to 143.8 after last night's news that peer Vivendi said it was "ready" to acquire the UK company's 44 pct stake in its mobile phone unit SFR, but "talks had not started," chief executive Jean-Bernard Levy said.
   
Hanson was benefiting from the read across from solid results from US peer Martin Marietta which raised its first-quarter earnings outlook, due to cost management and better-than expected pricing. Hanson gained 7 to 828.
   
Mining issues were also better as metal prices bounced amid fears subsiding that any move by Chinese authorities to cool economic growth will impact on commodity prices.
   
Gold and silver were higher as the dollar continued to weaken against the euro, boosting demand for the precious metals.

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Vedanta Resources rose 24 to 1,398, Xstrata moved up 22 to 2,722, Rio Tinto took on 19 to 3,096 and BHP was up 13 to 1,147.
   
On the downside, WPP slid 13-1/2 to 757 after reporting "slightly disappointing" Q1 revenue growth in a trading update.
   
Goldman Sachs said it remains a buyer of WPP, as it believes that the stock should remain a core long term holding for investors.
   
Oil issues were also weaker as crude oil prices slipped. BP lost 1 to 570 and Royal Dutch Shell dipped 2 to 1,753.
   
On the second tier WH Smith moved up 5-1/4 to 449 after being given an increased target of 425 pence, from 395, by Deutsche Bank with a retained 'hold' rating, and a raised target of 470 pence from 425 by Credit Suisse, with its rating maintained at 'outperform'.
   
On the macro front, UK sales on the high street are expected to have remained buoyant in March, continuing on from February's strong data and adding to the weight of evidence suggesting that the Bank of England will raise interest rates again soon.
   
Retail sales are forecast to have risen by 0.4 pct in March from February for a 4.6 pct annual rise. In February, retail sales jumped by 1.4 pct month on month after a weak January, while the annual rate stood at 4.9 pct.

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PARIS - Market data at 10.25 am:

Major indices:
   
CAC-40 up 27.79 points or 0.48 pct at 5,856.83
SBF-80 up 23.18 or 0.32 pct at 7,324.99
SBF-120 up 19.03 or 0.44 pct at 4,296.71

Volume: 918 mln eur
33 CAC-40 stocks up
7 CAC-40 stocks down

Major gainers:
   
Rhodia up 0.09 or 3.11 pct at 2.98 as it continued to benefit from positive reaction to its 1 bln eur refinancing plan.
   
Societe Generale up 4.33 or 2.99 pct at 149.20 amid ongoing rumours of takeover interest from Unicredito Italiano SpA. German newspaper Handelsblatt reported that Unicredito CEO Alessandro Profumo and Societe Generale counterpart Daniel Bouton are currently holding talks, citing sources within the financial industry.
   
Arcelor-Mittal up 1.14 or 2.94 pct at 39.98, with a Paris dealer pointing to the effect of gains by steel stocks in the US yesterday.
   
Eramet up 4.65 or 2.82 pct at 169.65 amid speculation about ongoing consolidation in the mining sector.

Major losers:
   
Clarins down 1.48 or 2.40 pct at 60.13 after its first-quarter sales missed consensus on a strong euro and weak US perfume operations
   
Iliad down 0.96 or 1.26 pct at 75.44
   
Alcatel-Lucent down or 0.07 or 0.75 pct at 9.28

Most active stocks:
   
Societe Generale, 134 mln eur
   
Rhodia, 69 mln
   
Total, down 0.10 or 0.19 pct at 53.24, on 68 mln

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FRANKFURT - market data at 10.18 am

Major indices
  
DAX - up 54.55 points, or 0.75 pct, at 7,297.28
MDAX - up 90.27 points, or 0.86 pct, at 10,631.99
TecDAX - up 11.49 points or 1.31 pct at 891.70
DAX futures - up 34.00 points, or 0.47 pct, at 7,338.00

Major Advancers:
   
Siemens, up 3.25 eur or 3.75 pct at 90.00, on news that supervisory board chairman Heinrich von Pierer is to step down and on a media report that the electronics giant has reached second-quarter margin targets in all divisions
   
SAP, up 0.95 eur or 2.63 pct at 37.05, after fresh first-quarter figures released this morning largely met market expectations and pleased many investors who were expecting much less of a turnaround from a dismal fourth quarter last year
    
Metro, up 1.17 eur or 2.10 pct at 57.00, after JP Morgan upgraded its stance to 'overweight' from 'neutral' and raised its target to 62 eur from 54 eur
   
Altana, up 0.78 eur or 1.51 pct at 52.34
   
Commerzbank, up 0.63 eur or 1.81 pct at 35.40, after UBS raised its target on Germany's second largest bank to 40 eur per share from 30 and reiterated its 'buy' rating
  
Major decliners:
   
Volkswagen, down 1.44 eur or 1.25 pct at 113.68, correcting from yesterday's gains
   
BASF, down 0.52 eur or 0.58 pct at 88.38
   
EON, down 0.58 eur or 0.54 pct at 106.50
   
Deutsche Post, down 0.11 eur or 0.47 pct at 23.24
   
Adidas, down 0.10 eur or 0.22 pct at 44.37, as rumours of a takeover dissipated.

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Forthcoming Events
   
TNT AGM
   
Wolters Kluwer AGM

Company News
   
Imtech wins 26 mln eur order for expansion at German Siltronic production plant
   
Vopak sees 6.5 mln eur Q2 book gain from VOTG tanktainer stake sale, expands Singapore storage capacity
   
Hagemeyer Q1 sales in line as Europe markets strong, sees FY profits improving
   
Akzo Nobel buys Ceilcote ops from Germany's KCH Group for 12 mln eur
   
Pharming Q1 net loss 5.0 mln eur vs loss of 3.7 mln in same period last year
   
Buhrmann's name change to Corporate Express becomes effective
   
Univar completes 650 mln usd acquisition of Chemcentral
   
ING Group rated 'AA-,' with stable outlook on higher financial profile
   
Mittal Steel's ratings affirmed on Arcelor Brasil minority buyout
   
Ordina wins extended payment-processing contract with Dutch public sector bank
   
RBoS consortium confirm will be attending April 23 meeting with ABN Amro

Market Sentiment
   
Hagemeyer will be in focus after reporting first-quarter sales

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