UK/Euro Financial Market Daily Morning Briefing 20-06-2006

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London shares weaker, miners fall on China growth concerns, DJIA falls

Leading shares remained weak, but off opening lows, with the resource sector leading the fallers on weaker metal prices as concerns surrounding the prospect for higher interest rates, and news China's central bank will continue money and credit controls weighed on early sentiment, dealers said.
   
At 9.00 am, the FTSE 100 was 19.5 points lower at 5,606.6, but off opening lows of 5,585.0, with the broader indices also weaker.
   
Early volume was moderate with 168.4 mln shares trading in 25,946 deals.
   
Last night on Wall Street, the Dow tumbled 72.44, or 0.66 percent, to 10,942.11, after sliding as much as 107 points earlier.
   
Hawkish comments from Fed Governor Guynn, speaking last night, added to the growing conjecture that the Fed will continue to raise interest rates after the next FOMC meeting next week to contain inflation.
   
Over in Asia, Japan's blue-chip Nikkei 225 Stock Average Index closed 211.94 points at 14,648.41, while over in Hong Kong the Hang Seng index closed the morning 197.20 points lower at 15,571.66.
   
Sentiment was dampened after China's central bank said it will continue money and credit controls, in a statement issued just days after it hiked the required deposit reserve ratio for its domestic lenders.
   
In London, weak metal prices provided the catalyst for some profit-taking following yesterday's gains, as concerns that rising interest rates will curb global growth.
   
Copper fell nearly 3 pct on the LME last night, while prices for gold and silver also eased as weaker oil prices brought in sellers. Gold fell as much as 2 usd to 563.22, while silver fell 7 cents to 9.87 usd an ounce.

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Kazakhmys fell 21 pence to 1043, BHP was off 15 at 940 and Xstrata dropping 26 to 1921.
   
Oil prices continued lower over in Asia as concerns about possible disruption of supplies from Iran eased.
   
New York's main contract was at 68.90 usd per barrel, 0.08 usd lower than in late trading in the US overnight. Brent North Sea crude for August delivery had dropped 0.11 usd to 68.00 usd.
   
Oil stocks dipped in reaction with BP down 7 at 588, Royal Dutch Shell off 22 at 1750 and Cairn Energy eased 25 pence to 1910.
   
Bridgewell Securities said that the departure of Cairn's finance director Kevin Hart was largely expected and was not unduly pressurising the shares.
   
It said that it envisaged a management reshuffle after the IPO of Cairn India, adding that shareholders should see todays news as confirmation of managements commitment to the IPO.
   
Elsewhere, British Energy was the worst FTSE 100 performing stock, off 14 pence to 476, after an in-line set of full-year results failed to impress.
   
The nuclear power group reported adjusted pretax earnings before interest, depreciation and amortisation in the year to Mar 31 of 846 mln stg.
   
Operating profit was 635 mln stg and profit before taxation was 599 mln stg.
   
Overall, British Energy said it had performed strongly during the year, although that was partially offset by power output below its target.
   
In reaction, Citigroup repeated its 'hold' recommendation and 620 pence target, telling clients that the group's operational performance was in line with its expectations.

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Fund manager Amvescap lost some of yesterday's gloss, sliding 13 to 473, after Merrill Lynch trimmed estimates ahead of the firm's Q2 results.
   
Among issues bucking this morning's negative trend, Carnival rose 31 pence to 2225 follows last weeks Q2 results and yesterday's bullish comment from JP Morgan.
   
Elsewhere, defensives were prominent among the gainers with Imperial Tobacco up 19 at 1663 and Gallaher rising 6 to 821, with Morrisons up 0-1/2 at 200 and Sainsbury up 0-1/2 at 325.
   
On the second line, JKX rallied 10 pence to 383 following yesterday's news of Glengary Overseas acquisition of a further 14.75 mln shares bring its stake to 26 pct.
   
Elsewhere, leisure group Whitbread rose 13 pence to 1110 after reporting like-for-like sales in the 13 weeks to June 1 increased 1.6 pct compared with a year ago, which led Merrill Lynch to reiterate its "buy" advice.
   
Whitbread added that although the second quarter has started slowly, the board is confident about the company's prospects.
   
Merrill Lynch noted that Whitbread's Travel Inn continued to perform strongly, with like-for-like sales up 6.7 pct over the 13 last weeks. The broker also said it expects pressure to build for the firm to sell all of the pubs.
   
In other earnings related news, Halma rose 1-1/4 pence to 183-1/2 after reporting record results for the year to April 1 2006.
   
Pretax profit for the year grew to 56.6 mln stg from 47.96 mln the prior year on organic revenue growth of 10.8 pct. Revenue from continuing operations was up 15.7 pct at 310.8 mln stg.

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FRANKFURT - Market data at 10.04 am

Major indices:
   
DAX 30 - 5,410.73, down 28.50 points or 0.52 pct
MDAX - 7,461.89, down 21.83 points or 0.29 pct
TecDAX - 623.81, down 0.81 points or 0.13 pct
DAX future - 5,447.50, up 11.50 points or 0.21 pct

Major gainers:
   
Siemens, up 0.62 eur or 0.93 pct at 67.61, as Morgan Stanley and JP Morgan raised their price targets on the stock to 87 eur from 79 and to 79 eur from 76 respectively, following news yesterday it is merging its networks unit with that of Nokia
   
Altana, up 0.26 eur or 0.60 pct at 43.59
   
ThyssenKrupp, up 0.13 eur or 0.54 pct at 24.23, as Credit Suisse branded it along with MDAX-peer Salzgitter and Sweden's SSAB its favourite stocks in the European steel sector
   
Linde, up 0.30 eur or 0.49 pct at 61.30
   
TUI, up 0.02 eur or 0.13 pct at 15.63
   
Major losers:
   
Hypo Real Estate, down 0.71 eur or 1.60 pct at 43.76
   
Commerzbank, down 0.41 eur or 1.53 pct at 26.37
   
SAP, down 2.43 eur or 1.49 pct at 161.17
   
Bayer, down 0.47 eur or 1.43 pct at 32.41
   
E.ON, down 0.80 eur or 0.97 pct at 81.35

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PARIS - Market data at 9.38 am:

Major indices:
   
CAC-40 down 24.18 points at 4,704.84
SBF-80 down 46.00 at 5,405.94
SBF-120 down 19.28 at 3,411.38

Volume: 465 mln eur
8 CAC-40 stocks up
31 CAC-40 stocks down
1 unchanged

Major gainers:
   
Arcelor, up 0.14 eur or 0.4 pct at 34.84 and extending recent gains. The company cancelled tomorrow's EGM, where shareholders were to vote on a massive share buyback deal that was part of the group's planned merger with Severstal.

With this setback, investors now see more chance of a success for the takeover offer of Mittal Steel, dealers said.
   
Aeroports de Paris, up 0.45 or 1 pct at 47.25. The shares have risen steadily since Friday's IPO, and are currently up over 6.6 pct from their 44 eur introduction price.
   
EADS, up 0.19 or 1 pct at 20.34. Germany's Handelsblatt reported today that German shareholders called for co-CEO Noel Forgeard to resign following the belated warning of Airbus A380 production problems, and the controversy surrounding his sale of EADS shares shortly before the warning was announced.

Major losers:
   
Vallourec, down 24.50 at 832.50 as oil services issues fall in line with retreating oil prices.
   
Thomson, down 0.22 or 1.7 pct at 12.98 after Exane BNP Paribas cut the stock to 'neutral' from 'outperform', citing expectations of weak first half margins.
   
Sanofi-Aventis, down 0.80 at 72. French daily La Tribune said the company saw a 25 pct drop in French drug sales in the first four months of this year, as the country's Social Security system moved to cut drug costs.

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AMSTERDAM - Market data at 9.55 am:

Major indices
   
AEX index             421.37, down 2.19 points
AMX Midcap index      546.74, down 2.60 points
Govt bonds            unchanged to slightly higher
   
Major decliners:
   
TomTom gave up 2.86 pct at 30.60 amid a newspaper report Philips will also move into the personal navigation device market, in direct competition with TomTom. Philips was down 1.62 pct at 22.47
   
ASML dropped 1.15 pct at 15.52, ASMI slipped 1.77 pct at 12.21
   
Oil sector stocks were also among leading decliners, with SBM Offshore easing 1.19 pct at 19.12 and Royal Dutch Shell falling 1.09 pct at 24.60
   
Rodamco Europe was 1.58 pct lower at 74.55, Corio gave up 1.6 pct at 44.92

Major gainers:
   
Ahold, due to report first-quarter results tomorrow, was up 0.46 pct at 6.62
   
ING edged up 0.17 pct at 29.63
   
Crucell put on 0.48 pct at 14.75 amid news of a new licensing deal for its PER.C6 cell line technology 
   
Corus added 1.25 pct at 5.67 as Standard & Poor's late yesterday removed the Anglo-Dutch steelmaker from CreditWatch and raised its long-term corporate credit rating on the group to 'BB' from 'BB-'

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