UK/Euro Financial Market Daily Morning Briefing 20-08-2007

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London shares open firmer; NY closed up; financials and miners gain

London shares opened firmer as Wall Street closed higher on Friday as investors took heart from the US Federal Reserve's surprise decision Friday to cut its discount rate with UK financials and miners the major risers.
   
At 9.01 am, the FTSE 100 index was 90.8 points higher at 6,155 having closed on Friday up 205.3 points at 6,064.2, while the FTSE 250 index was 165 points ahead at 10,851.2.
   
Volume was 228 mln shares changing hands in 65,897 deals.
   
"After the phenomenal rise in Far Eastern stocks with China up 5 pct following Wall Street's higher close overnight it seems to have halted the slide for the moment," said Mark Priest, head of equity sales at Tradindex. "However, there is potential for the markets to remain volatile over the next few weeks as investors eye whether or not the central banks across Europe will cut interest rates," added Priest.
   
Last week on Wall Street, stocks closed higher Friday after the Federal Reserve did what Wall Street was clamouring for and cut its key discount rate a half percentage point.
   
The Dow Jones Industrial Average index surged 233.30, or 1.82 pct, to 13,079.08, while the Nasdaq Composite index was 53.96 ahead, or 2.20 pct, to 2,505.03.
   
While it is a quiet week for data on both sides of the Atlantic, it will give economists plenty of time to ponder the extent to which the Federal Reserve's cut in the discount rate signals a pending cut in the target federal funds rate, and if so, whether it might happen this week.
   
In Britain, the key second quarter GDP data on Friday is expected to validate the strength of the economy, while the Confederation of British Industry's industrial trends survey for August - expected on Wednesday -- is predicted to show a moderate recovery in the core activity and price indicators.
   
On Asian markets, the Hang Seng index ended the morning up 736.97 points at 21,124.10, while the Nikkei 225 index was up 3.8 pct at 15,853.95.
   
In Asian trading hours, oil prices fell in Asian trade Monday as energy facilities in the United States appeared to be safe for the time being from the fury of Hurricane Dean.
   
New York's main contract, light sweet crude for September delivery had fallen 82 cents to 71.16 usd a barrel from 71.98 usd in late US trades Friday. Brent North Sea crude for October delivery dropped 92 cents to 69.52 usd.   

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Turning to the UK blue chips, Northern Rock was one of the major gainers up 36 at 745-1/2 after a bullish noted from Cazenove with the broker maintaining an 'outperform' stance on the group.
   
The financial sector was also helped by Lehman Brothers, which upgraded its weighting on the sector to 'overweight' from 'neutral', within which it is maintaining its 'overweight' stance on insurance.
   
Lehman said fundamentals of the corporate sector remain intact, and that valuations are at extreme levels compared with recent cycles. It said that, with financials being in the middle of the recent credit crisis, it thinks the reaction has been overdone.
   
Hedge fund group Man Group was up 15-1/2 at 474-1/2 and asset managers Invesco was 13-1/2 higher at 587 and Schroders was up 23 at 1,074.
   
Elsewhere, the miners were major gainers, helped by a recovery in commodity prices on Friday with BHP Billiton also rising in the Australian market, up 48 at 1,270.
   
Its peers were also higher: Kazakhmys gained 52 at 1,177, Xstrata was up 96 at 2,752, Lonmin edged 126 higher at 3,100, Anglo American was 86 firmer at 2,625, and Rio Tinto was up 128 at 3,110.
   
In broker generated news, British Energy Group was 12-1/2 higher at 444 after Goldman Sachs upgraded the group to 'buy' from 'neutral' with a price target cut to 536 pence from 570 pence, following last week's Q1 results.
   
Turning to the downside, Imperial Tobacco Group was down 1 at 2,159, the only blue chip faller.
   
Looking at the second liners, Keller Group was a major gainer, up 51-1/2 at 969-1/2 after posting a strong set of first half results this morning. In reaction Altium Securities has reiterated its 'buy' stance and 1,150 pence price target.
   
Also in earnings news, Hiscox edged 11-3/4 higher at 275 after the group said first-half pretax profits rose over 72 pct, helped by a strong performance at its catastrophe insurance and global markets divisions. Pretax profits for the first half of the year to end-June rose to 105.6 mln stg, up from 61.3 mln stg last year.
   
And Michael Page International was 6-3/4 higher at 464-1/4 after the group outperformed the specialist recruitment sector with a 53.1 pct increase in first-half pretax profit and said it sees further growth in new and existing markets.
   
First-half pretax profit for the period to June 30 rose to 69.2 mln stg from 45.2 mln in the same period last year, while revenue increased 26.8 pct to 395.8 mln stg.

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Elsewhere, Workspace Group gained 5 at 353-1/4 after pretax profit for the first quarter fell more than 40 pct on lower gains from its investment property, while its net asset value rose 4.1 pct to 3.54 stg per share.
   
Pretax profit fell to 24.9 mln stg from 43.1 mln stg, as gains from changes in the fair value of investment property declined to 21.0 mln stg from 34.7 mln stg.
   
Back to broker generated news, Tullow Oil gained 14-3/4 at 444-1/4 after UBS upgraded the group to 'neutral' from 'sell' and reiterated its 500 pence price target, citing lots of drilling catalysts later this year as providing unrisked upside potential.
   
On the downside, St Modwen was 11 lower at 529 after Merrill Lynch cut its stance on the group to 'sell' from 'neutral'.
   
Merrill said that although it recognises St Modwen is a niche developer operating in a very specialised part of the real estate market, in an environment where the appetite for risk is being reassessed it sees better
relative value elsewhere.
   
Its peer, Quintain Estates & Development, was 12 lower at 792-1/2.
   
And finally on today's UK economic agenda, the UK's preferred measure of public finances is expected to remain broadly stable in July from the same month a year earlier, as healthy profits from the corporate sector and an increase in income tax and national insurance receipts offset subdued spending by the
government.
   
And the UK's broad measure of money supply growth is expected to continue to slow in July, with provisional figures for M4 seen rising by 12.6 pct from a year earlier, after a 12.9 pct increase in June.
   
Elsewhere, a range of mortgage data from the likes of the British Bankers Association and the Council of Mortgage Lenders is expected to reveal signs of further slowing on the housing market, as the past five interest rate hikes in the last year take their toll on borrowers.

US Summary

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

UK Diary of Events

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

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PARIS - Market data at 9.58 am

CAC-40 index:
   
Up 74.58 points or 1.39 pct at 5,438.21
All 40 stocks higher
   
Major gainers:
   
ArcelorMittal, up 1.56 eur or 3.91 pct at 41.47, after posting steep losses last week amid a sell-off of metal company stocks.
   
Capgemini, up 1.53 eur or 3.51 pct at 45.15
   
Michelin, up 2.93 eur or 3.51 pct at 86.40   

Major decliners:
   
Teleperformance, down 0.84 eur or 2.79 pct at 29.26, after losing a major contract with Brasil Telecom.

Most active CAC-40 shares:
   
France Telecom, 2.22 mln shares, up 0.14 eur or 0.67 pct at 21.14
   
Alcatel-Lucent, 2.07 mln shares, up 0.15 eur or 2.07 pct at 7.89
   
Axa, 1.8 mln shares, up 0.51 eur or 1.76 pct at 29.53. It announced details of its annual employee share purchase program today.

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FRANKFURT - market data at 10.24 am
   
DAX - up 48.00 points, or 0.65 pct, at 7,426.29
MDAX - up 270.20 points, or 2.84 pct, at 9,782.35
TecDAX - up 17.10 points, or 2.02 pct, at 861.80
DAX futures - up 2.00 points, or 0.03 pct, at 7,457.00

Major Advancers:
   
Hypo Real Estate, up 1.30 eur or 3.33 pct at 40.29, enjoying a late rebound after the US Fed on Friday signalled its willingness to help bail out the financial sector should problems stemming from a subprime crisis and subsequent liquidity crunch intensify.
   
MAN, up 2.78 eur or 2.91 pct at 98.22, looking to rebound slightly after recent losses
   
Continental, up 2.09 eur or 2.34 pct at 91.29
   
Siemens, up 1.63 eur or 1.85 pct at 89.78
   
Deutsche Boerse, up 1.33 eur or 1.73 pct at 78.33

Major Decliners:
   
RWE, down 0.38 eur or 0.46 pct at 81.53
   
SAP, down 0.05 eur or 0.13 pct at 38.60
   
Merck, down 0.05 eur or 0.05 pct at 92.25

Other Major Movers:
   
IKB, up 0.64 eur or 4.90 pct at 13.69 after a report in WirstschaftsWoche said that Dutch-based Rabobank may be interested in purchasing the bank, which specializes in loans to mid-size companies.
   
Deutsche Telekom, up 0.15 eur or 1.14 pct at 13.34, after the head of its personnel operations, Thomas Sattelberger, said in an interview with Die Welt on Saturday that he wants to restructure his department.

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MILAN - market data at 9.50 am
   
Main indices:
   
Mibtel up 0.92 pct at 39,198  
   
S&P/Mib up 0.91 pct at 39,065 

Main S&P/Mib gainers: 
   
Parmalat up 3.21 pct at 2.505 eur
   
Alitalia up 2.37 pct at 0.82 as there seems to be revived interest to take over the ailing airline after the first privatisation attempt failed due to a lack of bidders
   
Fiat up 2.52 pct at 18.52 after the recent massive sell-off
   
Lottomatica up 2.18 pct at 26.19
   
Finmeccanica up 2.06 pct at 19.68 as Societe Generale upped the stock on valuation grounds to 'hold' from 'sell' with a 20.0 eur target

Main S&P Mib losers:
   
Terna down 0.28 pct at 2,455

Other stocks in the news:
   
Unicredito Italiano up 1.62 pct at 6.21, Intesa Sanpaolo up 1.43 pct at 5.69 as Lehman Brothers added the stocks to its European recommended portfolio while upping the financial sector to 'overweight' from 'neutral'
   
Italcementi up 2.01 pct at 17.64 after it announced it had through its  Egyptian unit Suez Cement Company launched an offer on the Hilal Cement Company valuing the whole group at some 89 mln usd 

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