UK/Euro Financial Market Daily Morning Briefing 21-03-2007

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London shares open firmer ahead of BoE's minutes; Budget Report in focus
 
Leading shares edged higher in opening deals following overnight gains on Wall Street, with all eyes in London focused on the minutes of the Bank of England's Monetary Policy Committee and Chancellor of the Exchequer Gordon Brown's Budget report due at midday, dealers said.
   
At 9.08 am, the FTSE 100 index was 1.6 points higher at 6,221.9, reversing earlier losses but well off the 6,235.5 level seen before. The broader markets were also positive. Volume was muted ahead of the BoE's minutes and Brown's Budget Report, with 321 mln shares changing hands in 54,812 deals.
   
Overnight in the US, investors yesterday came to the market as they anticipated that the Fed's FOMC will leave rates on hold later today.
   
The DJIA put on its best two-day performance since February, taking on 61.93 points to 12,288.10, or a two-day advance of 177.69. Broader stock indicators also strengthened, with the tech-dominated Nasdaq Composite index adding 13.80 points to 2,408.21.
   
The Nikkei 225 stock index remained closed today for Spring holiday, while Hong Kong's Hang Seng Index ended the morning 33.97 points lower at 19,322.93.
   
Meanwhile, oil prices inched higher ahead of the release of weekly data on US energy stockpiles, with the market expecting gasoline inventories to show a decline.
   
New York's main oil futures contract, light sweet crude for delivery in May was up 0.36 to 59.62 usd per barrel. The April contract expired at the close of trading in the US overnight.
   
Over in London on the economics front, the minutes to the BoE's Monetary Policy Committee meeting on March 8 -- when rates were left on hold at 5.25 pct -- will be closely scrutinised, particularly given that another rate hike is expected in coming months.
   
The market will be looking to see whether the MPC's hawks Tim Besley and Andrew Sentance still voted for a rate hike, while focus will centre on the reaction to the recent volatility on equity markets.
   
"The minutes should prove interesting, not least as they will reveal what the MPC made of the recent market volatility, which began the week before the meeting," said Philip Shaw at Investec.
   
The so-called hawks, newest members Besley and Sentance, are expected again to have called for another quarter point hike in rates in order to counteract rising inflationary pressures.
   
Also under the spotlight today is Gordon Brown's budget, with the market looking for an upbeat appraisal of the UK economy over the last ten years and expecting the unveiling of what a Brown-led government will do on the environment over the coming years.

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Brown will be able to show that the UK economy, referred to as "impressive" recently by the IMF, has enjoyed an unprecedented period of unbroken growth over the last decade and is currently growing above its long-run average despite elevated borrowing costs and sky-high energy costs.
   
The picture on the public finances has not been so rosy, though. After his initial commitment to keep to the previous Conservative spending plans, Brown has raised public spending and taxes by about 2 percentage points of GDP.
   
Analysts expect Brown to maintain his most recent GDP forecast, from last December's pre-budget. Brown forecast that the UK economy will grow by 2.75 3.25 pct this year, above the 2.7 pct recorded in 2006.
   
The cross-over to the market saw property groups go firmer on expectations of a possible easing in REIT regulations, with Land Securities taking on 37 pence to 2,161. Hammerson topped the gainers, adding 77 to 1,732, Liberty International improved 9 to 1,240 and British Land took on 12 to 1,54.
   
Hammerson was also talked of as being the target of interest from private equity firm GE Real Estate investment.
   
Financial stocks were another beneficiary, with Aviva up 6-1/2 to 765-1/2, Schroders taking on 0-1/2 to 1,098, Friends Provident taking on half a penny to 190-1/2, and Northern Rock and Amvescap respectively taking on 4 pence to 11,42 and 6 pence to 603-1/2.
   
Barclays was also among the top performers, adding 15 to 717, as potential merger talks with Dutch peer ABN Amro continue. The Wall Street Journal reporting that HSBC and American banking giant Citigroup are also potential bidders for ABN Amro.
   
Compass shares also saw some gains, up 3-1/4 to 320, on market talk the group could be subject to an MBO. Yesterday, the rumour mill resuscitated talk that peer Sodexho could be casting an acquisitive eye over the company.
   
Whitbread was one of the main casualties this morning, deflating 36 to 1,898 after gains yesterday were spurred by talk of a private equity bid at 2,300 pence a share.
   
Imperial Tobacco shed 5 to 2,245, ahead of a trading statement at 9 am, which will see chief executive Gareth Davis make his first public statement since Franco-Spanish Altadis group rebuffed his 45 eur per share approach on Friday. Shareholders will look for an insight into how any deal with Altadis may progress.
   
On the corporate front, Smiths Group dropped 2 to 1,038 after the release of first-half results, which were higher than consensus estimates, despite the impact of the weaker US dollar and which reassured investors with an upbeat outlook.
   
Earlier, the security and medical equipment maker reported a 7 pct rise in H1 headline pretax profits to 134 mln stg for continuing operations, despite a significant impact from the weaker dollar, the company said.

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Reacting to the numbers, Cazenove said concerns over the firm's Medical division appeared overdone, with interim results towards the upper end of expectations and solid core growth in the face of a marked deterioration in the US dollar.
   
On the midcap front, Weir Group's better than expected full-year results saw the shares take on 19-1/2 to 597-1/2, after the group reported pretax profit from continuing operations before exceptional items increased 40 pct in 2006 to 87.1 mln stg, and said it expects further improvement in 2007.
   
The company said EPS increased 38 pct to 32.4 pence, while revenues increased 19 pct to 940.9 mln stg.
   
In reaction Bridgewell said the results were slightly better than its own estimates, noting also that its own forecasts were at the top of consensus.
   
Kesa Electricals shares were flat, edging up 0-1/4 to 350-3/4, as a muted outlook offset in-line full-year results from Europe's third-biggest electricals retailer.
   
This morning, the group which trades as Comet in the UK, and Darty and BUT in France, said its full-year pretax came in at 165.4 mln stg, compared to analysts' forecasts of 163-171 mln stg and 143.3 mln stg last time.
   
In response, Merrill Lynch reiterated its 'buy' advice but cut its 2008 pretax and EPS estimates by 3 pct and 1 pct respectively to 170 mln stg and 21.3 pence.
   
Looking ahead to Wall Street, all attention will be focused on the FOMC committee meeting, expected to reveal a decision on interest rates as it closes today, due out 6.15 pm.
   
Banking giant Morgan Stanley also unveils first-quarter results ahead of the bell, with consensus looking for EPS of 1.88 usd compared to 1.51 usd.

US Summary

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

UK Diary of Events

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

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Paris shares AFX at a glance outlook

Forthcoming Events
   
Today
   
Provimi FY results, after market closes

Tomorrow
   
Areva FY results, after market closes
   
Hermes FY results, before market opens
   
Saint-Gobain FY results, after market closes

Company News
   
Bourbon SA reports 25.4 pct drop in net profit to 152.9 mln eur compared to 205.0 mln eur the previous year.
   
Rexel IPO priced at 16.35-19.00 eur, to comprise 1 bln eur capital increase, 15 mln eur share sale
   
GFI Informatique eyes acquisitions to add 60 mln eur of sales
   
Ipsos posts full-year net profit of 39.5 mln eur and expects 2007 organic sales to rise 'at least 8 pct'
   
CNP Assurances full-year net profit jumps 23 pct to 948 mln eur; the group says it is seeking to boost its market share in share rise
   
Carbone Lorraine mulls acquisitions in core and related businesses
   
Guyenne et Gascogne reports 27 pct rise in 2006 net profit to 47 mln eur, helped by disposal gain
   
Cap Gemini staff working on UK govt contract vote for strike over pay
   
Danone raises Wimm Bill Dann stake to 13.7 pct, may seek seat on board this year
   
Market Sentiment
   
Valeo upgraded to 'overweight' vs 'underweight' at Morgan Stanley
   
Ipsos upgraded to 'buy' vs 'hold' At ABN Amro
   
Atos Origin upgraded to 'equal-weight' vs 'underweight' at Morgan Stanley

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FRANKFURT - market data at 9.37 am

Major indices
   
DAX - up 1.28 points, or 0.02 pct, to 6,701.57
MDAX - up 0.84 points, or 0.01 pct, at 9,910.26
TecDAX - up 2.20 points, or 0.27 pct, at 829.73
DAX futures - down 3.50 points, or 0.05 pct, to 6,754.50

Major decliners:
   
Metro, down 0.80 eur, or 1.43 pct, at 55.31, after posting broadly-in-line but unimpressive full-year figures.
   
BASF, down 0.49 eur, or 0.63 pct, at 77.47,
   
Deutsche Telekom, down 0.09 eur, or 0.72 pct, at 12.48, as the telecom giant extended yesterday's losses.
   
Siemens, down 0.49 eur, or 0.61 pct, at 79.21
   
Deutsche Boerse, down 0.54 eur, or 0.32 pct, at 166.71
   
Major Advancers
   
BMW, up 0.84 eur, or 2.04 pct, at 42.10
   
Deutsche Postbank, up 1.42 eur, or 2.26 pct, at 64.25 after Sal Oppenheim raised its stance on the bank to 'buy' from 'neutral' and lifted its price target to 80 from 60 eur per share
   
Hypo Real Estate, up 0.74 eur, or 1.60 pct, at 46.95
   
SAP, up 0.34 eur, or 1.00 pct, at 34.26, after peer Oracle released consensus-beating numbers yesterday and Goldman Sachs reiterated its stance on the software giant with a target of 39 eur
   
Volkswagen, up 0.90 eur, or 0.85 pct, at 106.60
 
Other Major Movers:
   
MDAX-listed Gea Group, up 0.23 eur, or 1.27 pct, at 18.38, after the engineering and technology company announced full-year figures above analysts' expectations, signalling a long awaited turnaround, and said a sale of its Lurgi unit is nearing
   
MDAX-listed SGL Carbon, up 0.26, or 1.20 pct, at 22.00, as its shares were upgraded to 'overweight' from 'neutral' by HSBC with the price target raised to 26.0 eur from 18.1, citing the group's gradual move from a cyclical to a growth stock.

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Amsterdam shares AFX at a glance outlook

Forthcoming Events
   
Today
   
DSM will hold presentation about loyalty dividend
   

Company News
   
Univar ups bid for Chemcentral to 650 mln usd from 600 mln
   
Numico starts buying shares to claim remaining 1.3 pct stake of Sari Husada for estimated 14.1 mln eur - report
   
Market Sentiment
   
Fugro 'buy' rating reiterated by Theodoor Gilissen, target upped to 47 from 42
   
Vastned O/I upgraded to 'add' from 'neutral' at Kempen with a target of 30.7 eur

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