UK/Euro Financial Market Daily Morning Briefing 21-06-2006

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London shares easier in early deals; NY mixed; DSG weak after results

UK blue chips were weak in early deals following a mixed session overnight on Wall Street, with DSG International the main faller after in-line first-half results were accompanied by cautious outlook comments, dealers said.
   
At 9.14 am, the FTSE 100 index was 30.2 points lower at 5,628.0, with all the broader FTSE indices also weaker.
   
Early volume was slow, with 211 mln shares changing hands in 30,458 deals. Overnight on Wall Street, US blue chips broke a two-day losing streak thanks to pleasing housing data, although the broader market failed to hang on to early gains.
   
The DJIA closed 32.73 points higher at 10,974.84, off its early highs, while the Nasdaq closed 3.36 points lower at 2,107.06 and the S&P 500 index ended down 0.02 points at 1,240.12.
   
In Asia today, the Nikkei 225 index ended 4.15 points easier at 14,644.26, while the Hang Seng closed 50.39 points higher at 15,659.36.
   
In London, the day's corporate news was the main drag on blue chip sentiment first thing.
   
DSG International was the top FTSE 100 faller early on, down 4-1/2 pence at 189 after the electricals retailer, formerly known as Dixons reported underlying pretax profit of 318.2 mln stg, down from 332.8 mln last time and said it "remains cautious" on prospects for consumer confidence.
   
In response, Citigroup reiterated its "hold" rating, noting that DSG's pretax figure was broadly in line with its 318 mln stg forecast.
   
Other retail issues were also weaker, with GUS down 2 pence at 927, Next off 7 pence at 1,605, and Marks & Spencer off 4-1/2 pence at 565-1/2.
   
Food retailer J Sainsbury was also lower, down 3 pence to 320 as a better than expected first-quarter sales update prompted investors to cash in on recent gains.

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The UK's third-largest food retailer said like-for-like sales excluding petrol increased 5.7 pct. Analysts expectations had ranged between 5-6.5 pct, with the consensus at 5.4 pct.
   
Credit Suisse reiterated its 'underperform' stance on Sainsbury's, pointing out that although like-for-like sales growth was strong it was flattered by the World Cup and good weather.
   
And banking group HBOS was also weaker on profit-taking after a robust trading update, losing 15 pence at 938.
   
HBOS said its current performance is "robust," underpinned by good sales of investment products and stable credit quality, and added that it is comfortable with the 5.199 bln stg consensus analyst estimate for full year underlying pretax profit.
   
Away from the news, weakness in mining and oil issues also weighed on sentiment as yesterday's rallies were reversed - BHP Billiton shed 18 pence at 970, while Rio Tinto lost 43 pence at 2,724, and Cairn Energy dropped 32 pence at 1,888.
   
On the upside with blue chips, AB Foods was the top riser, up 13-1/2 pence at 730 lifted by a bullish note from UBS today, which repeated its 'buy' rating an 940 pence price target on the food producer.
   
The broker highlighted the benefits of its biofuels joint venture.
   
ITV was also a good gainer, up a penny at 103-1/2 as the broadcaster announced plans to raise its cash return to shareholders to 500 mln stg, up from 300 mln previously, in a trading update today.
   
The group also raised its targets for some non-advertising revenues.
   
On the second line, engineer Hunting was the top riser, up 21 pence at 384 after it said it expects its profit for the full year to exceed current market expectations as a result of ongoing robust trading conditions.
   
The company also said the capital expenditure for new business it spent in earlier months, combined with a robust market, makes them confident about the outlook for the rest of 2006 and going in to 2007.

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But on the downside, shares in regional newspaper publisher Johnston Press shed 12-1/2 pence at 429-3/4 after it reported a steep fall in advertising revenues since the start of the year, confirming that the World Cup has failed to lift the ad market out of the doldrums.
   
In a trading update, the group said there had been "no discernible improvement" in the newspaper industry since early March, when it reported a 10.5 pct slide in ad revenues in the first two months of 2006.
   
This morning it said that advertising revenues on a like for like basis, excluding acquisitions, were down 9.4 pct in the five months to 3 June.
   
And shares in Great Portland Estates lost 12-1/4 pence at 466-1/2 as investors took the news that the property group has forward sold its Tooley Street development in London as an opportunity to take profits.
   
Great Portland said today it will make a 7.7 mln stg profit from the sale of its proposed 200,000 sq ft office development in Tooley Street to UBS Global Asset Management for 94.3 mln stg.
   
Merrill Lynch noted that the sale will generate an immediate surplus on the land of 8 mln stg and a future development profit of 10 mln stg, with an additional 2 mln stg to follow if rent hurdles are achieved.
   
On the economic front, the main focus will be on the release of minutes from this month's Bank of England Monetary policy Committee meeting.
   
The market will be interested to see if anyone joined David Walton on the eight-member MPC to vote for a quarter point rate hike at the June 8 meeting.
   
Most analysts anticipate another 7-1 vote in favour of keeping the key repo rate unchanged at 4.50 pct for the tenth month running, with Walton voting for a quarter point hike for the second month running.
   
Tonight's annual Mansion House speeches from BoE governor Mervyn King and Chancellor Gordon Brown will also be closely followed.
   
No major US economic data is due for release today.

Diary of Events

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

US Summary

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

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PARIS - Market data at 9.51 am:

Major indices:
   
CAC-40 down 26.46 points or 0.55 pct at 4,743.96
SBF-80 down 24.60 points or 0.45 pct at 5,423.56
SBF-120 down 18.62 points or 0.54 pct at 3,437.56

Volume: 333 mln eur
3 CAC-40 stocks up
35 CAC-40 stocks down
1 CAC-40 stock unchanged
(Arcelor temporarily removed from CAC-40)

Major gainers:
   
Arcelor, up 0.43 eur or 1.21 pct at 35.83, after a revised merger proposal from Severstal. Arcelor's board is due to meet today on the matter.
   
STMicroelectronics, up 0.07 eur or 0.56 pct at 12.61, extending recent gains tied to the merger by Nokia and Siemens of their networks divisions, a move seen as strengthening the phone equipment sector; Nokia is a client of ST.
   
Gaz de France, up 0.12 eur or 0.46 pct at 25.95. France's governing UMP party will mull changes in the planned GDF-Suez merger before parliament debates the enabling legislation, according to La Tribune. The government still aims to have the merger completed by year end.
   
EADS, up 0.07 eur or 0.33 pct at 21.53, continuing yesterday's recovery. The French government wants to retain the company's French-German management structure despite the current turmoil in EADS' top management.

Major losers:
   
Bouygues, down 0.67 eur or 1.70 pct at 38.68
   
Publicis, down 0.48 eur or 1.63 pct at 29.00, extending yesterday's losses.
   
Electricite de France, down 0.53 eur or 1.35 pct at 38.68

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FRANKFURT - Market data at 9.47 am
   
Major indices:
   
DAX 30 - 5,452.31, down 41.30 points or 0.75 pct
MDAX - 7,565.59, down 7.63 points or 0.10 pct
TecDAX - 624.06, down 1.67 points or 0.27 pct
DAX future - 5,490.00, down 22.00 points or 0.40 pct

Major gainers:
   
ThyssenKrupp, up 0.21 eur or 0.86 pct at 24.76
   
Bayer, up 0.13 eur or 0.40 pct at 32.86, as it said it has gained control of 191 mln shares in Schering AG or 88.0 pct of outstanding shares, clearing the way for it to acquire the latter
   
Infineon, up 0.01 eur or 0.12 pct at 8.60, as Deutsche Bank lowered its price target on the stock to 11 eur from 11.50 on valuation grounds, though it advised investors to buy the issue ahead of what it expects to be an eventful second half of 2006

Major losers:
   
Volkswagen, down 0.81 eur or 1.51 pct at 52.87, as oil prices rose and the euro strengthened against the dollar
   
Deutsche Boerse, down 1.40 eur or 1.38 pct at 100.25, as Euronext dismissed the German exchange operator's revised merger offer
   
Continental, down 1.08 eur or 1.35 pct at 78.67
   
SAP, down 1.98 eur or 1.21 pct at 161.75
   
Lufthansa, down 0.17 eur or 1.20 pct at 13.96

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Amsterdam shares AFX at a glance outlook

Shares are expected to open flat to slightly lower, as concerns about interest rates in the US continue, dealers said.
   
Yesterday, the AEX closed 1.62 points higher at 425.18.

Forthcoming Events
   
Today
   
None expected
   
Tomorrow
   
April consumer spending data (7:30 am)

Today's Press
   
The Dutch First Chamber, or Senate, will vote on privatisation of Schiphol Airport on June 27 (Het Financieele Dagblad)

Company News
   
Ordina given a rating hike to 'buy' from 'hold' and increased price target to 21.50 eur from 18 at ING
   
Ahold posts Q1 results ahead of expectations

Singapore 3.35 pm (0735 GMT) Tokyo 1.00 pm (0400 GMT)

Forex

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