UK/Euro Financial Market Daily Morning Briefing 21-07-2006

London shares open down after lower NY close; miners weigh

Leading shares opened in the red, weighed down by miners on the back of retreating commodity prices and following a negative close on Wall Street overnight amid economic growth concerns, dealers said.
   
At 8.51 am, the FTSE 100 index was down 24.2 points at 5,746.7, while the broader indices also traded in negative terrain.
   
Last night, US stocks were impacted by economic growth concerns after the Philadelphia Federal Reserve Bank's index of business activity fell more than expected, to 6.0 in July from 13.1 the previous month.
   
And the overnight release of minutes from the June 29 Federal Open Market Committee meeting showed that Fed officials then were uncertain about future interest rate direction although they expressed concerns about core inflation in the short-term.
   
The disappointing economic data was compounded by weak results from Intel, which said its earnings tumbled 57 pct as competition forced the chipmaker to cut its prices.
   
The DJIA closed 83.32 points lighter at 10,928.10, while the Nasdaq Composite ended 41.29 points easier at 2,039.42 and the S&P 500 index closed down 10.68 points at 1,249.13.
   
After the bell, however, Microsoft shares jumped in after-hours trade on the back of its announcement that it will buy back shares worth 40 bln usd and better-than-expected 2007 guidance.
   
And Google's shares also edged up after hours, thanks to second-quarter profit that more than doubled, maintaining the Internet search leader's penchant for topping analysts' high expectations and further underscoring the advantage the company has built over its chief rivals.
   
Meanwhile, across Asia this morning, the Nikkei 225 index ended the afternoon session 125.58 points lower at 14,821.26, while Hong Kong's Hang Seng dipped 45.24 points at 16,427.38 by midday on profit-taking in property and financial stocks following yesterday's sharp gains.
   
And commodity prices also declined, with gold retreating back to levels around 620 usd per ounce after closing down 10.30 usd at 632.50 usd an ounce in New York.

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This weighed on the mining sector in the UK this morning, with Kazakhmys leading the fallers, down 27 pence at 1,146, followed by Antofagasta, 8-1/2 pence easier at 400-1/2, and Vedanta Resources, 259 pence lower at 1,277.
   
Elsewhere, Barclays slipped 7-1/2 pence to 601 as news the US district court has dismissed claims against Barclays PLC, Barclays Bank PLC and Barclays Capital Inc in the Enron class action failed to offset sector weakness.
   
The banking industry was under pressure after Capital One Financial Corp  shares fell 6.5 pct after hours as the credit-card issuer said Q2 net income rose 4 pct, but its results missed analysts' estimates largely because of deterioration in the UK credit environment.
   
Lloyds TSB Group also declined, down 4 pence at 527.
   
And Vodafone Group also traded lower amid talk that Arun Sarin's future at the mobile phone operator could come under renewed scrutiny at Tuesday's annual general meeting, with a number of major investors considering voting against the chief executive's re-election to the board, according to a well-placed source.
   
Vodafone's shares lost a penny to 112-1/2.    

Among oil-related plays, BP slipped 5 pence to 620, tracking the retreating crude oil price, which fell back to 74.00 usd per barrel levels, and on the back of a newspaper report that investors do not want its chief executive to retire.
   
BP is being urged to overturn its retirement policy for directors in order to allow the chief executive Lord Browne to stay on at the company, the Telegraph newspaper reported, citing Mark Iannotti, a Merrill Lynch oil analyst, who said Browne's impending retirement was a "potential medium-term risk for shareholders".
   
Still on the downside, PartyGaming gave up initial gains as ongoing concerns surrounding the betting industry offset its in-line Q2 trading update.
   
The gambling stock slipped back a penny to 86-1/4 after jumping 5-3/4 pence at the open.
    
The world's biggest online gambling group said revenues rose by nearly 50 pct in the second-quarter to 319.3 mln usd, boosted by record player numbers.
   
Responding to the update, Dresdner Kleinwort said Q2 revenues were in line with expectations and, importantly, geographic expansion continues.

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The German-owned broker repeated its 'buy' advice on the gambling stock.
   
Meanwhile, investors await the outcome of the detention hearing of BETonSPORTS' chief executive, David Carruthers, who was arrested along with 10 others charged with conspiracy, racketeering and wire fraud in taking sports
bets from US residents.
   
On the upside, Tate & Lyle managed marginal gains, edging up a penny to 669-1/2, after Morgan Stanley raised its price target on the stock to 550 pence, although the broker's reiteration of its 'underweight' rating capped the shares' rise.
   
And tobacco stocks were also higher, with Imperial Tobacco up 19 at 1,700 and BAT 10 pence stronger at 1,393, as defensives came into play.
   
On the second line, Ultra Electronics dropped over 5 pct, or 57 pence to 1,043, after denying that Finmeccanica was considering bidding for the company, a rumour which fuelled a 15 pct jump in Ultra's shares yesterday.
   
In reaction to the speculation, UBS today said this highlighted the UK defence technology group's appeal to potential suitors.
   
And on the upside, Colt Telecom led the gainers, up 3-1/2 pence at 130, bouncing back from yesterday's losses.
   
Finally, on the economic front today, UK Q2 preliminary GDP estimates are due this morning, with consensus pointing to GDP growth of 0.7 pct quarter-on-quarter or 2.5 pct year-on-year, while investors also await services sector output figures for May.

UK 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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AMSTERDAM - Market data at 10.17 am:

Major indices

AEX index             437.68, down 1.07 point
AMX Midcap index      569.57, down 1.48 point
Govt bonds            narrowly mixed

   
Major losers:
   
Technology stocks led decliners, weighed down by Intel's disappointing outlook overnight and disappointing third-quarter results from Infineon.  ASML lost 2.07 pct at 15.14 and ASMI gave up 1.4 pct at 11.27.
   
Philips eased 0.71 pct at 23.86, Getronics shed 0.86 pct at 8.09
   
TomTom, due to report second-quarter results on Tuesday, fell 2.87 pct at 26.37
   
Hagemeyer gave up some of yesterday's sharp gains, dropping 1.06 pct at 3.74
    

Major gainers:
   
Most notable gainer was Pharming, climbing 3.81 pct to 3.0 after an earlier high of 3.09, on news the biotech company applied for EU marketing approval for its lead product, recombinant human C1 inhibitor (rhC1INH) for the treatment of acute attacks of hereditary angioedema, in Europe
   
Numico advanced 0.33 pct at 36.02, Heineken rose 0.29 pct at 34.66 as Credit Suisse upped its price target to 33 eur from 29
   
Corio put on 0.59 pct at 51.40 eur as Citigroup upgrade the stock to 'hold' from 'sell'

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FRANKFURT - Market data at 10.21 am

Major indices:
   
DAX 30 - 5,516.84, down 28.98 points or 0.52 pct
MDAX - 7,582.24, down 99.28 points or 1.29 pct
TecDAX - 595.59, down 6.25 points or 1.04 pct
DAX future - 5,543.50, up 18.50 points or 0.33 pct

Major gainers:
   
Fresenius Medical Care, up 0.86 eur or 0.92 pct at 93.90
   
RWE, up 0.44 eur or 0.67 pct at 65.69
   
Metro, up 0.19 eur or 0.44 pct at 42.93
   
E.ON, up 0.31 eur or 0.35 pct at 88.94
   
Henkel, up 0.22 eur or 0.24 pct at 90.72

Major losers:
   
Infineon, down 0.42 eur or 4.71 pct at 8.50, as the chipmaker's third-quarter results disappointed investors
   
SAP, down 4.43 eur or 3.06 pct at 140.12, after JP Morgan downgraded its stance on the stock to 'underweight' from 'overweight' and slashed its price target to 120 eur from 225, following the software giant's final second-quarter results yesterday
   
ThyssenKrupp, down 0.68 eur or 2.53 pct at 26.16
   
Commerzbank, down 0.49 eur or 1.84 pct at 26.17
   
TUI, down 0.21 eur or 1.37 pct at 15.11

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