UK/Euro Financial Market Daily Morning Briefing 21-08-2006

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London shares slide in early deals on profit taking, weak Asian markets

Leading shares slipped into negative territory in early deals, with a firm mining sector outweighed by weakness in financials and general profit taking after recent gains, dealers said.
   
By 09.15, the FTSE 100 index was 13.0 points lower at 5,890.4, while the broader indices were also under pressure.
   
US stocks closed higher again on Friday night, pulling off a late comeback as investors shrugged aside concerns about lagging consumer sentiment and disappointing second-quarter results from Dell Inc, traders said.
   
The Dow Jones industrial average rose 46.51, while the Nasdaq gained 6.34 points to 2,163.95, having both been lower throughout most of the day.
   
In Asia, the Nikkei 225 index closed 136.94 points lower at 15,969.04, while the Hang Seng was down 320.76 points lower at 17,009.94 at midday, responding to Friday's rate hike by China.
   
Oil prices were higher in Asian trade after an Israeli commando raid into Lebanon threatened to unravel a fragile truce, and after Iranian missile tests added to tension in the Middle East, dealers said.
   
New York's main contract, light sweet crude for September delivery, was at 71.50 usd a barrel, up 0.36 usd from its close of 71.14 usd in the US Friday.      

BP shares stood out in London with a gain of 5 pence to 619, lifted by an upgrade to 'neutral' from 'sell' by Goldman Sachs.
   
The US broker pointed out to clients that since July, the shares have fallen 5 pct against a 3 pct rise in the European market and a 2-3 pct gain for key peers Royal Dutch Shell, Total and ENI and now sees 9 pct potential upside to its price target of 665 pence.
   
Royal Dutch Shell gained 13 pence to 1,961, while BG Group added 3 pence to 708.   

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Mining shares were also in demand in early deals with a combination of M&A talk and firmer metal prices providing support.
   
Anglo American jumped 35 pence to 2,409 after yesterday's Observer newspaper reported that the group is an 80 bln usd bid target for rivals awash with cash thanks to the commodities boom fuelled by China and India.
   
According to City sources, CVRD of Brazil, along with British-based Xstrata and Rio Tinto, are looking at a possible break-up bid and have hired financial advisers ahead of a possible approach, the newspaper said.
   
Rumours of a bid also lifted Lonmin 17 pence higher to 2,825 and Vedanta 5 pence higher at 1,374.
   
BHP Billiton was also in demand, up 5 pence at 1,037 after yesterday's Sunday Telegraph reporting that the mining giant could announce plans to return at least 3 bln usd to shareholders.
   
Copper prices, already at record levels, soared after the mining company closed the Escondida mine in Chile on Friday, the newspaper said. Workers had already been on strike for 12 days over pay demands, reducing output by 60 pct.
   
Elsewhere in the sector, Kazakhmys added 16 pence to 1,225, Antofagasta gained 5 pence to 436 and Rio Tinto added 23 pence to 2,745.
   
PartyGaming topped the early risers however, up 3 pence to 114, following reports that it is leading the race to buy Victor Chandler Group, the sport betting firm.
   
With a 500 mln stg war chest raised after its flotation last year, it sees the Victor Chandler sport betting firm as a good fit, yesterday's Observer said.
   
Financials featured among the fallers this morning, with Standard Chartered down 17 pence to 1,313 following overnight weakness by Asian markets, while HSBC dropped 10 pence to 943-1/2.
   
Elsewhere, Northern Rock lost 12 pence to 1,105 and Barclays fell 6-1/2 pence to 643-1/2l.

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Also on the downside, British Airways came under further pressure following weekend press speculation that passengers could face a fresh surcharge on tickets to pay for the escalating price of airport security.
   
It is seen as an alternative to taxpayers footing the bill or the airline industry paying the tens of mlns of pounds needed for more security staff, training and upgraded equipment, yesterday's Observer said.
   
BA shares fell 4 pence to 393-1/4, while on the second line, Easyjet dropped 7 pence to 426.
   
On the second line, LogicaCMG dropped 10-1/2 pence to 162 after announcing that it has made a cash and share offer to buy the entire share capital of WM-data, valuing the company at 882 mln stg, or 11.9 bln sek, equivalent to 27.75 sek per share.
   
On the economic front, a rather quiet week is in store for UK indicators and what figures there are will be unlikely to change the outlook for interest rates, analysts said.
   
Wednesday's CBI industrial trends survey is expected to moderate slightly in August, while Friday's second-quarter GDP data is predicted to be left unrevised at levels slightly above the long-term average.
   
Across the Atlantic, Thursday looks like being a key day with July durable goods data and new residential sales seen as providing further clues as to the health of the world's biggest economy.

UK Diary of Events

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US Summary

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AMSTERDAM - Market data at 10.22 am

Major indices
   
AEX                462.18, down 1.74 point
AMX Midcap         580.60, down 5.42 points
Government bonds   mainly unchanged 

Major losers:
   
LogicaCMG tumbled 5.88 pct to 2.40 after the company made a cash and share offer for WM-data, valuing the company at 882 mln stg, at a 25 pct premium over the average share price close over the last three months.
   
Pharming was down 3.49 pct to 3.60 and DSM slipped 1.41 pct to 29.44.
   
VastNed Retail went 1.95 pct lower to 62.75.
   
Boskalis slid 1.68 pct to 48.66.
   
USG People and Vedior fell 2.34 pct to 52.15 and lost 1.05 pct to 14.10 respectively.
   
Getronics was off 2.04 pct to 5.28 and Philips was down 1.06 pct to 26.16.
   
TNT outperformed the general market, 0.28 pct lower to 28.61 following reports late last week that French private equity house PAI Partners will buy TNT's contract logistics operations. F.van Lanschot Bankiers estimates proceeds from the sale at about 1.5 bln eur.
   
Nutreco also outperformed the general market, off 0.18 pct to 54.0, after the company said it was selling its 19.8 pct indirect stake in Hydrotech for 25 mln eur.
    
Local issue SNS Reaal was off 0.50 pct to 16.07 after Cheuvreux downgraded the issue to '3 Underperform' and cut its price target to 16 eur from 25 in the wake of the financial services group's first half results.

Major gainers:
   
SBM Offshore was up 1.47 pct to 21.39, and Royal Dutch Shell put on 0.80 pct to 27.88.
   
Wereldhave lifted 0.84 pct to 84.40.
   
Ordina went 0.51 pct higher to 17.57 ahead of results expected tomorrow.

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FRANKFURT - Market data at 9.44 am

Major indices:
   
DAX 30 - 5,787.37, down 29.65 points or 0.51 pct
MDAX - 8,109.40, down 21.46 points or 0.26 pct
TecDAX - 655.37, down 5.16 points or 0.78 pct
DAX future - 5,801.00, down 51.00 points or 0.87 pct

Major gainers
   
Adidas, up 0.06 eur or 0.16 pct at 37.65
   
E.ON, up 0.12 eur or 0.12 pct at 98.76
   
Metro, up 0.05 eur or 0.11 pct at 46.00
   
Altana, up 0.01 eur or 0.02 pct at 44.62

Major losers:
   
ThyssenKrupp, down 0.35 eur or 1.30 pct at 26.47
   
MAN, down 0.73 eur or 1.20 pct at 60.08
   
BMW, down 0.45 eur or 1.12 pct at 39.70, as peer Ford said it would temporarily halt production at 10 assembly plants between now and the end of the year  Rising oil prices and a stronger euro further dampened sentiment towards auto stocks
   
Commerzbank, down 0.26 eur or 1.01 pct at 25.49
   
DaimlerChrysler, down 0.41 eur or 0.99 pct at 41.00, on the Ford production halt news and amid rising oil prices and a stronger euro.

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PARIS - Market data at 10.19 am:

Major indices
   
CAC-40 down 34.00 points or 0.66 pct at 5,101.69
SBF-80 down 12.84 points or 0.23 pct at 5,653.11
SBF-120 down 23.10 points or 0.62 pct at 3,681.42

Volume: 347 mln eur
5 CAC-40 stocks up
34 CAC-40 stocks down
(CAC-40 has 39 stocks pending a replacement for Arcelor)

Major gainers:
   
Total, up 0.40 eur or 0.76 pct at 53.35, as higher oil prices amid the shaky truce in Lebanon outweighed speculation of an unfavourable court ruling for Sanofi-Aventis, in which Total has a 13 pct stake.
   
Veolia Environnement, up 0.17 eur or 0.41 pct at 41.49
   
Accor, up 0.02 eur or 0.04 pct at 46.92, after analysts at Raymond James said they expect it to sell its RRI motel unit in the US.   

Major losers:
   
Renault, down 1.60 eur or 1.76 pct at 89.15. It said it will dissolve a pact with Volvo and import its own vehicles to Scandinavia.
   
Alcatel, down 0.16 eur or 1.66 pct at 9.48.
   
Sanofi-Aventis, down 1.15 eur or 1.63 pct at 69.55, amid speculation that a US court won't agree to block competition to its blockbuster drug Plavix. Analysts say a ruling could come this week.

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