UK/Euro Financial Market Daily Morning Briefing 21-09-2006

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London shares slide lower in early deals; weak oils offset Morrison gains

Leading shares slipped lower in early deals as oil majors declined following a fresh drop in crude futures overnight, offsetting strong gains from Morrison Supermarkets on the back of its solid first-half results, dealers said.
   
At 8.56 am, the FTSE 100 index was 16.2 points lower at 5,850.00 after closing 34.4 points firmer at 5,867.2 yesterday, while the FTSE 250 index managed marginal gains, up 5.6 points at 9,796.7. Volume was solid, however, with 342.6 mln shares changing hands in 26,819 deals.
   
Overnight on Wall Street, US stocks closed higher, holding on to gains after the Federal Reserve kept short-term interest rates steady, as expected, but left the door open to additional rate hikes.
   
The Dow Jones closed 72.30 points stronger at 11,613.70, leaving it just 109 points away from its high close of 11,722.98, reached January 14 2000, while the Nasdaq Composite firmed 30.52 points at 2,252.89 and the S&P 500 index added 6.90 points at 1,325.20.
   
The Federal Open Market Committee said it is seeing a continuing moderation in economic growth, partly reflecting the cooling of the housing market. It added that inflation pressures seem likely to moderate over time, but said some inflation risks remain.
   
Oil prices recovered some lost ground in Asian morning trade after tumbling to fresh six-month lows in US trading hours, when they dipped briefly below 60 usd a barrel.
   
Oil futures were at 60.94 usd a barrel in Asian trade after falling briefly to as low as 59.80 usd in New York overnight, the lowest level recorded since March 21.
   
The low prices weighed on London's oil majors, with BP down 5-1/2 pence at 574, BG Group 8 pence lower at 637-1/2, Royal Dutch Shell 12 pence lighter at 1,764 and Cairn Energy in the red by 19 pence at 1,881.
   
Utility stocks were also under the cosh after carbon yesterday saw its biggest daily fall since the price collapse in four months as the continued sell off in global energy markets deterred buying of carbon allowances under the European emissions trading scheme.
   
British Energy Group shares slipped 8 pence at 566, International Power fell back 4 pence at 310-1/2 and Drax Group was 15 pence lower at 820.

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Among the supermarkets, Tesco and J Sainsbury both suffered after UK market share data last night revealed both groups slowed sharply in the last month, while Asda gave a good performance and Morrison -- which this morning posted solid results -- was little changed.
   
Data from market research company Taylor Nelson Sofres revealed Tesco maintained its commanding lead of the UK grocery market in the 12 weeks to Sept 10, but its market share slipped to a 31.4 pct share of the 26 bln stg market, down from 31.6 pct a month earlier.
   
Wal-Mart's Asda came in at 16.7 pct, up from 16.6 pct a month earlier, while Sainsbury's was 15.9 pct from 16 pct and Morrison Supermarkets was unchanged at 11 pct.
   
Tesco shares dipped a penny lower at 371-1/4 and Sainsbury also lost quarter of a penny at 377-1/2.
   
But Morrison's shares led the blue chip gainers, up 4.3 pct or 10-1/4 pence at 243-3/4 after the group this morning reported first-half earnings at the upper end of expectations and revealed trading in the first eight weeks of the second half has been better than market expectations.
   
Pretax profit for the 25 weeks to July 23 came in at 134.2 mln stg, compared with a loss of 82.1 mln stg the previous year.
   
In reaction, Citigroup repeated its 'buy' recommendation and 240 pence target, noting that the interim pretax profit was 6-7 pct above expectations, due to the strength of the gross margin.
   
The US broker argued that the group is ahead of targets in margin, costs and profits, although noted that it is unlikely to reveal any new guidance as the new CEO will not be presenting his ideas to investors until March.
   
Still on the upside, Reuters Group was also in fine fettle, taking on 13-1/4 pence at 427 after Morgan Stanley told clients in a research note this morning that the media group's 5-6 pct total revenue growth forecast for 2006 could prove conservative, judging by the 'good third quarter of trading', in terms of the announced business, the relatively positive recent results for the major investment banks and the Core Plus initiatives.
   
Elsewhere, mining issues bounced back after yesterday's declines, despite commodity prices remaining under pressure in Asian trade today.
   
Anglo American rose 50 pence at 2,190, Rio Tinto added 45 pence at 2,472 and Xstrata was 28 pence higher at 2,180.
   

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On the second line, Croda International was the top performer, 22-1/2 pence to the good at 520-1/2, thanks to a UBS upgrade to 'buy' from 'neutral' following the recent reverse takeover of Uniqema, for which the broker sees significant improvement potential.
   
And Cable & Wireless was also in upbeat mode, taking on 3-3/4 pence at 133-1/2 after the struggling telecoms group published new growth targets for its overseas businesses.
   
In a statement released ahead of a presentation to investors and analysts later today, the group said profit margin at the EBITDA level should rise to between 35-37 pct by the 2009 fiscal year, compared to 34 pct now.
   
Among the midcap fallers, Daily Mail & General Trust was a feature, down 6 pence at 582 after warning that the prolonged downturn in the UK's advertising market would offset most of the growth at its fast-expanding business publishing operations.
   
In a trading update the owner of the Mail national titles and London's Evening Standard said it would only make "modest progress" in the fiscal year ending on Oct 1.
   
On the economic front, late morning will see the release of the monthly industrial trends survey from the Confederation of British Industry, which is expected to show orders down slightly in September. Analysts polled by AFX News expect the total orders balance to slip slightly to -10 pct from -8 pct.
   
And across the Atlantic, investors in the US will be eyeing weekly jobless claims, seen rising to 310,000 in the week ending Sept 16 from 308,0000 in the previous week, and leading indicators for August, which are expected to slip further to -0.2 pct from -0.1 pct in July.
   
After the Wall Street close, the Philly Fed is forecast to slide to 14.6 in September from 18.5 last month.

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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PARIS - Market data at 9.30 am:

Major indices:
   
CAC-40 down 12.16 at 5,180.58
SBF-80 down 11.65 at 5,875.22
SBF-120 down 8.60 at 3,747.60

Volume: 285 mln eur
11 CAC-40 stocks up
29 CAC-40 stocks down

Major gainers:
   
Michelin up 0.35 at 55.70
   
Vivendi up 0.15 at 27.86
   
TF1 up 0.36 at 25.00

Major losers:
   
Pernod Ricard down 3.40 or 2.01 pct at 165.50 on weaker than expected interims
   
EADS down 0.38 or 1.67 pct at 22.42 on confirmation of new A380 delays
   
Euronext down 1.00 at 73.10, announces Chinese tie-up talks

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AMSTERDAM - Market data at 10.12 am

Major Indices
  
AEX                476.94, up 0.48 points
AMX Midcap         581.87, up 1.51 points
Government bonds   Flat to lower

Major gainers
   
Philips gained 0.84 pct to 27.49 eur
   
Hagemeyer added 0.78 pct to 3.88 eur
   
ABN Amro added 0.66 pct to 22.85 eur
   
Vopak rose 1.07 pct to 29.20 eur after a price target hike and a bullish note from Petercam
   
Ordina added 0.53 pct to 15.30 eur after announcing the acquisition of Wisdom Group
   
Major losers
   
KPN shed 0.30 pct to 10.07 eur as Morgan Stanley placed 8 mln shares previously held by the Dutch government at 10.06 eur per share
   
Royal Dutch Shell dropped 0.35 pct to 25.55 eur
   
Akzo Nobel shed 0.48 pct to 47.41 eur
   
Aalberts led decliners among midcap shares, dropping 0.93 pct to 58.75 eur after brokerages reacted negatively to the 100.8 mln eur fine handed to Aalberts by the European Commission yesterday

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