UK/Euro Financial Market Daily Morning Briefing 22-05-2006

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London shares open sharply lower, miners hit as commodity prices slide

The FTSE 100 opened lower this morning as resource stocks were again hit by fresh falls in metal prices, while renewed M&A speculation among the UK mortgage bank sector failed to ease ongoing concerns about the prospect of higher interest rates, dealers said.
   
At 9.00 am, the FTSE 100 was 85.6 points weaker at 5,571.3, thereby breaking through its year opening level of 5,618. The broader indices were also lower, with the FTSE 250 off 167.5 points at 9,025.1.
    
On Friday, the Dow Jones Industrial Average closed up 15.77 points at 11,144.06.
   
Over in Asia, Japan's Nikkei closed 297.58 points lower at 15,857.87, while over in Hong Kong, the Hang Seng Index ended the morning down 189.03 points at 16,124.33 as a slump in commodity prices hurt sentiment.
   
Among shares on the move in early deals, mining issues dominated the losers' board after base metal prices fell again following heavy falls on Friday.
   
In Asian trade copper fell more than 5 pct, gold fell 3.5 to below 650 usd per troy ounce and oil tumbled more than 1 per cent, continuing last week's decline that saw the index of 19 major commodities 5.4 pct lower for the week, its biggest one-week drop in more than 25 years.
   
Antofagasta fell 161 pence to 1,878, while Kazakhmys dropped 85 to 961. Xstrata eased 124 to 1,808 and Rio Tinto fell 124 to 2,637.
   
Oil stocks were also lower as the price of oil again fell on Friday, although prices picked up slightly in Asian trade.
   
Royal Dutch Shell eased 19 pence to 1,780 while BP fell 7 to 616.

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On the upside, Alliance & Leicester topped the small group of FTSE 100 risers, up 27 pence at 1,140, after French bank Credit Agricole said it was considering a possible takeover offer for the UK mortage lender but stressed that its assessment is at an early stage.
   
Responding to a weekend press report that it is poised to make an offer for A&L, Credit Agricole said it has not put forward any proposal to the UK bank.
   
"At any one time the group may also review selected larger opportunities and in so doing will maintain its strictly disciplined evaluation approach," the French bank said in a statement.
   
Also bucking this morning's negative trend, M&S rose a penny to 576 ahead of its annual results scheduled for release tomorrow, which are again expected to impress following on from the outstanding numbers revealed in its fourth quarter.
   
Analysts expect M&S to report a 27 pct increase in underlying profit before tax.
   
Among second liners, London Stock Exchange was slightly lower in early trade on news that NYSE Group, once seen as a potential bidder for the LSE, has chosen to make an offer for Euronext instead.
   
LSE shares were down 14 pence at 1,231 pence in a market that was sharply lower overall.
   
Numis Securities said US electronic exchange Nasdaq's acquisition of a 25 pct stake in the LSE over the past six weeks has led most investors to write off the chances of a rival approach from NYSE.
   
"Given Nasdaq's 25 pct stake was it likely that NYSE would come in? Not that likely at all. This doesn't really change the LSE's take-out situation, although it could certainly change its competitive position," Numis Securities said.
   
Meanwhile Bradford & Bingley paced the mid cap risers, up 15 pence to 465 on the read across from the Credit Agricole interest in A&L.

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Shares in Punch Taverns fell as the weak market sentiment offset forecast- busting interim results from the pub operator.
   
The group revealed it plans to sell 380 managed pubs as it reported a 13 pct rise in interim pretax, pre-exceptional profits to 116 mln stg.
   
In response, Morgan Stanley reiterated its 'overweight' recommendation and said profits of 116 mln stg beat its forecast of 113 mln, thanks to a higher contribution from the Spirit estate it acquired in January.
   
Turning to that acquisition, the broker said the integration has proceeded smoothly, the transfer of 740 managed pubs to lease is progressing well, and Punch has brought forward its estimated completion date by 6 months to August 2007.
   
Elsewhere, AMEC rose 7-1/4 pence to 373, after saying it will sell AMEC Spie to PAI Partners for 707 mln stg, generating a profit on disposal of 220 mln.
   
Seymour Pierce said that the sale price topped its estimates and reiterated its 'outperform' rating.
   
Homeserve was another strong performer, up 21 pence to 1381 after turning in full-year results that were 'slightly ahead of expectations' according to brokers.
   
The UK firm this morning said pretax profit for the year to March 31 came in at 50 mln stg, up from 38.8 mln stg the previous year, on revenues up 66 pct at 367 mln stg.

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PARIS - Market data at 9.50 am:

Major indices:
   
CAC-40 down 58.97 points or 1.19 pct at 4,885.60
SBF-80 down 75.66 points or 1.35 pct at 5,535.43
SBF-120 down 45.03 points or 1.26 pct at 3,535.39

Volume: 750 mln eur
1 CAC-40 stock up
39 CAC-40 stocks down

Major gainers:
   
Safran, up 0.42 eur or 2.46 pct at 17.49. Last week it confirmed its full year earnings guidance.
   
TF1, up 0.48 eur or 1.85 pct at 26.40. It is due to release first quarter results after the market closes today.
   
Capgemini, up 0.06 eur or 0.15 pct at 41.26
   
Major losers:
   
Eiffage, down 1.95 eur or 3.50 pct at 53.70
   
Arcelor, down 0.97 eur or 2.78 pct at 33.87. Its board postponed consideration of Mittal's raised bid as regulators examine it.
   
Lafarge, down 1.80 eur or 1.90 pct at 93.15. Late last week, Saint-Gobain denied a report that it is mulling a merger with Lafarge, and Moody's downgraded the long-term debt ratings of Lafarge's North American unit.

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FRANKFURT - Market data at 10.29 am

Major indices:
   
DAX 30 - 5,578.84, down 93.44 points or 1.65 pct
MDAX - 7,999.26, down 182.99 points or 2.24 pct
TecDAX - 649.09, down 7.62 points or 1.16 pct
DAX future - 5,588.50, down 110.50 points or 1.94 pct

Major losers:
   
MAN, down 3.47 eur or 5.88 pct at 55.54, trading ex-dividend
   
Deutsche Boerse, down 5.88 eur or 5.31 pct at 104.86, on fears it will get involved in a bidding war for Euronext after the New York Stock Exchange this morning announced a bid for the pan-European exchange
   
ThyssenKrupp, down 1.01 eur or 3.90 pct at 24.87
   
Hypo Real Estate, down 1.60 eur or 3.27 pct at 47.38
   
Volkswagen, down 1.24 eur or 2.30 pct at 52.72

Major gainers:
   
Infineon, up 0.05 eur or 0.57 pct at 8.76, as Nomura upgraded its stance  to 'buy' from 'neutral' with a 14.4 eur fair value estimate, arguing that investors are failing to price in the probability of a successful IPO of its DRAM unit Qimonda
   
Fresenius Medical Care, up 0.43 eur or 0.49 pct at 87.61
   
SAP, up 0.61 eur or 0.37 pct at 165.47
   
TUI, up 0.01 eur or 0.06 pct at 15.87
   
Schering, up 0.03 eur or 0.04 pct at 85.61.

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