UK/Euro Financial Market Daily Morning Briefing 22-09-2006

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London shares weaker in early deals, US economic slowdown fears weigh

Leading UK shares were lower in early deals after the latest US data raised concerns the world's largest economy may be slowing too quickly, while higher oil prices provided a further drag amid a thin corporate agenda, dealers said.
   
At 9.00 am, the FTSE 100 was off 39.0 points at 8,557.6 with the broader indices also lower. Early volume was light with shares trading in deals.
   
Last night on Wall Street, US shares fell sharply after the Philadelphia Federal Reserve surprised investors by announcing that its broadest measure of manufacturing activity fell to a negative reading for the first time since April 2003.
   
The Philadelphia Fed said its index of current activity fell from 18.5 in August to negative 0.4 this month. The regional bank said indicators for general activity, new orders and shipments fell substantially from August and suggested no growth for September.
   
The Dow Jones industrial average fell 79.96 or 0.69 pct to 11,533.23, while the Standard & Poor's 500 index, which reached a five and a half year high Wednesday, fell 7.15 or 0.54 pct to 1,318.03 and the Nasdaq composite index fell 15.14 or 0.67 pct to 2,237.75.
   
Bonds rose sharply, with the yield on the benchmark 10 year Treasury note falling to 4.64 pct from 4.73 pct late Wednesday as investors theorised that the Fed would keep interest rates stable. The dollar was mixed against other major currencies, while gold prices rose.
   
Meanwhile, oil prices were higher in Asian trading hours in a short-term bounce after reports that world powers had handed Iran a new early October deadline to halt uranium enrichment.
   
The impact on supply growth from delays at BP's Thunder Horse facility in the Gulf of Mexico was also seen underpinning prices.
   
New York's main contract, light sweet crude for November delivery, was up 36 cents at 61.95 usd a barrel from 61.59 in US trade overnight. Brent North Sea crude for November was up 29 cents at 61.63 usd.
   
Over in Tokyo a short while ago, the blue-chip Nikkei 225 Stock Average closed 199.56 points or 1.26 pct lower at 15,634.67 while in Hong Kong the Hang Seng was down 57.44 points at 17,562.53.

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Among shares on the move this morning, SABMiller led the fallers off 23 at 1002 deals after US industry data revealed volumes remained weak for the four weeks to September 9, with SABMiller underperforming in the domestic segment.
   
Looking at the week ending September 10, Morgan Stanley noted that US volumes for the industry remained soft with crafts/imports continuing to take share from a weak domestic segment.
   
Focusing on SABMiller, the broker said volumes declined 5.4 pct versus a 4.1 pct decline a year ago as average price per volume increased 2.5 pct versus a 0.4 pct decline a year ago.
   
The broker added that the UK brewer's underperformance in volumes drove 80 bp of share loss, in line with an 80 bp share loss a year ago.
   
Shire was under pressure in early deals after the Canadian Department of Health warned that ADHD drugs carry the risk of psychiatric side-effects.
   
Canada Health said it is to revise its prescribing and patient information for all ADHD (attention deficit hyperactivity disorder) drugs to add the warning of 'potential for psychiatric adverse events', which have reportedly included rare events of agitation and hallucinations in children.
   
Shire is best known for its hyperactivity franchise, and makes the top selling ADHD drug Adderall XR, which currently accounts for around half of sales and profits. Shire shares were down 14 pence at 817 1/2.
   
Elsewhere, British Airways, off 6 3/4 at 427 1/4, and Carnival, off 28 at 2425, fell victim to firmer crude oil prices.
   
Wolseley, which is particularly sensitive to weakness in the US housing market, dipped 12 to 1,174 following dismal US data last night.
   
Among supermarket operators, Tesco slipped 4 1/4 after JP Morgan downgraded its stance to 'neutral' from 'overweight', adding that stock prices looks set to remain around current levels for some time, adding that Tesco is likely to be hurt by a weakened first half UK margin.
   
US stock weakness also buffeted UK hedge fund operators with Amvescap off 9 1/2 at 546 and Man Group down 7 1/2 at 426. On the upside, resource stocks benefited from firmer oil and metal prices overnight.

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Xstrata gained 17 to 2189, RIO rallied 22 to 2490, while BHP rose 6 to 922. Among oilers, BP nudged 1 pence better to 580, also underpinned by an upgrade to 'equal weight' from Morgan Stanley.
   
The same broker however, cut its stance on Royal Dutch Shell to 'underweight' from 'equal-weight' knocking the stock back 7 at 1778.
   
Elsewhere, Brambles rallied following yesterday's decision by the European Commission to approve Veolia Environnement's UK-based unit Veolia's proposed acquisition of Brambles Industries' waste management UK peer Cleanaway, subject to conditions. The shares rose 2 3/4 to 459 3/4.
   
Among second liners, MFI bucked this morning's negative trend, up 5 pence at 92 1/2, after confirming it is to sell its struggling retail business to private equity group Merchant Equity Partners LLP (MEP) in a deal which will involve it paying MEP up to 125 mln stg to take the business off its hand. MFI will then focus on its remaining Howden Joinery business and its Supply operations, and plans to change its name to Galiform PLC.
   
Under the terms of the deal, MEP will acquire the Retail business for a nominal of 1 stg, but has agreed to invest 50 mln into Retail on completion and said it "may invest up to a further 12.0 mln in April 2008."
   
Elsewhere, Stagecoach took on 1 to 129 3/4 after news the group has been awarded the South Western rail franchise by the Department for Transport was broadly welcomed.
   
Finally, CSR rose 10 to 850 after Merrill Lynch upped its rating in the group to 'buy' from 'neutral'.
   
Merrill Lynch said the stock has historically has traded towards the upper end of the range supported by its fair value model, noting that with the shares now trading below fair value, it offers a good entry opportunity.

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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German shares AFX at a glance outlook

Forthcoming Events

Today
   
nothing scheduled
      
Monday
   
UBS Global Life Sciences Conference, New York (Bayer attends)
   
Austria's BDI BioDiesel to list on Frankfurt Stock Exchange
   
Today's Press
  
Axel Springer's Doepfner leaves Deutsche Telekom supervisory board
(Handelsblatt)
   
Federal Mogul says not interested to buy ThyssenKrupp's US auto ops
(Handelsblatt)
  
Speculation on future of Deutsche Telekom's Ricke continues (Handelsblatt)
   
Gruner Jahr launches new women's magazine in France (Handelsblatt)
   
Trade union, employers' group agree to 3.8 pct wage hike for steel workers
(Sueddeutsche Zeitung)
   
Linde's Kion attract bidders (Frankfurter Allgemeine Zeitung)
   
Axa cuts stake in TUI to 4.02 pct (Boersen-Zeitung)
   
Morgan Stanley holds 16.251 pct stake in Borussia Dortmund after capital
hike (Boersen-Zeitung)
   
Deutsche Telekom scraps three-pillar strategy (Financial Times Deutschland)
   
German govt convenes special meeting because of Bafin's Sanio (Financial
Times Deutschland)
   
Deutsche Bahn proposes compromise in conflict over its IPO (Financial Times
Deutschland)
  
Company News
   
FDA advisory committee strongly endorses use of Bayer's Trasylol in coronary artery bypass graft surgery patients
   
SolarWorld wins two contracts to deliver solar wafers to Taiwan, South Korea
   
Siemens/Nokia networks joint venture could trigger 10-15 pct job cuts by 2010 - CFDT

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Paris shares AFX at a glance outlook

Forthcoming Events
   
Today
   
President Jacques Chirac meets with German Chancellor Angela Merkel and Russian President Vladimir Putin at Compiegne, outside Paris.

Monday
   
SR Teleperformance H1 results
   
Sept business climate indicator  0645 GMT

Today's Press
   
GM, Renault, Nissan tie-up talks make little progress (Wall Street Journal)

Political/Macroeconmic News
   
French govt hopes 2007 budget deficit to fall to 43 bln eur.
   
French state defence group Giat to change name to Nexter as part of restructuring.
   
Finance Minister Thierry Breton says government satisfied with Suez/GDF proposals for EU merger approval
   
French stock option limits could be set by company boards, according to latest version of bill to be presented to parliament in October.

Market Sentiment
   
Aeroports de Paris downgraded to 'hold' from 'buy' by Citigroup
   
Carrefour downgraded to 'neutral' from 'overweight' by JP Morgan

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Amsterdam shares AFX at a glance outlook
 
Forthcoming Events
   
Today
   
No items scheduled

Today's Press
   
ASML plans Asia-Pacific R&D headquarters in Taiwan (Economic Daily News)

Market Sentiment
   
Royal Dutch shell to cut to 'underweight' from 'equal weight' by Morgan Stanley.

Forex

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