UK/Euro Financial Market Daily Morning Briefing 22-10-2007

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London shares sharply lower in early deals following Dow sell-off

Leading shares were sharply lower early on following Friday's huge fall on Wall Street, with most sectors lower amid concerns surrounding the US economy as rising oil prices, weaker-than-expected earnings and US housing figures out this week hit confidence.
   
At 9.00 am, the FTSE 100 was off around 92.2 points at 6,433.1 and the FTSE 250 was down 188.1 at 11,111.1, with the broader indices also weaker. Early volume was moderate with 277 mln shares trading in 76,558 deals.
   
Among early movers, British Energy topped the list of fallers, off nearly 8 pct or 57 points at 536 after saying its Hartlepool 1 Reactor start-up has been delayed due to complications during a planned inspection of its boiler units.
   
As a precaution, the company has also closed sister units at Hartlepool and Heysham with four units down in total.
   
Elsewhere, miners dragged on the senior index in reaction to a negative broker note from Citigroup in which it cuts its stance on the sector to 'hold'.   

Kazakhmys slid 93 to 1,441, Vedanta eased 119 to 2,044, Xstrata dipped 141 to 3,292 and Rio came off 149 to 4,057.
   
UK banks were also under the cosh, after Credit Suisse told clients to avoid the sector, citing the deterioration of the UK housing market.
   
Barclays fell 16 to 573, Royal Bank of Scotland 12 to 498, Lloyds TSB, which the broker downgraded to 'neutral' from 'outperform', fell 10 to 526 and Northern Rock fell 10 to 176, with midcap peer Bradford & Bingley off 15 at 243.
   
But Pearson was up 3 at 768 after lifting full-year guidance for its education segment as underlying sales across the group in the first nine months rose 6 pct and underlying profit lifted 20 pct.
   
The company said in a third-quarter update all its businesses are trading in line with, or ahead of, previous guidance at the moment, as it looks towards the important fourth-quarter selling season for higher education and consumer publishing.
   
In reaction, Seymour Pierce said it anticipates raising estimates on the numbers and is retaining its 'hold' stance on the shares. Reuters rose 1 penny to 645 on the read-across.

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Resolution also outperformed, flat at 722 after weekend press reports claiming Standard Life and Zurich-based reinsurer Swiss Re are expected to make a 5 bln stg bid for UK insurer.
   
And GlaxoSmithKline added 3 to 1,246 ahead of third-quarter numbers due on Wednesday.
   
Turning to the second line, AGA Foodservices fell 18 to 408 after a flurry of downgrades following its decision to sell its foodservice business to a private Italian company Ali for 260 mln stg in cash.
   
Citigroup downgraded its stance in the group to 'hold' from 'buy', while traders reported Merrill Lynch had also cut AGA to 'neutral' from 'buy'.
   
Paragon dipped 9-1/2 to 241-1/2 after a report in this morning's Financial News suggested the buy-to-let lender was facing a funding crunch.
   
The article also assessed the options for the business if it was unable to secure new funding, which included a sale or a winding down of its operations.
   
On Friday, the Dow fell 366.94, or 2.64 pct, to 13,522.02. The Dow was down for the fifth-straight session and for the week was off 4.05 pct.
   
Broader stock indicators also fell sharply on Friday. The Standard & Poor's 500 index fell 39.45 or 2.56 pct to 1,500.63, and the Nasdaq composite index dropped 74.15 or 2.65 pct to 2,725.16.
   
Later today, Apple, Merck and American Express are scheduled to report earnings although there is no economic news on the calendar.
   
Over in Asia, the Nikkei closed down 375.90 points or 2.2 pct at 16,438.47, while in Hong Kong the Hang Seng is currently off 910.1 points at 28,554.9.
   
New York's key oil futures contract, light sweet crude for delivery in November, was 76 cents lower at 87.84 dollars per barrel in early morning trade.   

It is a light week for US data, but the data that is available is expected to show more weakness in housing, manufacturing and consumer sentiment.

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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

Amsterdam

AMSTERDAM - market data at 10.16 am

Major indices
   
AEX 542.96, down 1.47 pct, 8.09 points
AMX Midcap 715.13, down 1.02 pct, 7.38 points
Government bonds higher

Major decliners
  
Randstad falls 2.64 pct at 39.83 eur, while AEX peer Vedior slips 1.79 pct at 16.45 eur. Midcap staffing stock USG People 2.44 pct lower at 13.61 eur
   
Fortis falls 2.62 pct at 21.95 eur
   
Hagemeyer loses 2.24 pct at 4.81 eur ahead of its Q3 trading update tomorrow
   
ArcelorMittal 1.80 pct lower at 54.06 eur after announcing 500 mln usd investment in hot strip mill in Turkey in joint venture with Borusan.
   
Ahold sheds 1.79 pct at 11.00 eur amid news of downgrade to 'underperform' from 'neutral' at Exane BNP Paribas.
   
DSM sheds 1.69 pct at 38.39 eur after cut to 'underweight' from 'overweight' by Lehman Brothers.
   
Heineken falls 1.16 pct at 46.05 eur following weekend reports Scottish & Newcastle is moving to thwart a takeover bid by Carlsberg and Heineken consortium, while reports also emerged that Carlsberg is planning a 30 bln dkr (5.8 bln usd) rights issue to finance the proposed takeover
   
Akzo Nobel down 1.06 pct at 59.02 eur ahead of its Q3 results tomorrow
   
Van der Moolen down 3.34 pct at 3.47 eur
   
BinckBank falls 0.94 pct at 13.73 eur amid news that it is in exclusive talks with Rabobank over acquisition of unit Alex

Major gainers
   
Numico up 0.13 pct at 54.70 eur
  
Wereldhave up 0.04 pct at 80.09 eur

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MILAN - Market data at 9.38 am:
   
Main indices:
   
Mibtel at 30,633, down 1.68 pct
S&P/Mib index at 39,179, down 1.78 pct

Main S&P/Mib losers
   
Fastweb was down 12.12 pct at 35.11 eur after distributing a dividend of 3.77 eur per share. Adjusted to the dividend payment, the stock was down about 2.7 pct.
   
Eni dropped 4.20 pct to 24.84 after paying an interim dividend of 0.6 eur per share. Adjusted to the dividend payment, the stock was down about 1.9 pct.
   
Snam RG fell 2.70 pct to 4.425 after paying an interim dividend of 0.08 eur per share. Adjusted to the dividend payment, the stock was down about 1.8 pct.
   
Parmalat was down 2.69 pct at 2.55.
  
Main S&P/Mib gainers
   
No gainers
   
Other stocks in the news
   
Telecom Italia was down 0.60 pct at 2.083, but outperforming the market ahead of the expected clearance this week by the Brazilian regulator of the purchase of a controlling stake in the Italian incumbent by Telefonica and Italian investors.

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FRANKFURT - Market data at 10.15 am

DAX - down 98.34 points at 7785.78
MDAX - down 167.98 points at 10,283.17
TecDAX - down 22.48 points at 967.3
DAX futures - down 14.5 points at 7,846.50

Major Decliners:

Commerzbank was down 1.14, or 3.78 pct, at 29 eur after chief executive Klaus-Peter Mueller told Financial Times Deutschland in an interview that the US subprime crisis has affected the bank more than initially forecast.

Daimler dropped 2.21, or 3 pct, to 71.69 eur.

Hypo Real Estate lost 1.31, or 3.08 pct, to 41.27 eur.

Siemens slid 1.96, or 2.15 pct, to 89.4 eur

Infineon declined 0.24, or 2.26 pct, to 10.38 eur.

Major gainers:

Volkswagen was up 2.58, or 1.45 pct, at 180.08 eur.

TUI edged 0.02 eur higher, or 0.1 pct, to 19.74 eur, still better than the market, after TUI shareholder Guy Wyser-Pratte told Euro am Sonntag he will oppose a renewal of Michael Frenzel's contract as chief executive.

Fresenius Medical Care advanced 0.04, or 0.11 pct, to 35.64 eur.

EON slid 0.47, or 0.36 pct, to 130.78 eur.

Other Stocks in Focus:

MDAX-listed Techem surged 17.17 pct to 57.7 eur, after the provider of services to utilities said the Macquarie Group relaunched its takeover bid eight months after the Australian bank failed to completely acquire the company.
   
WestLB has lifted its recommendation on Techem to 'add' from 'reduce', saying the bid is likely to succeed.

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PRAGUE - The Czech crown hit an all-time high of 27.17 to the euro at 9.08 am CET, beating Friday's record of 27.20, pushed up by investors unwinding carry trades, analysts say.
   
Carry trades use the crown to hold positions in higher-yielding assets.  On Friday, the Czech crown also hit a record high of 18.99 to the dollar.

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