UK/Euro Financial Market Daily Morning Briefing 23-02-2006

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London

London shares up as investors draw comfort from results, oil price weaker

Leading shares were trading slightly higher, having quickly recovered from opening losses as investors drew comfort from a mass of corporate earnings reports which generally came in near, or better than, expectations, dealers said.
   
At 9.25 am, the FTSE 100 was up 5.2 points at 5,877.6, while the broader indices were moderately lower.
   
Early volume was reasonable with 403.2 mln shares traded in 35,848 deals.
   
Last night on Wall Street, US stocks closed higher, as a benign retail inflation report and a drop in crude-oil prices lifted the Dow Jones Industrial Average to its best level in more than 4-1/2 years.
   
The DIJA closed up 68.11 points at 11,137, the Nasdaq Composite Index ended
20.21 points higher at 2,283.17 and the S&P 500 Index rose 9.63 points to 1,292.67.
   
Over in Asia, Japan's Nikkei closed up 314.32 points at 16,096.10, and in Hong Kong, the Hang Seng Index ended the morning session up 108.49 points at 15,744.21.
   
Back in London, Capita Group rallied 9-1/2 to 451 after reporting a 19 pct rise in underlying annual profits with the company optimistic this performance will continue in a buoyant business process outsourcing market.
   
Also showing early gains, Brambles shares were 7 pence higher at 415 after saying it had received strong interest in the units it plans to divest as part of its restructuring process, according to chief executive David Turner.
   
Speaking on a conference call after the group's first half result, Turner said the divestment process remains on track.

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Mining issues were also stronger this morning, with Anglo American rising 56 pence to 2255 following an upgrade to 'buy' from 'hold' by Citigroup.
   
The broker said it was happier that Anglo appears to be speeding up its restructuring, which includes the listing of its paper operations, Mondi, on the London Stock Exchange in 2006/07 and the sell-off of some of its 52 pct holding in Anglo Gold Ashanti.
   
Meanwhile, peer Xstrata rose 10 to 1756 despite being downgraded to 'hold' from 'buy' by Deutsche Bank ahead of 2005 earnings scheduled for next week and after the shares' recent strong rally.
   
Deutsche Bank said that Xstrata's specific positives were expected to come to the fore in the 2005 results, with strong cash flow generation, volume growth, strong cost focus and a revenue line benefiting from strength in key commodity exposures of copper, gold, zinc and thermal and coking coal.
   
Positive broker comment helped PartyGaming rise 1 pence to 124-1/2 after Bridgewell Securities said that the firm's integrated platform will boost overall revenues as evidenced from Sportingbet second quarter results yesterday.
   
The broker said that he expects PartyGaming to launch two new games this year, one by June and one by the end of the year.
   
On the downside, Reuters remained bottom of the pile, off 30 pence to 422, after it said that it is targeting total revenue growth of around 5 pct, which was below expectations.
   
In reaction to the group's full year numbers, Morgan Stanley said Reuters' earning are "slightly shy of expectations" both on overall revenue growth and recurring revenue growth.
   
It said revenue growth guidance for 2006 is seen falling short of previous guidance and capex for 2005 of 220 mln stg significantly ahead of expectations.
   
The broker retains a 'hold' rating and 500 pence target.
   

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Meanwhile BAE Systems was another faller, off 11-1/4 pence at 436. It reported full year results which were in line but investors decided the expectations of an improved performance in 2006 from its defence businesses provided an opportunity to lock in some profits following the shares strong recent showing.
   
Rentokil Initial was another early faller, off 3 at 157-1/2 after the support services group reported a 17 pct decline in underlying 2005 profit, towards the lower end of expectations, after boosting investment in an effort to revive sales growth.
   
In reaction, Merrill Lynch said that Rentokil's outlook statement indicates that there is unlikely to be a return to profit growth until 2007, as expected, albeit on lower base, and that there is unlikely to be a dividend increase in 2006.
   
In other news, ICI eased back 8-1/4 pence to 342-1/2 after US peer Sherwin Williams fell 18 pct last night after a Rhode Island jury called them guilty in a case concerning the lead content in its paints.
   
Hilton Group eased 5-1/4 to 378 after posting a 10 pct rise in underlying profits in 2005 and announcing a 240 pence special dividend after selling its hotel chain.
   
Looking at the numbers, Bridgewell Securities pointed to weak results from its gambling business, where operating profits fell 2 pct to 266 mln stg. Gross wins on a like-for-like basis fell 2.3 pct, and telephone betting fell to a loss, after making a 17.8 mln stg profit last year.
   
Heavyweight oil stocks eased after oil prices fell, as expectations of a build-up in US crude and gasoline stockpiles offset concerns about supply disruptions in Nigeria.
   
At 3.00 am, New York's main contract, light sweet crude for delivery in April, was down 0.26 usd at 60.75 usd a barrel from its close of 61.01 usd in the US overnight.
   
In response RD Shell fell 16 to 1829 while BP dipped 4-1/2 to 646-1/2.
   
On the second line, Colt Telecom was the worst performing mid cap, off 3-1/4 pence to 61-1/4 after reporting in line results according to analysts.
   

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According to Matthew Pearson at Investec, Colt's impairment charges "highlight the malaise in the sector" while the rearrangement of the corporate structure "looks as though they are about to accelerate their debt refinance."
   
Spirent was another early casualty, down 1-1/2 at 50-3/4 after posting a sharp drop in profits from continuing operations for the year to Dec 31, mainly due to restructuring and disposals aimed at refocusing the group on core operations.

Diary of Events

For a list of key UK financial and corporate events today, click here 

US Summary

For a summary of US stocks at the close of trade, click here

Paris

PARIS - Market data at 09.18 GMT

   
Major indices:
   
CAC-40 up 16.44 points or 0.33 pct at 5,058.04
SBF-80 up 4.36 points or 0.08 pct at 5,650.19
SBF-120 up 8.70 points or 0.24 pct at 3,653.62

Volume: 1.02 bln eur
24 CAC-40 stocks up
16 CAC-40 stocks down

   
Major gainers:
   
Thomson, up 0.58 eur or 4.12 pct at 14.66, after saying it is positioned to
return to profitability after posting a full year net loss
   
Electricite de France, up 1.39 eur or 3.32 pct at 43.22. It reported a
doubling of its full year net profit
   
Suez, up 1.04 eur or 3.26 pct at 32.93, amid speculation that Enel SpA may
launch a hostile bid for Suez to snare its Electrabel unit
   
Capgemini, up 1.29 eur or 3.24 pct at 41.16, after posting a full year
profit that pleased analysts

   
Major losers
   
Saint-Gobain, down 0.65 eur or 1.13 pct at 56.80
   
Vinci, down 0.85 eur or 1.10 pct at 76.75
   
Arcelor, down 0.27 eur or 0.89 pct at 30.13, after Turkey's OYAK withdrew
from a deal to sell part of local steelmaker Erdemir to Arcelor

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Frankfurt

FRANKFURT - Market data at 09.39 GMT

   
Major indices:
   
DAX 30 - 5,875.67, up 13.61 points or 0.23 pct
MDAX - 8,334.48, up 42.73 points or 0.52 pct
TecDAX - 738.46, up 2.72 points or 0.37 pct
DAX future - 5,884.00, up 4.50 points or 0.08 pct

   
Major gainers:
   
Metro, up 1.62 eur or 3.84 pct at 43.82, after the GfK market research institute said its consumer climate index is forecast to rise to 4.8 points in March, up from 4.6 points this month, after consumer sentiment remained buoyant in February ahead of the football World Cup.

News that the IFO Institute's business climate index rose to 103.3 in February from 101.8 in January, beating the 101.7 forecast of economists polled by AFX News, also boosted sentiment towards the stock, dealers said.
   
Continental, up 1.72 eur or 2.01 pct at 87.20, as investors mulled its full-year results and 2006 outlook
   
SAP, up 2.78 eur or 1.61 pct at 175.17
   
MAN, up 0.60 eur or 1.14 pct at 53.15
   
Deutsche Bank, up 0.87 eur or 0.93 pct at 94.35, as Cheuvreux hiked its price target on the issue to 98 eur from 90 after raising its earnings estimate for the company on the back of an improved investment banking outlook

   
Major losers:
   
RWE, down 1.62 eur or 2.17 pct at 73.02, as a weaker-than-expected full-year 2005 net profit, a cautious 2006 outlook and a below-consensus dividend payment disappointed investors, and as WestLB downgraded the stock to 'hold' from 'add'
   
ThyssenKrupp, down 0.28 eur or 1.32 pct at 20.92
   
Schering, down 0.46 eur or 0.79 pct at 58.11, as Morgan Stanley downgraded its stance on the stock to 'equal-weight' from 'overweight'
   
Infineon, down 0.05 eur or 0.63 pct at 7.93   
   
TUI, down 0.09 eur or 0.53 pct at 16.95

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