UK/Euro Financial Market Daily Morning Briefing 23-03-2006

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London shares slip back early on; results disappoint; properties weak

UK blue chips slipped back from opening gains in early deals this morning as a combination of results disappointments from William Morrison, Next, and Friends Provident and profit-taking in yesterday's property high flyers pulled the index lower, dealers said.
   
At 9.09 am, the FTSE 100 index was 0.4 points easier at 6,007.1 having opened at a peak of 6,029.4.
   
All the broader FTSE indices, however, held also firmer.
   
Early volume was strong, with 466 mln shares changing hands in 41, 248 deals.
   
Overnight on Wall Street, US stocks ended higher as stable long-term interest rates, strong earnings from Morgan Stanley, and a labor deal at General Motors lifted the blue chips to levels not seen in nearly five years.
   
The DJIA ended 81.90 points at 11,317.40, the best closing level for the benchmark index since May 2001. The Nasdaq composite index finished 9.12 points higher at 2,303.35.
   
Asian markets were mixed today. The Nikkei 225 index closed 6.11 points lower at 16,489.37 on further profit-taking, while the Hang Seng ended 128.36 points higher at 15,771.17 with results today from major blue chips Hutchison Whampoa and Cheung Kong.
   
In London, today's batch of blue chip results were all taken negatively, with William Morrison, Next, and Friends Provident all weaker after numbers.
      
Morrison was the biggest FTSE 100 faller, down 8-1/4 pence to 201-3/4 after the UK supermarket group which has seen profits collapse since acquiring the Safeway chain in 2004, reported  pretax profit before exceptional items plunged by 81 pct to 61.5 mln stg.
   
Citigroup said the profit of 61.5 mln was at the lower end of the companys 50-150 mln stg guidance, as it reiterated its 'hold' advice.
   
Fellow retailer Next was also under pressure, down 59 pence to 1,669 after group reported an expected 5.8 pct increase in full year pretax profit but cautioned that the competitive and economic environment on the high street is set to remain "very challenging".
   
In sympathy, Marks & Spencer shares shed 6 pence at 558.
   
And insurer Friends Provident shed 6 pence to 209-1/2 as its stronger-than-expected full year results failed to impress brokers on the back of consensus-beating sector wide results.

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Merrill Lynch maintained its 'neutral' recommendation, saying that although its profit forecasts will edge higher, any upgrade will be weaker than those made for peer UK life companies.
   
Away from results, support services group Capita was also a big faller, down 16-3/4 pence to 453 on news its executive chairman Rod Aldridge has taken the decision to step down after questions were raised about a personal loan he made to the Labour Party. 
   
And blue chip property issues ran in to some profit-taking after initial gains today following yesterday's jump on news of a softening in the regulation required for the introduction of REITS.
   
The REITS news led a number of brokers to adjust ratings in the sector.
   
Credit Suisse upgraded its sector stance to 'market weight' from 'underweight', upgrading its stance for Hammerson, but cutting it for Brixton.
   
Meanwhile JP Morgan maintained its 'overweight' sector stance, upgrading second liners Derwent Valley and Shaftesbury, downgrading blue chip Liberty International and mid cap Great Portland.
   
Among the real estate fallers, blue chips British Land lost 16 pence at 1,284, Hammerson shed 15 pence at 1,285, and Liberty International lost 11 pence at 1,214,
   
However, the mid caps property issues continued to find support, with Shaftesbury up 12-1/2 pence at 545-1/2, St Modwen ahead 13-1/2 pence at 536, and Capital & Regional up 16 pence at 1,155 lifted by results today.
   
On the upside, British Airways was the biggest blue chip gainer early on, up 13-1/4 pence to 374 after news the airline will pay 500 mln stg into its main pension fund as part of an effort to clear a pretax deficit of about 2 bln stg.
   
Drugs group Shire Pharma also found support early on, adding 30-1/2 pence at 916-1/2 after indications from the US FDA that attention deficit disorder drugs do not need black box warning labels for children.
   
Among the miners, Anglo American shares gained 57 pence at 2,073 after news it has raised its share buybacks programme by 1 bln usd to 2 bln, with the programme to start immediately.
   
The mining group was also lifted by news that ABN Amro has initiated coverage on the stock with a 'buy' rating.
   
The Dutch-owned broker also initiated coverage on Xstrata with a 'buy' rating in a report on the global mining sector -- Xstrata shares were up 36 pence to 1,831.
   
And Prudential shares were 12-1/2 pence higher at 733 after the Times reported that shareholders in the UK insurer have called chief executive Mark Tucker to a second round of meetings after hearing rival Aviva's case for a merger between the two groups.

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In reaction Aviva shares shed 2-1/2 pence at 817.
   
On the second line, De Vere was the biggest FTSE 250 riser, up 62 pence to 812 after the hotels group confirmed it has received a possible bid approach. Market chatter yesterday suggested Spain's NH Hoteles was about to pounce on the UK firm.           
   
And well-received trading news lifted Investec shares 81 pence higher at 3,111, while Premier Oil gained 22 pence at 906.
   
But on the downside, First Choice shares lost 4-1/4 pence to 229 after a trading update failed to impress.
   
The holidays operator said trading for the 2005/06 financial year is progressing in line with expectations against a background in which certain segments of the marketplace are experiencing tougher trading conditions.  
   
And shares in Stanley Leisure lost 17-1/2 pence to 737-1/2 after being downgraded to 'sell' by Merrill Lynch after the UK government increased taxes on slot machines operated by betting and gaming companies in yesterday's Budget.
   
Merrill Lynch believes the changes will cost Stanley about 600,000 to 750,000 in a full year.
   
On the macro front, after yesterday's UK Budget, little domestic economic data is expected, with only the February vehicle production numbers and the latest CBI monthly industrial trends survey expected.
   
Few US pointers are due either aside from February existing homes data and the latest weekly jobless numbers.

Diary of Events

For a diary 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

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FRANKFURT - Market data at 08.58 GMT

Major indices:
   
DAX 30 - 5,944.61, up 12.30 points or 0.21 pct
MDAX - 8,689.81, up 30.78 points or 0.36 pct
TecDAX - 729.32, up 3.22 points or 0.44 pct
DAX future - 5,982.50, down 12.00 points or 0.20 pct

   
Major gainers:
   
Lufthansa, up 0.54 eur or 3.92 pct at 14.32 after the German flag carrier proposed a higher-than-expected dividend hike late yesterday afternoon, as it reported mixed full-year results
   
Commerzbank, up 0.80 eur or 2.58 pct at 31.85 after UBS upgraded its stance on the stock to 'buy' from 'neutral' and hiked its price target to 38 eur versus 28.50
   
Hypo Real Estate, up 1.41 eur or 2.58 pct at 56.10 as UBS initiated coverage of the issue with a 'buy' rating and a 66 eur price target
   
Deutsche Boerse, up 2.25 eur or 1.95 pct at 117.67
   
Metro, up 0.71 eur or 1.64 pct at 43.91, bouncing back from yesterday's sharp losses

Major losers:
   
Continental, down 0.91 eur or 1.00 pct at 89.70
   
TUI, down 0.14 eur or 0.83 pct at 16.82 as Exane BNP Paribas downgraded its stance on the stock to 'underperform' from 'neutral' and cut its price target to 14 eur from 16 following the tourism and shipping giant's full-year results yesterday
   
Altana, down 0.41 eur or 0.82 pct at 49.80
   
E.ON, down 0.44 eur or 0.47 pct at 93.42
   
ThyssenKrupp, down 0.08 eur or 0.35 pct at 22.80

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AMSTERDAM - Market data at 09.04 GMT

Major indices
   
AEX                   469.88, up 0.85 points  
AMX Midcap            626.62, up 0.32 point
Government bonds      mixed

Major gainers
   
Hagemeyer advanced 2.62 pct to 4.31. Additional customer loyalty programmes and the introduction of new catalogues are further signs management is making progress in evolving from a company focused on getting its act together to a company that is focused on customer service and top line growth, SNS Securities said, putting its price target under review.
   
Nutreco added 1.60 pct to 47.75 after Dutch broker Kempen & Co upgraded the issue to 'buy' from 'hold' and lifted the target price to 60.0 eur from 36.0.
   
Philips put on 1.65 pct to 27.12 after the company said it has closed its acquisition of Lifeline Systems, Inc, a leading personal emergency response service company.
   
Boskalis strengthened 1.59 pct to 54.40 and Univar lifted 1.02 pct to 47.70.
   
Vedior was 1.51 up pct to 16.09. USG People added 1.40 pct at 58.05.
   
SBM Offshore added 0.88 pct to 80.0 after SNS Securities upgraded the issue to 'add' from 'buy', saying it prefers the issue over Fugro.
   
BAM was 0.55 pct higher to 82.80 after initially falling when the construction company posted in-line full-year results but gave a "conservative" net profit outlook for this year. Investors then put their attention on the "record" order book, analysts said. F.van Lanschot Bankiers reiterated its 'buy' rating, saying the company is well positioned to "significantly" surpass the 2006 guidance, supported by this 17 pct higher order book.
   
TNT went up 0.21 pct to 28.14 after the company said it will propose the appointment of R King as new member of its supervisory board.

Major losers
   
Corio was off 1.56 pct to 53.50 after the property company bought a factory outlet centre in France for 26 mln eur.
   
Versatel was down 1.16 pct to 0.85.
   
Getronics shed 0.81 pct to 9.74.
   
ABN Amro weakened 0.46 pct to 25.80 and Aegon was 0.45 pct lower to 15.49.
   
Wessanen slid 0.07 pct to 13.54 after management board member and CFO Doede Vierstra resigned to work for Dutch energy company Nuon. SNS Securities said the departure was a "surprise" and a "puzzle".

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Paris shares at a glance outlook

Forthcoming Events

TOMORROW -Oberthur Card Systems Q4 sales

Today's Press
   
New Vivendi Universal shareholder may urge unwinding of company (Wall Street Journal)
  
Company News
   
Belgium's CNP buys 6.1 pct in Eiffage for 307 mln eur.
   
Enel says board made no decision on Suez bid at last night's meeting.
   
GDF signs 10-yr deal to buy wind-generated electricity from UK Falck Renewables
   
Hermes FY net 247.0 mln eur vs 213.9 mln
   
Legrand sets IPO price range at 17.00-19.75 eur, may raise 1.011 bln eur.
   
Pernod Ricard H1 net 488 mln eur, up 51 pct; still sees 10-15 pct rise in FY EPS.

Politics/Macroeconomic/Miscellaneous
   
French growth recovery on track, unemployment to continue falling - Insee.
   
Luxembourg govt says new takeover bill won't affect Mittal bid for Arcelor.

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