UK/Euro Financial Market Daily Morning Briefing 23-10-2006

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London shares open up; Anglo American firm amid talk of reverse takeover

Leading UK shares made modest gains in early deals in volatile trade, with strength in Standard Chartered and Anglo American somewhat offset as oil and commodity stocks retreated on easing crude prices
   
At 9.05 am, the FTSE 100 was 3.9 points higher at 6, 159.2, while the broader indices were also firmer. Volume was below average, with 146 mln shares changing hands in 23, 686 deals.
   
Last Friday, Wall Street finished a record-setting week which saw the index climb above the 12, 000 mark, with the DJIA clawing back gains at the close despite a lacklustre profit report and forecast from Caterpillar.
   
The DJIA closed down 9.36 points at 12, 002.37, while the Nasdaq Composite index rose 1.36 points to 2, 342.30 following a strong showing by Google Inc.
   
However, investors will be focusing on the second half of the week, which sees the release of US existing home sales, durable goods orders, consumer sentiment as well as jobless claims.
   
Over in Asia this morning, the Nikkei 225 closed up 137.19 points at 16, 788.82,  while the Hang Seng was 13.42 points firmer by midday at 18, 126.97.
   
On the upside, Anglo American climbed 18 pence to 2,430 on weekend press reports that the incoming chairman of Rusal Brian Gilbertson has suggested a reverse takeover of the group.
   
The Saturday's Times reported that the incoming chairman of Rusal, the world's largest aluminium group following its acquisition of Sual, said its group could borrow at least 15 bln usd and use the takeover to list in London.
   
The banking sector was also be eyed, with Standard Chartered shares shooting up 33 pence to 1, 458 to top the leaders board, after the group confirmed it has acquired more than 51 pct of the issued share capital of Taiwan-based Hsinchu International Bank.
   
This will result in Standard Chartered having majority ownership of Taiwan's seventh-largest private-sector bank in terms of loans and deposits as at 30 June, it said in a statement.
   
In addition, The Observer reported this weekend that Dubai could be mulling raising its stake to as much as 20 pct at a cost of 7 bln usd, according to sources in the oil-rich state.

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Meanwhile, positive broker comment spurred gains in Prudential, up 6 1/2 pence to 646, after UBS lifted its price objective to 710 pence from 658 pence, with the broker noting that after rejecting Aviva's offer in March, the focus is on delivering value for shareholders.
   
Elsewhere, shares in Corus were also in fine fettle, up 3 1/2 pence to 477, on follow-up M&A speculation on the back of Tata Steel's 4.3 bln stg bid for the group.
   
The weekend press was full of comment on the bid, with The Observer raising caution on the buyer's ability to meet pension liabilities of 14 bln stg when it takes over the Anglo-Dutch company in the new year. Meanwhile other papers tipped Severstal, ThyssenKrupp and Brazil's CSN as possible contenders.
   
However, ThyssenKrupp denied yesterday reports that it is considering a counterbid; while the FT today said Severstal is 'extremely unlikely' to bid for Corus.
   
Meanwhile, Corus shareholder Standard Life advanced, up 1 1/2 pence to 287, as the Daily Telegraph reported the group is set to net 100 mln stg from a Corus deal. Standard Life has complained that Tata's offer under-values Corus.
   
In other news, aero defence group BAE Systems benefited from reports that the group could list in the US provided the group retained a strong presence in the UK, with the shares up 2 pence at 421 1/2.
   
Intercontinental Hotels, meanwhile, added 5 1/2 pence to 1, 002 1/2 on news the group has struck a joint venture with All Nippon Airways hotels. The hotel group will invest 8 mln stg for a majority stake in all the Nippon jv, and noted it expects earnings to be enhanced from the third year.
   
On the downside, easing oil prices saw oil heavyweight issues slip, with light sweet crude for December deliver down 0.11 usd at 59.22 usd a barrel from its close of 59.33 usd in the US Friday.
   
Royal Dutch Shell was among the main casualties, down 6 pence to 1, 760 after The Observer reported this weekend that the group's costs on Sakhalin are spiraling.
   
The paper said that a leaked Russian document claims that the final bill for the troubled joint gas project could be 28 bln usd. Peer BP lost 2 pence at 600 1/2,  while  BG Group shed 3 1/2 pence at 699.
   
Mining issues also slid, with Xstrata slipping 18 pence at 2, 203, while Kazakhmys lost 10 points at 1, 237, Lonmin shed 21 pence at 2, 834, and BHP Billiton 6 pence lower at 1, 014, while Vedanta lost 3 pence at 1, 400.

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But shares in British Energy were the main casualty, shedding 7 pence at 441 and adding to last week's 25 pct loss in share price, as engineers plan to launch investigations at key sites to work out the extent of the damage across its plants that last week caused a 25 pct fall in its share price, reported the Financial Times.
   
Investors switched out of defensive stocks, with Severn Trent and Scottish Power out of favour, down 13 pence at 1,446 and 3 1/3 pence lower at 661 respectively.
   
On the second line, Intertek Group shares were 8 pence firmer at 811 after  Merrill Lynch upgraded to 'buy' from 'neutral' following the group's upbeat investor day and as it sees further sector consolidation.
   
Merrill Lynch said it has upgraded its earnings estimates by 2 to 3 pct on the back of the stronger margin improvement prospects, while pointing out that the group's balance sheet looks under leveraged, which opens opportunities to make earnings accretive acquisitions in a consolidating sector, as well as double-digit dividend growth.
   
Regarding valuation, the broker highlighted the stock trades at a 20 to 30 pct discount to nearest rival SGS, and said Intertek looks "too cheap".
   
Elsewhere, Whitbread added 9 pence to 1, 379, on press speculation that the group is planning to return about 400 mln stg to shareholders when it publishes its financial results this week, according to the Sunday Times.
   
Among casualties, Punch Taverns shares slid, down 11 1/2 pence to 1, 010, a fall of more than 1.1 pct, after UBS downgraded the stock to 'reduce' from 'neutral' as recent outperformance of the sector looks set to ease.
   
UK Diary of Events

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US Summary

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PARIS - Market data at 9.35 am;

Major indices:

CAC 40 up 8.01 at 5,838.36
SBF 80 up 4.91 at 6,183.01
SBF 120 up 5.66 at 3,901.45

Volume: 200  mln eur
26 CAC 40 stocks up
11 CAC 40 stocks down
3 CAC 40 stock unchanged

Major gainers:

CNP Assurances up 1.40 at 81.55, upgraded to 'overweight' from 'neutral' at JP Morgan

Arcelor-Mittal up 0.43 at 32.25 amid consolidation in global steel sector

Thomson SA up 0.14 at 13.49

Michelin up 0.45 at 62.00

Major losers:

PPR down 0.60 at 117.30 after 2 straight days of gains

Total down 0.25 at 53.45 as crude prices fall

Lafarge down 0.20 at 105.80

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FRANKFURT -  Market data at 9.15 am  

Major indices:

DAX 30 - up 13.99, or 0.23 pct at 6,216.68
MDAX - up 48.59 or 0.56 pct at 8,700.02
TecDAX - up 1.22 or 0.18 pct at 680.66
DAX future - up 9.5 at 6,251.0

Major gainers:
   
Deutsche Lufthansa up 0.31, or 1.95 pct at 17.23;  Boersenzeitung reported it may consider expanding its management board at a supervisory board meeting at the end of November. Christoph Franz, head of Swiss International Air Lines, may be a possible candidate for the new board seat.
   
Deutsche Postbank up 0.46 or 0.77 at 60.31; CEO Wulf von Schimmelmann sells stock, leading to rumour he may be about to step down.
   
EON up 0.50 or 0.5 pct at 94.63;  NY court suspends Acciona's probe in E.ON acquisition of Endesa.
   
RWE up 0.21 or 0.27 pct at 78.21; Thames Water sale may net RWE well over 500 mln eur.

Major fallers:
   
Henkel down 0.91 or 0.87 pct at 104.47
   
TUI down 0.08 or 0.46 pct at 17.43; not in talks with Hamburg or Lower Saxony over stake sale.
   
Deutsche Bank down 0.3 or 0.31 pct at 97.31
   
BMW down 0.15 or 0.33 at 44.67
   
DCX down 0.11 or 0.27 at 41.30.

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