UK/Euro Financial Market Daily Morning Briefing 24-03-2006

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London shares back above 6,000 level at open as Tesco, Compass shine

Leading shares edged back above the key 6,000 level in opening deals as strong gains in supermarket group Tesco and caterer Compass offset losses overnight on Wall Street, dealers said.
   
At 9.03 am, the FTSE 100 was 26.1 points higher at 6,016.2, mirroring the positive wider market sentiment.
   
Tesco was an early winner after this morning's Daily Telegraph reported the food retailing giant is mulling placing its 12 bln stg property portfolio into a Real Estate Investment Trust.
   
The paper said the move would allow the retailer to place its property into a separate quoted vehicle and use the money raised from selling shares in this entity to buy back its own shares.
   
In reaction, Goldman Sachs told clients it estimates Tesco has capacity to comfortably put 9-10 bln stg of property into a REIT, generating around 6 bln stg in proceeds for share buyback.
  
It argued the combined value of 'Tesco' and 'Tesco REIT' would provide substantial upside to the current share price and maintains its 'outperform' recommendation. 
   
In pharmas, Shire climbed almost 3 pct after US medicine regulators rebuffed a rival's hyperactivity drug, which would have competed with several products being developed by the UK company.
   
Analysts at Deutsche Bank said the news is positive for three hyperactivity drugs that Shire is hoping to launch -- Daytrana, NRP104 and SPD503.
   
Compass also found favour as the catering giant appointed Richard Cousins to succeed Michael Bailey as chief executive.
   
Sentiment in the stock was further lifted by growing hopes the company will reveal the sale of its motorway service operations for up to 1.5 bln stg in a trading update next week.
   
Oil heavyweights lent support, as crude prices edged closer to the 64 usd mark on the back of weaker than-expected US inventories.
   
BP took on 7 at 622-1/2, Shell added 3 at 1809 and Cairn took on 14 at 2122.

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Elsewhere, Carnival rebounded from post first quarter results falls yesterday, aided by Deutsche Bank reiterating its 'buy' advice on the cruise operator and 45 stg price target.
   
Miners also found favour, building on gains in Australia overnight, on yet another spike in commodity prices as copper hit all time highs.
   
Xstrata firmed 14 at 1845, Rio Tinto took on 17 at 2790, BHP was up 7-1/2 at 998-1/2, Kazakhmys added 8-1/2 at 973 and Anglo American gained 12 at 2090.
   
Anglo American was further in focus after the group revealed it is to   further reduce stake in AngloGold to 42.6 pct via a placing of 27.9 mln shares.
   
But Antofagasta bucked the trend, 11 lower at 2064 as traders fretted the group might get dragged into a bidding war over Australian-listed Tethyan Copper.
   
Antofogasta upped its offer for the group by 17 pct to 112 mln usd but dealers thought this would not be enough to deliver a knock-out blow.
   
But British Airways was the top faller on a report in the Times claimed the national carrier could face a summer of industrial action after admitting yesterday it had to slash its pension deficit.
   
Vodafone was another casualty after Credit Suisse highlighted the European Union is to outline its plans next week to cut international roaming prices.
   
The broker argued the move "continues to present a downside risk" to the mobile phone giant.
   
On the second-line, Babcock International soared over 20 pct after BAE and VT last night revealed they were mulling a joint bid for the group.
   
Bridgewell said the group could be worth between 340 and 360 pence a share, valuing the support services and engineering company at between 708 mln and 750 mln stg.
   
Babcock took on 51 at 321 and VT gained 23-1/4 at 449-1/4.
   
M&A hopes lifted AB Ports as talk resurfaced it could be a takeover target  for PSA International of Singapore, which recently lost out in the battle for  P&O.

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On the downside, GCAP Media fell foul after the radio group said it expects total revenues for the year to end March to be down 13 pct year-on-year, dealers said.
   
The company, formed by the merger of Capital Radio and GWR last year, said revenues were hit by amongst other things weak advertising conditions and audience declines at core stations.
   
Shares lost 4 at 238.
   
Meanwhile, overnight on Wall Street, US stocks ended lower as a rise in long-term interest rates, sparked by strong housing data, and a spike in crude-oil prices prompted investors to cash in prior-session gains.
   
But after hours, Palm shares jumped almost 7 pct after the handheld device maker turned in higher third-quarter earnings and revenue.
   
The DJIA ended down 47.14 points at 11,270 the Nasdaq eased 3.20 points to 2,300.15, while the S&P 500 slipped 3.37 to 1,301.67.
   
And today investors will look to US durable goods orders for February in an attempt to provide clues to the health of the world's biggest economy.
   
After plunging 9.9 pct in January, economists are mixed on the result, but the average poll is for a gain of 1.5 pct.
   
New home sales will also come under scrutiny with the market looking for a reading of 1.21 mln, down from 1.23 in January.
   
And in Asia overnight, the Nikkei 225 ended up 71.50 points at 16,560.87, while the Hang Seng closed 54.71 lower at 15,716.46.

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Diary of Events

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German shares AFX at a glance outlook
 
Forthcoming Events
   
TODAY
   
Feb import prices (8.00 am)
   
German federal states CPI

Company News
   
Bayer makes 86 eur/share offer for Schering; supported by Schering
   
Merck KGaA declines comment on Bayer's 86 eur/share offer for Schering
   
Germany's SAP to invest 25 mln eur in China R&D in 2006

Paris

Paris shares AFX at a glance outlook
 
Forthcoming Events
   
TODAY
   
Oberthur Card Systems Q4 sales

Company News
   
Lucent, Alcatel confirm merger talks
   
Sanofi-Aventis says EU committee recommends Taxotere for stomach cancer use
   
US commerce secretary backs Apple over French law that would throw open Apple's popular online music store to competitors
   
Venezuela sets back-tax deadline for Sincor (jv between Total, Statoil & Petroleos de Venezuela (PDVSA)
   
Vivendi makes best initial bid for Tunisie Telecom with 1.5 bln eur
   
Vinci, Morgan Sindall unit win 100 mln stg order to build bridge in Scotland
   
Suez CEO asks French market regulator to tell Enel to clarify intentions

Politics/Macroeconomics/Miscellaneous
   
Shops, cars left in flames in Paris youth jobs demo
   
Chirac walks out as French head of employers' body speaks in English

Market Sentiment
   
Veolia Environnement upgraded to 'overweight' at Morgan Stanley

Amsterdam

Amsterdam shares AFX at a glance outlook

Forthcoming Events
   
Wednesday
   
Ahold FY results, news conference (10.00 am)

Company News
   
Corio FY result beats guidance, sees slight fall in 2006
   
Akzo Nobel says ferrazone iron compound receives FDA acceptance
   
Pharming to acquire Dutch biopharmaceutical co DNage
   
Athlon 'BBB-/A-3' ratings placed on creditwatch positive on proposed acquisition by Lage Landen 

Market Sentiment
   
Wessanen upgraded to 'buy' from 'hold' by ABN Amro
   
Telecom stocks will get a boost from news Alcatel and Lucent are in merger talks
   
Pharma stocks are likely to benefit from Bayer's recommended offer for Schering

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