UK/Euro Financial Market Daily Morning Briefing 24-08-2006

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London shares remain lower in early deals dented by weak miners and oil

UK blue chips remained under pressure in early deals, weighed down by further weakness across miners and oils, while disappointing results from Rentokil and Ladbrokes also hit market sentiment, dealers said.
   
At 9.17 am the FTSE 100 index was down 18.0 at 5,842.0 with the wider market also depressed.
   
Volume was moderate with 147.7 mln shares trading hands in 27,439 deals.
   
Overnight on Wall Street, stocks fell for a third consecutive session as signs of fresh woes for the US housing market undermined investors' confidence in the economy, while energy stocks also fell back as oil inventories remained well-stocked.
   
The DJIA fell 41.94 points, or 0.37 pct, to 11,297.90 while the S&P 500 index fell 5.82 points to 1,293.00.
   
US investors have some key data to digest today with durable goods orders seen rising by 0.5 pct in July after increasing by 3.1 pct in the prior month. Excluding the weak transportation sector, orders are seen rising 1 pct in July, slightly down on June's 1.1 pct.
   
Weekly jobless claims meanwhile, are forecast to rise slightly to 318,000 from 312,000 in the prior week.
   
Overnight in Asia, the Nikkei 225 index closed 202.41 points lower at 15,960.62, while the Hang Seng ended 205.35 points lower at 16,883.04.
   
Oil prices remained weaker in Asia after an unexpected rise in US gasoline reserves, dealers said.
   
New York's main contract, light sweet crude for October delivery, was down 0.03 usd to 71.73 usd a barrel from its close of 71.76 usd in the US overnight, where it had dropped 1.34 usd.

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The US Department of Energy said overnight that gasoline stocks had risen by 400,000 barrels to 205.8 mln barrels in the week ended Friday. Analysts had expected a decline of more than 2 mln barrels.
   
In the UK, BP was down again this morning, slipping 6 pence to a two month low of 604, following news that production at its Prudhoe Bay oil field was reduced by another 90,000 barrels yesterday when a problem was discovered in a compressor.
   
Sector peers BG Group and Royal Dutch were also lighter, down 2 pence at 692 and 2 pence at 1,932 respectively.
   
Miners were also under pressure following overnight falls across the commodity basket.
   
Vedanta dropped 22 pence to 1,340, Antofagasta eased 5-3/4 to 386 and BHP Billiton was lighter by 11 at 1,003.
   
Rentokil was the day's biggest loser however, down 6-3/4 at 153, as the UK support services group unveiled an expected drop in interim profits, held back by costs relating to its ongoing restructuring.
   
However, the company lowered full-year profit expectations for its textiles and washroom services division in the current year, blaming current market and trading conditions, and said it expects a broadly flat second half performance compared to the first.
   
On the upside, Rexam, improved by 11-1/2 pence at 522-1/2, turned in an underlying pretax profit of 137 mln stg for the six months to end-June, down from 141 mln stg the prior year and in line with expectations - taking it to the top of the leader board.
   
The group said its performance in the first half was solid in a challenging environment.
   
Chairman Rolf Borjesson said that during the first half of 2006 Rexam delivered strong top line growth, good cash flow, significant market share gains and a solid profit performance.
   
DSG International benefited from positive broker comment up 3-1/2 at 198-3/4, after being upgraded to 'buy' from 'hold' by Citigroup with a raised target of 230 pence from 190.

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The US broker argued that electrical trading patterns look to have remained buoyant over the summer, driving its first-half UK like-for-like sales forecast up to +5 pct from +3 pct, while its pretax profit estimate rises to 355 mln stg from 345 mln stg.
   
On the second line, John Laing was the day's biggest faller, down 15-1/2 at 275, after announcing a drop in full-year pretax profits, hit by a loss at its Chiltern Railways unit.
   
The PFI and infrastructure specialist posted pretax profits of 12.3 mln stg in 2006, down from 13.8 mln in the previous year, weighed down by a 2.4 mln stg loss from its Chiltern Railways division following the Gerrards Cross tunnel collapse in June 2005.
   
Bets were off for Ladbrokes, easing 12-1/2 pence to 383-1/4.
   
The worlds largest bookmaker was reiterated as 'neutral' at UBS with a reduced price target as caution over future earnings offset forecast-busting results.
   
Operating profit from continuing operations increased by 12.3 pct to 151.3 mln stg, up from 134.7 mln stg the previous year and compared with a flagged range of between 145-150 mln stg.
   
On a more positive note, for the stock at least, Northern Foods gained 1-3/4 pence at 83-1/4 after the food maker announced the closure of its Trafford Park Bakery in Manchester with the loss of 690 jobs and at a cost of 12 mln stg.
   
In response, UBS reiterated its 'neutral' stance on the group and nudged its price target up by 1 pence to 91 pence to reflect the value release from the closure.

UK Diary of Events

For a list 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

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AMSTERDAM - Market data at 10.16 am:

Major indices
   
AEX                460.57, down 0.48 point
AMX Midcap         575.08, down 3.90 points
Government bonds   unchanged to slightly higher
 
  
Major losers:
   
Royal Dutch Shell was 0.61 pct lower at 27.56
   
Philips slipped 0.53 pct at 26.26 amid a report that the Hamburg prosecutor is investigating a number of its employees for alleged corruption
   
Buhrmann shed 0.6 pct at 9.87
   
ABN Amro gave up 0.52 pct at 21.10, Aegon fell 0.74 pct at 13.42 and Fortis slipped 0.43 pct at 29.81
   
Corio sank 1.78 pct at 52.45 after the property fund reported a slight fall in its first-half results and repeated its forecast for a slightly lower full-year result. VastNed Retail was down 2.21 pct at 59.75

Telegraaf sank 5.38 pct to 19.01 after the media group last night reported weak first-half results
   
Ajax plunged 8.93 pct to 8.87 after unexpectedly losing their match to qualify for the main Champions League

Major gainers:
   
Ahold rose 1.2 pct at 7.56 after a report in the FT said activitist hedge funds Paulson and Centaurus Capital have been meeting with some of the retailer's biggest shareholders in the Netherlands this week to garner support for their plan to break up the group
   
Unilever was up 1.5 pct at 18.29
   
Other blue chip gainers were Wolters Kluwer, up 0.42 pct at 19.32, and TNT, 0.53 pct higher at 28.60 after yesterday falling 2.47 pct as the net proceeds of the announced sale of its Logistics division came in at the low end of analysts' expectations 
   
TKH, listed on the local market, rose 3.09 pct at 50.0 after better-than-expected first-half results and full-year outlook

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FRANKFURT - Market data at 10.08 am

Major indices:
   
DAX 30 - 5,773.15, down 2.39 points or 0.04 pct, having jumped from a level of 5,745.07 to a session high of 5,789.04 as the Ifo August business climate index was published, standing at 105.0 versus 105.6 in July, slightly ahead of the 104.9 consensus.
   
MDAX - 7,955.00, down 75.60 points or 0.94 pct
TecDAX - 646.46, down 5.04 points or 0.77 pct
DAX future - 5,785.50, down 11.00 points or 0.19 pct

Major gainers:
   
Hypo Real Estate, up 0.38 eur or 0.83 pct at 46.36
   
E.ON, up 0.78 eur or 0.79 pct at 99.10
   
Linde, up 0.39 eur or 0.58 pct at 67.99
   
Volkswagen, up 0.35 eur or 0.56 pct at 62.45
   
Adidas, up 0.19 eur or 0.51 pct at 37.81

Major losers:
   
ThyssenKrupp, down 0.39 eur or 1.49 pct at 25.74
   
DaimlerChrysler, down 0.32 eur or 0.78 pct at 40.60, after the Wall Street Journal reported that the automaker has cut production of pick-ups and SUVs in North America. However, analysts said the cut was not a surprise, as it was in-line with earlier comments made by DaimlerChrysler's management.
   
Siemens, down 0.30 eur or 0.46 pct at 65.31
   
BMW, down 0.14 eur or 0.35 pct at 40.02
   
Fresenius Medical Care, down 0.34 eur or 0.33 pct at 101.81

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PARIS - Market data at 9.54 am:

Major indices:
  
CAC-40 down 12.23 points or 0.24 pct at 5,070.50
SBF-80 down 8.07 points or 0.14 pct at 5,647.50
SBF-120 down 8.24 points or 0.22 pct at 3,663.45

Volume: 293 mln eur
10 CAC-40 stocks up
28 CAC-40 stocks down
1 CAC-40 stock unchanged

Major gainers:
   
Vallourec, up 0.90 eur or 0.54 pct at 168.20, after Merrill Lynch started it at 'buy' with a 215 eur price target.
   
Accor, up 0.19 eur or 0.41 pct at 46.62. Finance Minister Thierry Breton said the government will proceed with plans to launch transport vouchers, which creates a new potential market for Accor's voucher business.
   
Danone, up 0.30 eur or 0.29 pct at 104.70, after announcing the sale of its Canadian water unit.

Major losers:
   
Unibail, down 2.00 eur or 1.27 pct at 155.90. Its chairman said it could sell some mature properties while focusing on new generation shopping centres, and that it could mobilise more than 2 bln eur for suitable acquisitions.
   
Capgemini, down 0.38 eur or 0.92 pct at 41.07
   
Schneider Electric, down 0.65 eur or 0.78 pct at 82.20

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