UK/Euro Financial Market Daily Morning Briefing 25-09-2006

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London shares gain in early deals as M&A excitement offsets weak miners

Leading shares were higher in early deals, recovering from Friday's late sell-off, with M&A excitement in financials, pharmas and midcap oils countering further weakness across mining stocks and a surprise placing in Wolseley, dealers said.
   
By 9.15 am, the FTSE 100 index was up 21.4 points at 5,843.7, while the broader indices were also higher.
   
Early volume was moderate, with 129.1 mln shares changing hands in 17,838 deals.
   
US stocks ended lower again on Friday, with a weaker-than-expected Philadelphia manufacturing survey draining Wall Street of any enthusiasm that followed Wednesday's Fed decision to leave interest rates unchanged, traders noted.
   
The DJIA closed down 25.13 at 11,508.10, having dropped nearly 80 points Thursday, while the Nasdaq fell 18.82 points to 2,218.93.
   
Across Asia overnight, the Nikkei 225 closed 0.86 points lower at 15,633.81, while the index began its afternoon session 56.86 points lower at 16,677.81. The Hang Seng closed down 54.61 points lower at 17,546.04.
   
In the UK, ICAP stood out with a gain of 6-1/2 pence to 519-1/2 after the inter-dealer broker confirming that it has held exploratory discussions about a merger with London Stock Exchange PLC.
   
It added however, that the talks were discontinued because they failed to agree on pricing.
   
Bridgewell told clients that 'it is a reminder that the exchanges and IDBs are moving ever closer together and that ICAP is the partner of choice in the IDB space for all exchanges.'

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The news reawakened old M&A stories across the financial sector, with  Amvescap up 9 pence to 555, Standard Chartered adding 19 pence to 1390, Legal & General gaining 1-1/2 pence to 136-1/2 and HBOS moving 11 pence higher to 1051.
   
Shire was also lifted by bid hopes, with today's acquisition of Schwarz Pharma by Belgian drugmaker UCB fueling hopes of further sector consolidation, coming hard on the heels of last week's Merck/Serono tie up.
   
Elsewhere, AstraZeneca gained 34 pence to 3358 and GlaxoSmithkline added 15 pence to 1433.
   
Carnival topped the FTSE 100 risers however, with a gain of 48 pence to 2433, helped by sliding fuel prices and an upgrade to 'buy' by Evolution after last week's results.
   
Wolseley topped the blue-chip fallers this morning as its better than expected full-year results were overshadowed by plans for a new share placing and a cautious outlook on its US operations.
   
The building materials group said it is to place 59.5 mln new shares in a bookbuilding exercise as it posted a 21.8 pct hike in pretax profits before amortisation of intangibles to 817 mln stg.
   
In response, Merrill Lynch said the placing should be around 4 pct dilutive in 2007 and around 6 pct dilutive in 2008, although noted that the full-year figures came in 4.5 pct ahead of its EPS forecast.
   
Looking ahead, the US broker said the outlook statement was positive with some uncertainty in the US residential construction market more than offset by strong growth in other sectors and in Europe.
   
Wolseley shares were down 63 pence at 1101.
   
Miners were weak again this morning, with metal prices remaining under pressure. BHP Billiton eased 16 pence to 871, while Vedanta Resources fell 19 pence to 1174 and Xstrata lost 33 pence to 2080.

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Energy stocks were also lower, as oil prices fell below 60 usd in overnight trade, their lowest level in six months.
   
New York's main contract, light sweet crude for November delivery, however, regained some poise this morning to trade down 49 cents at 60.06 usd a barrel from 60.55 in late US trade Friday.
   
BP dropped 8 pence to 566, while Royal Dutch Shell eased 2 pence to 1757.
   
Midcap oil stocks fared better however, with a sliding crude price offset by M&A excitement after Tullow Oil's agreed 581 mln stg bid for Australian peer Hardman Resources.
   
Tullow shares fell 2 pence to 356 however, although Hardman topped the small cap risers with a gain of 46 pct, up 24-1/2 pence to 77-1/2.
   
Merrill Lynch reiterated its 'buy' advice and said the deal is both net asset value accretive and strategically sound with Tullow taking advantage of the 30 pct fall in Hardman Resources' share price since January.
   
The news helped the midcap E&P sector, with Dana Petroleum gaining 5 pence to 1130, Venture Production adding 4 pence to 708 and Premier Oil gaining 5 pence to 999.
    
Among the fallers, cautious broker comment weighed on Laird Group and FKI, down 14 pence to 366-1/2 and 1-1/4 pence to 88-1/4 respectively, after Goldman Sachs downgraded both stocks to 'neutral' from 'buy'.

UK Diary of Events

For a diary of key financial and corporate events in the UK today, click here

US Summary

For a summary of US stocks at Friday's close of trade, click here

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PARIS - Market data at 10.00 am:

Major indices:
   
CAC-40 up 26.14 at 5,168.09
SBF-80 down 1.41 at 5,866.85
SBF-120 up 16.14 at 3,739.08

Volume: 430 mln eur
33 CAC-40 stocks up
7 CAC-40 stocks down

Major gainers:
   
Alstom up 1.50 or 2.06 pct at 74.30, wins 700 mln eur Bulgarian power plant order
   
Veolia Environnement up 0.77 or 1.69 pct at 46.33, rebounds from Friday's slide
   
Euronext up 1.65 at 76.50, adds to Friday gains

Major losers:
   
Altran down 0.45 or 6.92 pct at 6.05 on fresh profit warning
   
Pernod Ricard down 0.50 at 161.80 after Friday's gains
   
EADS up 0.36 at 22.75
   
Haulotte down 0.56 at 21.64

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AMSTERDAM - Market data at 10.08 am

Major Indices
   
AEX                475.56, up 2.57 points
AMX Midcap         579.81, down 0.12 points
Government bonds   Flat to higher

Major Gainers
   
ASML added 1.44 pct to 17.59 eur
   
Aegon put on 0.99 pct to 14.24 eur amid reports the insurer is vying for the insurance ops of Banca Monte Dei Paschi di Siena; Fortis, reportedly also in the race for the same acquisition, lifted 0.73 pct to 31.59 eur
   
Crucell gained 1.87 pct to 18.55 eur amid mounting speculation that one of its mainstay vaccines will receive pre-qualification from the WHO
   
TomTom rose 0.67 pct to 31.37 eur after news that it will supply navigation devices for Seat cars
   
Ahold added 0.24 pct to 8.25 eur amid continued reports of it merging with Delhaize
   
Wolters Kluwer edged up 0.20 pct to 19.96 eur after a price target hike at ING
   
OPG added 1.63 pct to 74.90 eur after it announced an acquisition in Germany for 23 mln eur
   
Major losers
   
Royal Dutch Shell lost 0.08 pct to 25.47 eur amid easing oil prices
   
Hagemeyer shed 1.83 pct to 3.75 eur
   
Getronics lost 3.99 pct to 5.30 eur after Deutsche Bank initiated tracking the stock with a 'sell' rating
   
Aalberts lost 1.80 pct to 57.20 eur

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FRANKFURT - Market data at 10.28 am
   
Major indices:
   
DAX 30 - 5,924.62, up 41.30 points or 0.70 pct
MDAX - 8,333.89, up 86.54 points or 1.05 pct
TecDAX - 639.11, up 11.73 points or 1.87 pct
DAX future - 5,968.50, up 48.50 points or 0.82 pct

Major gainers:
    
Deutsche Telekom, up 0.20 eur or 1.64 pct
    
VW, up 1.06 eur or 1.62 pct at 66.31
    
E.ON, up 1.44 eur or 1.50 pct at 97.47, on a report the European Commission will rule tomorrow that Spain must remove the 19 conditions it attached to its approval of E.ON AG's 26.9 bln eur bid for Endesa, dealers said.
   
Deutsche Bank, up 0.99 eur or 1.07 pct at 93.34, after being added to Merrill Lynch's Europe 1 list as the US broker says the market is still undervaluing the German group's prospects.
   
Bayer, up 0.39 eur or 1.01 pct at 38.82.
  
Major losers:
   
ThyssenKrupp, down 0.25 eur or 0.96 pct at 25.87, on continued concern over the future prospects of its Transrapid maglev train following Friday's crash, dealers said.
   
MAN, down 0.37 eur or 0.59 pct at 62.40, on a weekend report it will up its offer for rival Scania by 14 pct.
   
Schering, down 0.16 eur or 0.17 pct at 91.92

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