UK/Euro Financial Market Daily Morning Briefing 26-02-2007

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London shares up in early deals; Persimmon, AB Foods please; utilities up

Leading shares opened higher, shrugging off Wall Street's negative close on Friday, with Persimmon's full-year numbers and AB Foods's trading update pleasing investors, while International Power led utilities higher on sector consolidation hopes, dealers said.
   
At 8.50 am, the FTSE 100 index was 26.9 points ahead at 6,428.4 after closing at session highs on Friday, up 20.6 points at 6,401.5. The broader indices were also positive in early deals. Early volume was fair, with 153.9 mln shares changing hands in 30,427 deals.
   
In the US on Friday, stocks ended a lacklustre week with a moderate decline as higher oil prices weighed on investor sentiment and treasuries rallied amid concerns about a meltdown in the subprime mortgage market among companies that offer loans to those with poor credit records.
   
The DJIA closed 38.50 points lower at 12,647.50 Friday, while the Nasdaq Composite fell 9.84 points at 2,515.10 and the S&P 500 index lost 5.20 points at 1,451.20. It was the worst week for the Dow Jones industrials since mid-August, while the broader market indices were mixed for the week.
   
In Asia this morning, the mood was mixed as Tokyo's Nikkei 225 index closed up 26.93 points at 18,215.35 points but Hong Kong's Hang Seng closed down 203.70 points at 20,507.95.
   
Hong Kong share prices finished the morning sharply lower as index heavyweight China Mobile succumbed to profit-taking after strong gains last week. Investors were generally cautious before the settlement of February futures contracts tomorrow and results announcements by some big companies next week.
   
Still in Asia, oil prices continued to trade above 61 usd a barrel, the highest level of the year, with the market focused on renewed geopolitical tensions, traders said.
   
Earlier this morning, New York's main oil futures contract, light sweet crude for delivery in April, advanced 33 cents to 61.47 usd a barrel from 61.14 in late US trading on Friday. Brent North Sea crude for April delivery climbed 38 cents to 61.26 usd a barrel.
   
In London, AB Foods was among the top risers, 29 pence firmer at 836-1/2, after this morning reiterating its full-year earnings guidance.
   
The group said on Dec 8 last year that adjusted operating profit in the current year was in line with internal expectations despite volatility in some commodity prices and fluctuations in currencies.
   
Persimmon was also higher, up 50 pence at 1,474, after the housebuilder said full-year pretax profits rose 17.5 pct to 582.1 mln stg after the acquisition of Westbury last year. The group also raised its dividend to 46.5 pence after as EPS rose 16 pct to 137.5 pence.

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Bridgewell Securities said the results were marginally ahead of the broker's estimates, but the biggest surprise was the 50 pct rise in the dividend, which the group said is a sign of confidence in the future business.
   
Results from Old Mutual also pleased, sending the Anglo-South African insurer's shares up 3-3/4 pence to 185-1/4, after its full-year numbers narrowly beat analysts' forecasts, buoyed by recently acquired Swedish rival Skandia.
   
However, gains were capped as the group warned earnings growth may be held back in 2007 because of foreign exchange rates, investments to achieve synergies across Europe, as well as costs at the South African life business.
      
Elsewhere, International Power took on 10-1/2 pence at 389-3/4 as the utility sector gained on sector consolidation hopes following news US firm TXU, the largest electricity producer in Texas, could be taken over in what would be the largest private buyout in US corporate history.
   
TXU's directors gave tentative approval on Sunday night to sell the company to two private equity firms that would abandon plans to build eight new coal-fired power plants, according to people close to the situation.
   
Kohlberg Kravis Roberts & Co and Texas Pacific Group were offering about 32 bln usd plus the assumption of more than 12 bln usd in TXU debt.
   
Other UK utilities groups also rallied, with Drax Group up 9-1/2 pence at 749 and National Grid adding 8 pence at 790-1/2.
   
The miners offered support, extending sector gains in Australian trade, tracking firming base metals prices. Xstrata took on 39 pence at 2,684, Lonmin was up 48 pence at 3,385 and Kazakhmys rose 16 pence at 1,189.
   
Oil price strength fuelled gains in oil and gas stocks, with BP 4-1/2 pence higher at 539-1/2, Royal Dutch Shell up 6 pence at 1,708 and Cairn Energy 15 pence better at 1,615.
   
On the downside, meanwhile, BSkyB lost 2-1/2 pence at 562, after the broadcaster warned there is a real possibility its deal with Virgin Media on basic channels will collapse before the current deal expires on Feb 28, cutting Sky's full-year operating profits by 15-20 mln stg.
   
The pay television broadcaster said it is seeking a "fair price" for its offerings and is disappointed that Virgin Media "appear to have walked away from negotiations".

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Lloyds TSB Group extended recent declines after last week's full-year results disappointed. The stock fell 4 pence at 588 this morning -- the main casualty with a 0.7 pct decline.
   
Bearish broker comment hit shares in 3i Group, down 2-1/2 pence at 1,181-1/2 after UBS downgraded the stock to 'reduce' on valuation grounds. It also comes after the shares have rallied almost 20 pct in the past three months.
   
In a note this morning, UBS said the share price has risen partly on hopes for continued strong returns from realisations, which the broker said are "exceptionally good".
   
On the second line, it was bullish broker comment that sent Spectris shares 24 pence higher at 887. Bridgewell Securities this morning upgraded the stock to 'neutral' from 'underweight' after Friday's full-year results. The broker said it believes the company's midteens margin target is comfortably within reach.
   
Bridgewell said stripping out the unexpected 7.7 mln stg restructuring charge and discontinued businesses, Spectris' full-year performance was impressive.
   
However, Bunzl led the mid-cap gainers with a 3.3 pct increase, up 22 pence at 685, after the distribution and outsourcing group posted a 7 pct rise in pretax profits to 189.7 mln stg and said it is hiking its full year total dividend by 8 pct to 17 pence per share.
      
Among the mid-cap casualties, Alfred McAlpine plummeted 17.7 pct, dropping 108-1/2 pence to 505, after news the firm has uncovered material accounting irregularities at its Slate subsidiary, prompting Altium Securities to cut its stance to 'sell' from 'reduce', dealers said.
   
McAlpine said the accounting irregularities at Slate will reduce the business's expected pretax profit in the year to Dec 31, 2006, by about 13 mln stg, prior to any potential restructuring and impairment provisions. In response, Altium said it believes investors are now potentially faced with a serious fraud situation.

UK Diary of Events

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US Summary

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PARIS - Market data at 9.56 am:

Major indices:
   
CAC-40 up 25.44 points or 0.45 pct at 5,741.82
SBF-80 down 3.44 points or 0.05 pct at 7,116.10
SBF-120 up 15.56 points or 0.37 pct at 4,207.06

Volume: 511 mln eur
27 CAC-40 stocks up
10 CAC-40 stocks down
3 CAC-40 stocks unchanged

Major gainers:
   
Arcelor Mittal, up 1.03 eur or 2.61 pct at 40.54
   
Total, up 0.62 eur or 1.17 pct at 53.49
   
Axa, up 0.37 eur or 1.10 pct at 33.88, as blue chip insurers gained amid M&A moves in the industry, notably Scor's bid for the 67.1 pct of Converium it doesn't already own.

Major losers:
   
Carrefour, down 0.58 eur or 1.16 pct at 49.48, after a downgrade to 'sell' from 'hold' by Citigroup.
   
Scor, down 0.21 eur or 0.99 pct at 21.01
   
Sodexho Alliance, down 0.77 eur or 1.38 pct at 55.05, after a French newsletter reported it plans a 5 bln usd bid for Jones Lang LaSalle.

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German shares AFX at a glance

Forthcoming Events

Today
   
Deutsche Boerse Reto Francioni speech at the reopening of Frankfurt stock exchange trading room
   
Schwarz Pharma FY results 
   
Dresdner Bank annual news conference
   
GfK consumer climate survey with forecast for March
   
Volkswagen Nutzfahrzeuge Ag annual news conference

Tomorrow
   
DaimlerChrysler publishes annual report
 
German Jan import prices
  
Henkel annual news conference

Company News
   
Schwarz Pharma FY profits, sales beats forecasts
   
Germany's Merck KGaA plans Serono squeeze-out

Macroeconomic News
   
Germany's GFK sees March consumer climate index 4.4 pts vs revised 4.9 in Feb

According to The Times newspaper, one of our products rose in value by 90%* last year and our market outstripped the FTSE 100 by 36.1 %.*

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*Source The Times, December 15th 2006

Amsterdam shares AFX at a glance outlook

Forthcoming Events
   
Today
   
No items scheduled
   
Tomorrow
   
Wessanen FY earnings
   
Unit 4 Agresso earnings
   
Imtech FY earnings

Weekend Press
   
ABN Amro shareholder TCI warned by Dutch Central Bank over ABN Amro split-up plans

Today's Press
   
LVMH's Bernard Arnault poised for Endemol bid (Financial Times)

Company News
   
TNT Q4 earnings in line with expectations, gives cautious outlook for mail division
   
Rodamco Europe FY direct investment result per share 4.12 eur vs 3.80

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