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London shares open lower; NY closes weaker; BAE System slumps on US probe

Leading shares opened weaker as Wall Street closed lower overnight ahead of Thursday's FOMC meeting. In the blue chips, BAE Systems was lower after the US Department of Justice launched a formal investigation into the group's compliance with anti-corruption laws. 

At 9.01 am, the FTSE 100 index was 41.7 points lower at 6,546.5, while the FTSE 250 index was down 39.8 points at 11,536.3.   

Volume was weak with 260.6 mln shares changing hands in 50,997 deals.    

"UK stocks opened lower on the basis of the US not going forward overnight with mixed news on the housing market as well as a slower time in Asia. The market will probably remain weaker until the US opens up," said Justin Urquhart Stewart, director at 7-Investment.    

Last night on Wall Street, stocks gave up earlier advances and turned lower as investors suffered a renewed case of the jitters ahead of the Federal Reserve's meeting on interest rates later this week.   

The stock market was initially relieved to hear from the National Association of Realtors that existing home sales declined in May by only 0.3 pct to 5.99 mln units. The tepid reading was expected, indicating that the housing
sector is still weak.    

But when crude oil prices rose back above 69 usd a barrel on news of US refinery outages, many investors chose to take money off the table fearing high energy prices could translate to accelerating inflation -- which the Fed may use as a reason to raise interest rates later this year.   

The Dow Jones Industrial Average closed 8.2 points lower at 13,352, while the Nasdaq fell back 11.88 points at 2,577.08.   

The S&P 500 index lost 4.82 points at 1,497.74.    

In US economic news, US new home sales in May are expected to be 920,000 units annualised. April's 981,000 annual rate was a surprise and Sal Guatieri at BMO Capital Markets said that May sales should "retrace a good portion of April's shocking 16.2 pct increase -- unless builders slash prices as deeply as
they did that month".   

Economists have already seen some signs of slippage in US consumer confidence and the Conference Board's index for June is expected to fall to 105.3 from 108.0 in May, reflecting higher gasoline prices and interest rates
offsetting the positive effects of low unemployment and stock market gains.    

On Asian markets, investors moved to the sidelines ahead of a US Federal Reserve policy meeting this week and due to concerns over possible economic tightening measures in China.    

The Nikkei 225 index closed 21.37 points down at 18,066.11, while the Hang Seng Index ended the morning down 17.45 points at 21,804.90.   

Oil prices were off highs in Asian trading hours with prices still pressured by below-normal gasoline inventories in the US.    

The New York Mercantile Exchange's main oil futures contract, light sweet crude for delivery in August, was down 0.04 usd at 69.14 usd a barrel from 69.18 usd in late trading US overnight. Brent North Sea crude for August was down 0.18 usd at 71.18 usd.    

Turning to the UK blue chips, on the downside, defence and aerospace group BAE Systems was the biggest faller, down 29-1/4 or 6.61 pct at 413, after the US Department of Justice announced it has started a formal investigation relating to the company's compliance with anti-corruption laws, including its business concerning Saudi Arabia. 

The company had faced claims US prosecutors may investigate bribery allegations surrounding the Al-Yamamah arms-for-oil deal between the UK and Saudi Arabia.    

Lafite 1998:  06-07.. +91%  v  House Price Index:  06-07..  +7%
Latour 1996: 06-07.. +72%  v  Dow Jones:  06-07..  +14%
Liv-ex 100:   06-07.. +45%  v  Ftse 100:  06-07..  + 9%
CGT - 0% vs CGT- 40%

Source: The Times, December 2006. Free Information Pack Click Here

A broker downgrade saw shares in Cadbury Schweppes fall 9-1/2 at 666 after Citigroup cut the group to 'hold' from 'buy' saying it sees little upside for the share price now the disposal of its beverages business is almost certain,
according to insiders.   

Citigroup said the only upside would be if the firm's confectionery businefss were to fall prey to a bid.   

Commodity stocks were also lower following global economy concerns.    

Anglo American was 37 lower at 2,958, BHP Billiton was 16 weaker at 1,374, BG Group fell back 10-1/2 at 796-1/2, Xstrata edged back 32 at 2,963 and Lonmin was down 32 at 4,014.   

On the upside, there were few blue chip risers, with Experian Group topping the leader board, up 8-1/2 at 597-1/2, after Panmure Gordon reiterated its 'buy' stance following the group's acquisition of Brazil's biggest credit checking
bureau.   

The broker said Experian's acquisition of 65 pct of the 4th-largest credit checking bureau in the world, Serasa, is a text book example of its approach to building out the global footprint, and confers exposure to a rapidly growing
market.    

Investors also turned to the defensive stocks this morning as a safe haven.   

British American Tobacco was up 11 at 1,663, Imperial Tobacco Group was 4 higher at 2,219, Tate & Lyle ticked up 1 at 573-1/2 and Associated British Foods was 1 firmer at 921.   

Elsewhere, Vodafone Group was 0.6 higher at 158.2 after the FT reported that the group is tipped as frontrunner to sell iPhone in Europe.   

Turning to the midcaps, on the downside, Carpetright fell back 44 at 1,191 after the group reported a 1.8 pct rise in full year underlying pretax profit and said it remains cautious about short-term prospects.   

For the year to April 28 2007, the group, which trades from around 620 outlets in the UK, Ireland, the Netherlands, Belgium and Poland, made an underlying pretax profit of 57.7 mln stg.   

This is in line with guidance issued in an April 12 profit warning and is up from 56.7 mln stg last time.   

On the upside, earnings news helped shares in Chemring Group after the group reported underlying pretax profits from continuing operations of 20.3 mln stg for the six month period to April 30, 2007 -- 68 pct up on the 12.1 mln it reported during the same period last year.   

The group saw its first-half sales increase by 29 pct year-on-year to 106.8 mln from 82.6 mln, while the firm's basic EPS shot up 54 pct to 40.7 pence during the period. Chemring said it would pay an interim dividend of 7.20 pence -- 50 pct up on its handout this time last year.    

Meanwhile, Ashtead Group was 3 higher at 163 following its full-year results showing underlying pretax profit was up on good performance in all three of its units, with KBC Peel Hunt retaining its 'buy' rating and 158 pence target

And finally, positive broker comment helped shares in Pennon Group gain 5-1/2 at 615 with Lehman Brothers upgrading the group to 'overweight' from 'equal-weight' with an unchanged target of 690 pence, as part of a
utilities sector review.    

Lehman Brothers said that it sees the UK water sector as fully valued, but after recent underperformance it believes Pennon now looks attractive.

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US Summary

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Paris shares TFN market data at 10.43; CAC continues tracking Wall St downwards

Major indices:

CAC-40 down 48.78 pofints or 0.81 pct at 5,954.07
SBF-80 down 23.87 or 0.33 pct at 7,132.91
SBF-120 down 32.89 or 0.75 pct at 4,340.30

Volume: mln eur
4 CAC-40 stocks up
36 CAC-40 stocks down

Major gainers:

Eiffage up 5.56 eur or 5.79 pct at 101.61 as an interview from CEO Benoit Heitz plus expected legal developments in its conflict with Spanish shareholders served to reignite speculation. 

In his comments to Les Echos, Heitz did not rule out the idea of an investor other than major shareholder Sacyr Vallehermoso taking a stake, provided they respect the central role of employee share ownership and the group's current business model. Financial regulator AMF, meanwhile, is due to give its opinion today on whether Spanish shareholders acted in concert at Eiffage's AGM, as requested by the Nanterre commercial court ahead of a hearing on Thursday.

Haulotte Group up 0.87 or 2.90 pct at 30.84 as Morgan Stanley initiated coverage of the aerial work platform maker with an 'overweight' rating and 36 eur target in expectation of a "clear run" for the company over the next three years. 

Bull SA up 0.10 or 1.98 pct at 5.15 after a report in Le Figaro that the company has held merger talks with GFI Informatique -- up 0.02 or 0.22 pct at 9.26 -- as a way of saving GFI from being taken over by Japanese technology giant Fujitsu.

Alstom up 0.55 or 0.46 pct at 119.35 after announcing it is to acquire Spanish wind turbine manufacturer Ecotecnica for 350 mln eur, in order to gain a foothold in the market for wind energy equipment.

Major losers:

ArcelorMittal down 0.98 or 2.03 pct at 47.33 after Merrill Lynch cut its recommendation on the shares to 'neutral' from 'buy' on the grounds they are trading within a 2 pct range of the broker's 49 eur a share target, according to dealers.

Renault down 1.85 or 1.61 pct at 113.34

BNP Paribas down 1.29 or 1.45 pct at 87.51 as financial stocks suffered from renewed interest rate worries.


Most active stocks:

Total, down 0.57 or 0.97 pct at 57.93, in 104 mln eur

France Telecom, down 0.07 or 0.34 pct at 20.53, in 102 mln

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Stockholm shares lower midmorning, led by Trelleborg after cartel probe news

Stockholm shares were lower in midmorning trade on continued profit-taking, with Trelleborg leading the market down after the company safid the costs from a cartel pfrobe could wipe out its 2006 profits.

At 10.30 am, the OMX Stockholm index was down 0.96 pct at 404.23, while the OMX Stockholm 30 was down 0.94 pct at 1,238.46. Turnover amounted to 5.34 bln skr.   

"There is still a lot of nervousness in the market," a dealer said.   

Ericsson B was down 0.45 pct at 26.76.   

Among telecom operators, TeliaSonera was up 0.70 pct at 49.90, while Tele2 B was up 0.22 pct at 112.75.  
  

Trelleborg B was down 7.98 pct at 196. Trelleborg said the total costs from an ongoing EU and US cartel investigation could correspond to a 'predominant' part of its 2006 pretax profits of 1.193 bln skr.   

Trelleborg said that in a first step it will take charges of around 75-100 mln skr in its upcoming first-half results.   

The EU competition authorities and the US Justice Department have launched investigations relating to an alleged cartel for certain types of marine hoses used to transport oil. The investigations encompass several international
companies, including one of Trelleborg's French subsidiaries, Trelleborg Industrie SAS.   

"We knew that the investigations were going on, but that it could end in these sort of numbers, almost a bln kronor, nobody imagined. This is clearly negative news," an analyst at a European investment bank said.   

Lindex was up 5.37 pct at 88.25, after reporting better-than-expected third quarter profits, and gross margins.   

"Expectations ahead of the report were very low, but in the long term I am not sure this share is worth having. I am not convinced they have sorted out their problems with collection mismatch and their supplier issues," a dealer
said.   

"But they have good cash flow which may attract a private equity bidder," he added.   

Hennes & Mauritz B was up 0.25 pct at 409. Deutsche Bank upgraded shares in Hennes & Mauritz to 'buy' from 'hold' and lifted the target for the Swedish business to 470 skr from 435 skr.    

In a note to clients, the broker said the upgrade reflects H&M's success in online and mail-order business and the fashion chain's strong entrance in the Chinese market.   

It added that it estimates the online/mail-order sales to total 13 bln skr by 2012 and highlighted the company's plans to expand the online business internationally.    

Furthermore, the broker believes that H&M will be able to unlock significant margin expansion potential in central and eastern Europe thanks to lower personnel costs.      

Nordea was down 1.29 pct at 107.50. Nordea's CEO told Svenska Dagbladet that the bank will concentrate on its own projects in the next 3-4 years and may consider mergers after this time.   

Among other heavily-traded shares, SCA B was down 0.87 pct at 113.50, Handelsbanken A was down 1.26 pct at 195.50, and Scania B was down 2.91 pct at 167.

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