UK/Euro Financial Market Daily Morning Briefing 26-07-2006

London shares open firmer, Reuters ups guidance, late Wall Street rally

Leading shares opened firmer Wednesday, helped by news that Reuters raised 2006 growth targets and hiked its dividend, while a late surge on Wall Street on the back of a weaker oil price and some equally bullish earnings reports helped divert attention away from events in the Middle East, dealers said.
   
At 8.50 am, the FTSE 100 was up 21.8 points at 5,872.4, with the broader indices also ahead.
   
Early volume was light with 105 mln shares trading in 19,015 deals.
   
Last night on Wall Street, US stocks advanced as sharply lower oil prices and an unexpected jump in consumer confidence soothed investors' unease over a batch of mixed earnings.
   
The Dow gained 52.66, or 0.48 pct, to 11,103.71, while the broader stock indicators also recovered. The Standard & Poor's 500 index added 7.97 to 1,268.88, and the Nasdaq composite index rose 12.06 to 2,073.90.
   
Meanwhile, bonds pulled back, with the yield on the 10-year Treasury note rising to 5.07 pct from 5.04 late Monday. The US dollar gained ground on the Japanese yen, while gold prices rose to about 620 usd an ounce.
   
Oil prices tumbled as energy traders awaited developments in the conflict between Israel and Hezbollah in Lebanon. A barrel of light crude sank 1.30 usd to 73.75 on the New York Mercantile Exchange.
   
After the US markets closed, earnings results and outlooks from several companies fell below the numbers Wall Street was looking for, causing companies
such as Amazon.com to take a tumble in the aftermarket session.
   
Over in Asia, Japan's Nikkei 225 index closed 121.17 points or 0.8 pct lower at 14,884.07, while over in Hong Kong the Hang Seng finished the morning up 10.98 points at 16,594.84.
   
Back in London and among shares on the move, Reuters was the top riser, up 10-1/2 pence at 387 as it raised its growth target for the full year after reporting stronger-than-expected interim results.
   
The group now expects to deliver revenue growth of between 5-6 pct in 2006, up from its previous 5 pct target. The interim dividend was upped to 4.1 pence per share from 3.85 pence last year, the first such increase in five years.
   
Seymour Pierce, which upgraded Reuters to 'outperform' from 'hold' this morning, said the company's bullish guidance was a vindication of the 'Core Plus' growth plan it launched last year.

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"The development of 'Core Plus' revenues is evidence of progress being made to deliver revenue growth from new segments in the market," said the broker in a research note.
   
Xstrata was another riser, up 43 at 2,067 after it received notice from Canada's Minister of Industry that its potential acquisition of Falconbridge Ltd has been approved by the Minister under the Investment Canada Act.
   
In other earnings related news, Northern Rock was able to claw back initial losses to trade 0-1/2 pence better at 1,047 after the UK's eighth-biggest bank turned in first-half profits, which are seen as in line with estimates.
   
Pretax profit for the six months to June 30 came in at 293.9 mln stg, 13.3 pct up on a restated 207.9 mln stg in the same period a year earlier.
   
Broker Teather & Greenwood upped its stance to 'buy' from 'hold' following the result. However, JP Morgan reiterated its 'neutral' stance and said underlying post-tax profit of 173.5 mln stg was bang in line with consensus, though 3 pct lighter than its higher end of the range of 179 mln.
   
Underlying diluted EPS of 41.3 pence was again short of the broker's flagged 42.6 pence with dividends of 10.9 pence also below JP Morgan's 11.3 pence estimate.
   
Ahead of results due at midday, pharma group GlaxoSmithKline rose 13 pence to 1,543.
   
The company is widely expected to be able to beat its own guidance of 10 pct growth in earnings per share earnings this year. Market estimates currently stand at around 15 pct, which some believe may still be conservative.
   
Meanwhile, among broker generated news, Sage Group rose 1-1/2 pence to 214-3/4 after Deutsche Bank reiterated its 'buy' rating as it revisited the IT service sector.
   
In the same report it also cut its stance on Misys to 'hold' from 'buy' with an unchanged 235 pence target, and Computacenter to 'sell' from 'hold' with a reduced target of 220 pence from 260, citing its concerns on the pricing and margin environment around hardware resale.
   
Morrison Supermarkets gained 0-3/4 pence to 200-1/2 after SG Securities upgraded the stock to 'buy' from 'sell', offsetting a downgrade to 'sell' from 'hold' by Panmure Gordon.
   
SG Securities said that while there has been no change in message, UK supermarkets seem to have less of an appetite to chase prices ever downwards, and noted Morrisons Supermarket would be the biggest beneficiary of less price deflation.

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On the second line, CSR was the FTSE 250 index's top riser, bolstered by a positive update alongside strong first half results, leading Panmure Gordon to up the stock to 'buy' from 'hold' with an increased price target of 1,280 pence from 1,200.
   
The stock was up 68 pence at 1,165, an increase of almost 7 pct.
   
Elsewhere, shares in Colt Telecom Group gained 6 pence to 127 after being upgraded to 'buy' from 'sell' at Goldman Sachs.
   
The broker noted that the upgrade follows a sharp fall in the share price, pointing out that since July 6, when it added Colt to its 'sell' list, the stock has fallen 31.4 pct on an absolute basis.
   
Wolfson Microelectronics benefited from an increase to 'overweight' from 'neutral' by Bridgewell Securities, after its first half results.
   
The supplier of mixed-signal semiconductors for consumer electronic products said its first half pretax profit grew by 141 pct on the back of a 47 pct growth in sales.
   
Bridgewell said that second-quarter results were ahead of expectations, although somewhat below seasonal 'norms' due to the first quarter build-up of iPod stock.
   
Panmure Gordon also upped its stance to 'buy' from 'hold', with a revised price target of 460 pence from 450.
   
Spirent Communications was 0-1/2 pence higher at 34 after being upgraded to 'neutral' from 'sell' at Goldman Sachs this morning, with the broker saying it believed the absolute return potential was now in line with the sector and it saw a 15 pct potential upside to its price target of 40 pence.
   
Finally, on the downside, Wellington Underwriting eased 1-1/4 pence to 85 after JP Morgan initiated coverage in the London market insurer with an 'underweight' rating.

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 yesterday's close of trade, click here

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PARIS - Market data at 10.03 am:

Major indices:
   
CAC-40 up 11.27 points or 0.23 pct at 4,944.39
SBF-80 up 14.44 points or 0.26 pct at 5,463.77
SBF-120 up 9.42 points or 0.26 pct at 3,569.07

Volume: 474 mln eur
30 CAC-40 stocks up
8 CAC-40 stocks down
1 CAC-40 stock unchanged
(Arcelor temporarily suspended from CAC-40)

Major gainers:
   
Capgemini, up 0.75 eur or 1.94 pct at 39.46. Citigroup upgraded the stock ahead of tomorrow's second quarter sales figures.
   
Renault, up 1.15 eur or 1.41 pct at 82.55, rebounding after an initial dip of more than 1 pct as competitor Peugeot reported poor first half results.
   
Total, up 0.60 eur or 1.16 pct at 52.35
   
Major losers:
   
Peugeot, down 2.75 eur or 6.03 pct at 42.86, after poor first half results and a warning on the full year margin.
   
STMicroelectronics, down 0.20 eur or 1.67 pct at 11.80. Oddo Securities downgraded the stock after the company reported in-line second quarter results but gave guidance that disappointed analysts.
   
Suez, down 0.31 eur or 0.95 pct at 32.17, amid reports the government is studying a proposal for a scaled down Suez-Gaz de France merger.

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FRANKFURT - Market data at 9.39 am

Major indices:
   
DAX 30 - 5,582.68, up 16.92 points or 0.30 pct
MDAX - 7,735.93, up 19.50 points or 0.25 pct
TecDAX - 619.05, up 3.25 points or 0.53 pct
DAX future - 5,605.00, down 24.00 points or 0.43 pct

Major gainers:
   
Hypo Real Estate, up 1.13 eur or 2.62 pct at 44.29
   
Deutsche Post, up 0.27 eur or 1.42 pct at 19.32, recovering from yesterday's losses, having closed down 2.51 pct after US peer UPS reported a disappointing set of second-quarter results and issued guidance that did not please the market
   
Siemens, up 0.55 eur or 0.86 pct at 64.55, ahead of tomorrow's third quarter results
   
Allianz, up 0.92 eur or 0.76 pct at 121.92
   
Commerzbank, up 0.19 eur or 0.71 pct at 26.85

Major losers:
   
Volkswagen, down 0.51 eur or 0.93 pct at 54.51, as French peer Peugeot slumped in Paris after reporting a much-weaker-than-expected set of first-half numbers and warning that second-half margins would only match levels seen in the first half
   
Bayer, down 0.36 eur or 0.93 pct at 38.55
   
Adidas, down 0.33 eur or 0.90 pct at 36.35
   
Altana, down 0.35 eur or 0.81 pct at 43.05
   
Continental AG, down 0.39 eur or 0.52 pct at 75.33

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