UK/Euro Financial Market Daily Morning Briefing 27-03-2006

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London shares slide in early deals as profit taking deflates M&A bubble

Leading shares slipped back into negative territory in early deals as profit taking across recent M&A candidates outweighed continued strength across the mining sector, dealers said.
   
By 09.00 am, the FTSE 100 index down 14.2 points at 6,022.1, while the broader indices were mixed.
   
Volume was moderate, with 193.6 mln shares changing hands in 17,433 deals.
   
US stocks ended higher on Friday, capping a mostly flat week for the market, as investors preferred to tread cautiously ahead of Tuesday's Federal Reserve meeting on interest rates, dealers said.
   
The DJIA rose 9.68 points to 11,279.97, while the Nasdaq was up 12.67 points at 2,312.82 as Google shares rallied on its inclusion in the S&P 500, and Lucent Technologies surged after it confirmed it was in merger talks with France's Alcatel, traders noted.
   
Across Asia overnight, the Nikkei 225 index closed 89.23 points higher at 16,650.10, while the Hang Seng was up 20.55 points at 15,737.01 in late afternoon deals.
   
In the UK, the blue-chip earnings season draws to a close this week, with copper miner Kazakhmys the only FTSE 100 constituent due to post results, although continued M&A speculation is expected to keep investors busy.
   
Recent potential bid candidates Alliance & Leicester, Lloyds TSB, Amvescap and Gallaher however, all lost ground this morning as the rumour bandwagon moved on.

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After rising on Friday, all four fell back today, losing 15 pence to 1143, 4-1/2 pence to 564-1/2, 558 down 9-1/2 and 5 to 852 respectively.
   
Cable & Wireless suffered however, losing 1 pence to 111-1/4 after the Business reported that the troubled telecoms group is facing an increase of up to 300 mln stg in its pension deficit, potentially creating a large poison pill for any prospective buyer.
   
On the upside, mining stocks were in demand again, with a bullish report from Citigroup lifting the sector.
   
The US broker raised its commodity price forecasts and lifted target prices across the sector in order "to reflect strong demand and a continued lack of substantial supply side response."
   
Rio Tinto shares added 43 pence to 2891 in early deals after Citigroup upgraded the shares to 'buy' from 'hold', while target price hikes also boosted XStrata 39 pence to 1911, BHP Billiton and 10 pence to 1031-1/2 and Antofagasta 21 pence higher to 2126.
   
Elsewhere, ITV shares remained higher, up another 1-1/4 pence to 129 after yesterday's Sunday Times reported that private equity houses Apax Partners and Blackstone Group and investment bank Goldman Sachs are preparing another bid for the broadcaster which will include a cash alternative.
   
They may decide to abandon the bid however, if the cash sweetener fails to win over ITV's board, headed by chief executive Charles Allen.
   
On the second line, AB Ports added 26 pence to 722 after a consortium comprising Borealis Infrastructure Management Inc, an investment vehicle directed by GIC Special Investments Pte Ltd, and Goldman Sachs International confirmed it is considering a possible offer for the group.

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Babcock shares meanwhile, added 8-1/2 pence to 324, following weekend press reports that BAE Systems and VT Group are expected to table a 750 mln stg joint bid for the group within the next seven to 10 days.
   
In domestic economic news, investors will be kept pretty busy over the coming week as a raft of key household spending data is scheduled to be released.
   
As well as the final estimate of fourth quarter 2005 GDP, investors will be focusing on Bank of England housing and credit news.
   
In the US, the highlight of the economic week will undoubtedly be the latest FOMC meeting, the first under new Fed chief Ben Bernanke, who is expected to oversee another quarter point rate hike.
   
Elsewhere on the economic front, Tuesday's March consumer confidence report should provide some valuable clues as to the health of the world's largest economy.

US Summary

For a summary of US stocks at the close of trade, click here

Diary of Events

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

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AMSTERDAM - Market data at 09.16 GMT

Major indices:

AEX index             471.91, down 0.16 point
AMX Midcap index      634.66, up 2.73 points
Government bonds      flat to higher

Major gainers:
   
Crucell soared 5.66 pct to 23.70 after the pharmaceutical company said it received market approval for its Quinvaxem vaccine in South Korea. Pharming was up 1.51 pct to 4.03.
   
Hagemeyer put on 2.39 pct to 4.29.
   
Philips added 2.09 pct at 28.34 and ASML strengthened 1.40 pct to 16.64.
   
Versatel was up 2.04 pct to 1.0.
   
Ahold lifted 1.53 pct to 7.29 after ex-COO Theo de Raad said in an interview that a break up of the company was inevitable.

Major losers:
   
Akzo Nobel was down 1.68 pct to 44.54, with analysts pleased about the group's pipeline news but investors feeling they wanted more concrete information about Pharma division's upcoming IPO. Profit-taking following last week's strong share price gains is also a factor in today's weaker trading, analysts said.
   
DSM shed 0.86 pct to 39.36.
   
ABN Amro slid 0.70 pct to 25.53 and Fortis lost 0.44 pct to 29.50.
   
Royal Dutch Shell edged 0.04 pct lower to 25.60.

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FRANKFURT - Market data at 09.04 GMT

Major indices:
   
DAX 30 - 5,965.42, down 7.72 points or 0.13 pct
MDAX - 8,711.58, up 9.09 points or 0.10 pct
TecDAX - 733.94, up 1.73 points or 0.24 pct
DAX future - 6,002.00, down 1.00 point or 0.02 pct

Major gainers:
   
DaimlerChrysler, up 0.80 eur or 1.71 pct at 47.65, after the auto giant yesterday said it plans to spend some 1 bln eur on a revamp of its troubled small car unit Smart, which this morning prompted Lehman Brothers, HVB and Morgan Stanley to increase their price targets on the issue
   
Volkswagen, up 0.62 eur or 1.00 pct at 62.75
   
Infineon, up 0.08 eur or 0.95 pct at 8.53, amid reports it may spin off its DRAM unit on May 1, earlier than expected
   
Continental, up 0.85 eur or 0.95 pct at 90.25
   
Munich Re, up 0.92 eur or 0.79 pct at 118.10

Major losers:
   
Bayer, down 0.51 eur or 1.44 pct at 34.91, following its 86 eur per share takeover bid for Schering on Friday
   
MAN, down 0.65 eur or 1.18 pct at 54.45
   
Lufthansa, down 0.16 eur or 1.10 pct at 14.33
   
Deutsche Bank, down 0.75 eur or 0.79 pct at 94.25
   
E.ON, down 0.73 eur or 0.78 pct at 92.27

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