UK/Euro Financial Market Daily Morning Briefing 27-03-2007

1 Point Spread - FTSE 100 daily rolling - Click Here

London shares open higher on miners strength, Wall St fight back

Leading shares opened higher, edging back above the key 6,300 level, as strength in heavyweight miners added to a late recovery on Wall Street overnight.
   
At 9.00 am, the FTSE 100 was 35.3 points firmer at 6,327.2, mirroring the positive wider market sentiment. Volume was solid with 1.9 mln shares changing hands in 44,541 deals.
   
Miners helped to lead blue chips higher in opening deals as sector consolidation hopes and a spike in commodity prices fuelled sentiment.
   
Kazakhmys was the top riser, up 28 at 1,181 after Citigroup upgraded the stock to 'buy' from 'hold' and on news copper prices rose 1 pct to hit three month highs.
   
Sentiment was further lifted as Anglo-Swiss mining Xstrata yesterday agreed to buy LionOre Mining International Ltd, a Canadian nickel and gold miner, for 4 bln usd. Xstrata gained 39 at 2,612, Rio Tinto rose 54 at 2,899 and Anglo American was 27 better at 2,644.
   
But Antofagasta missed out on the rally, losing 3-1/2 at 505 after Citigroup cut its stance on the copper miner to 'hold' from 'buy'. In a note to clients, the broker said it has long preferred the group over peer Kazakhmys, but following Antofagasta's strong run since mid-2006 it believes the opportunity has shifted. It argued Kazakhmys now trades at a significant valuation discount to Antofagasta and offers better near-term momentum.
   
Elsewhere, ongoing M&A hopes provided further support, with Next 37 higher at 1,265 after the Financial Times reported rumours that a leading investment bank had joined forces with a private equity group to work on an leveraged buyout of the retailer.
   
Still on the high street, Sainsbury added 2 at 550-1/2 as The Independent highlighted talk Wal-Mart-owned Asda is seeking soundings from competition regulators on whether it could make a bid for the grocer.
   
The paper said a combination of Asda and Sainsbury would have a similar market share to Tesco, but added the US-backed group is thought to be waiting to see whether the CVC-led consortium makes a formal offer.
   
Meanwhile, today's Guardian market report talks of a 585 pence per share bid for Sainsbury after the companys trading update.
   
In healthcare, Smith & Nephew also continued to be buoyed by ongoing M&A rumours, up 10 at 658, with The Express referring to "bid rumours" without giving any further details.

City Index Advisory launches APOLLO – the ‘star-rated’ research tracking tool.
Click here.

Broker comment also helped to provide early direction with Diageo 15 to the good at 1,019 hares in Diageo after an upgrade to 'add' from 'hold' by Dresdner Kleinwort on the back of positive organic growth forecasts.
   
In a note to clients, Dresdner said as the drinks group ends its third quarter, it sees no slowdown amongst the stronger markets, and feels some of the weak spots are now faring slightly better.
   
In utilities, United Utilities took on 8 at 749-1/2 after an upgrade to 'neutral' from 'underweight' as part of a wider note on the water sector at HSBC. But peer Severn Trent slipped 6 to 1,429 as the same broker cut its stance to 'underweight' from 'neutral'.
   
HSBC said it believes 2007-08 is a pivotal year for the UK water sector, with Kelda, Pennon and Severn Trent all having delivered more efficient balance sheet structures. For them, as well as for United Utilities, operational performance is again the priority.
   
Still on the downside, Persimmon lost 7 at 1,428 after The Times reported the housebuilder may consider making a bid for peer Taylor Woodrow, which agreed to merge with George Wimpey yesterday, according to the Times. Persimmon is also interested in Bovis Homes Group and Redrow, the paper said.
   
Other blue-chip fallers were mainly the victims of profit taking following recent speculative gains with Kingfisher off 2-1/2 at 277-3/4, Hammerson off 7 at 1,740 and Barclays 3-1/2 lower at 738.
   
Barclays was hit further by ongoing fears it could be dragged into a pricey bidding war for merger target ABN Amro.
   
But Wolseley was the major casualty, off 26 at 1,233, as the latest housing data from the US hit sentiment in the building materials group.
   
Yesterday, the Commerce Department reported that sales of new single-family homes fell by 3.9 pct last month to a seasonally-adjusted annual rate of 848,000
-- the slowest sales pace in nearly seven years and dimmed hopes for a rebound in the troubled housing market.
   
On the second-line, Signet was a major gainer, up 5-1/4 at 123-3/4 as Morgan Stanley upgraded the Anglo-US jeweller to 'overweight' from 'equal-weight'.
   
The broker said its analysis suggests the long-mooted merger with US peer Zales would transform the Signet investment case, sending fair value to around 160 pence per share, or even more. Zales and Signet terminated secret merger discussions nine months ago.

Arc, the niche fund management house specialising in small and unlisted companies, launches its 6th HMRC approved EIS Fund. The Fund offers investors attractive tax benefits including 20% Income tax relief, CGT Deferral and IHT exemption, combined with the growth potential of a portfolio of exciting unquoted shares. Click Here

In corporate news, Emap added 8-1/2 at 748 after the media group said it is reviewing its Republic of Ireland radio stations alongside an in-line, albeit cautious, trading update.
   
This morning, the group which owns FHM and Closer magazine as well as radio stations Kiss and Magic, confirmed it is trading in line with full-year expectations after a profit warning last month.
   
At the same time, it revealed it is reviewing its radio stations in the Republic of Ireland as part of a restructuring of its consumer media business. In response, Citigroup reiterated its 'hold' advice and said it expects this statement to be taken well and possibly rekindle private equity/break-up talk.
   
On the downside, Cairn Energy lost 21 at 1,613 after the oil explorer announced a full-year net loss due to another cut in reserves at its Sangu field in Bangladesh.
   
The recently demoted group revealed a net loss of 82 mln usd in 2006, compared to a profit of 79 mln last time, after a 71.5 mln usd asset writedown relating to the Sangu reserves cut.
   
In response, Merrill Lynch repeated its 'buy' recommendation, but said the Sangu downgrade lowers its NAV by 7 pence per share as it reminded clients this is the third reserve downgrade in 18 months.
   
And Brixton eased 2 at 517-3/4 as the market digested a drop in pretax profit and a fall in net rental at the property group. In response, Citigroup said the group's EPS and NAV were "entirely in-line" but said the stock seems to be trading "at cruising altitude" and it sees no catalyst for the shares to outperform.
   
Meanwhile, Wall Street pared early heavy losses as a late rally in technology stocks helped shore up confidence after the surprise drop in new home sales triggered further worries the economy is growing slower than expected.
   
The DJIA ended the day 11.94 points lower at 12,469.07, having bounced back from a low of 12,368. The S&P 500 rose 1.39 to 1,437.50, and the Nasdaq added 6.70 to 2,455.63.
   
Today, investors will look to the latest consumer confidence data in a bid to gauge the health of the world's largest economy. The Conference Board's index is seen falling to 108.5 in March from February's 112.5 level, the highest level for the index in more than five years.
   
Finally, in Asia, Japan's Nikkei 225 closed down 156.91 at 17,365.05, while the Hang Seng closed for lunch off 32.0 at 19,733.85.

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

£105,000 profit! spread betting UK shares with the Intelli-Trend system!
Click Here to find out more.

PARIS - Market data at 10.10 am:

Major indices:
   
CAC-40 up 29.96 or 0.54 pct at 5,606.26
SBF-80 up 31.28 or 0.44 pct at 7,197.44
SBF-120 up 20.99 or 0.51 pct at 4,129.26

Volume: 600 mln eur
36 CAC-40 stocks up
4 CAC-40 stocks down

Major gainers:
   
STMicroelectronics up 0.33 or 2.31 pct at 14.62 after gains on Nasdaq overnight
   
Capgemini up 0.72 or 1.29 pct at 56.61
   
Bouygues up 0.68 or 1.22 pct at 56.24

Major losers:
   
EADS down 0.09 or 0.39 pct at 22.75 after three days of gains
   
Carrefour down 0.31 or 0.57 pct at 53.91, continuing slide as speculative appeal fades
   
EDF down 0.35 or 0.58 pct at 60.22
  

Most active stocks:
   
Total up 0.39 or 0.76 pct at 51.74 in 70 mln eur
   
Alcatel-Lucent up 0.01 at 8.91 in 40 mln
   
Eiffage up 0.12 at 116.01 in 40 mln

…with a financial and lifestyle investment at Blue Waters - Antigua’s most successful hotel development. 28 luxurious buy-to-let suites and penthouses with uninterrupted Caribbean Sea views, for more information click here.

FRANKFURT  - Market data at 10.23 am

Major indices
   
DAX - up 49.28 points, or 0.72 pct, to 6,878.10
MDAX - up 67.11 points, or 0.67 pct, to 10,105.90
TecDAX - up 5.61 points, or 0.66 pct, to 850.35
DAX futures - down 8.00 points, or 0.12 pct, to 6,934.50

Major advancers:
   
DaimlerChrysler, up 2.37 eur or 3.93 pct at 62.60, after Morgan Stanley raised its price target to 75 eur per share from 62 and amid speculation the automaker is readying to sell its Chrysler unit as it said it will not publish its first quarter results on April 26 as originally planned but on May 15 instead.
   
Adidas, up 1.17 eur or 2.99 pct at 40.27, after Merrill Lynch raised its stance on the sports equipment manufacturer and on speculation that Sports Direct founder and control shareholder Mike Ashley could raise a 3 pct stake he just bought in the company to 10 pct
   
Henkel, up 2.77 eur or 2.62 pct at 108.61, after Morgan Stanley raised its stance on the adhesives and household goods manufacturer to 'overweight' from 'equalweight' and pegged its target  at 130 eur
   
Munich Re, up 2.69 eur or 2.23 pct at 123.48, following an upgrade to 'buy' from 'neutral' at Goldman Sachs and the brokerage's adding the reinsurer's stock to its conviction buy list
   
Continental, up 0.89 eur or 0.92 pct at 97.53

Major decliners:
   
Volkswagen, down 1.11 eur or 0.97 pct at 112.89
   
Lufthansa, down 0.14 eur or 0.69 pct at 20.16
   
Hypo Real Estate, down 0.27 eur or 0.57 pct at 46.89,
   
Fresenius Medical Care, down 0.44 eur or 0.40 pct at 109.00
   
RWE, down 0.27 eur or 0.35 pct at 77.82

Other Major Movers:
   
Siemens, up 0.61 eur or 0.75 pct at 81.97, after the electronic giant's Automation and Drives (A&D) division said it expects double-digit sales growth in the 2006/07 business year, according to an interview with the head of the unit in the Frankfurter Allgemeine Zeitung
   
EON, 0.63 eur or 0.63 pct at 100.90, after the utilities giant reached an agreement with Caja Madrid, a major shareholder in EON's takeover target Endesa SA, to buy Caja's 9.99 pct share in Endesa while the Spanish group hold on to the voting rights for two years
   
SDAX-listed Air Berlin, up 0.55 eur or 3.40 pct higher at 16.75, after the company said it bought German carrier LTU for 140 mln eur, including 190-200 mln eur net debt, to boost growth and said it swung to a full-year profit in 2006

..at St Lucia's most successful buy to let 5 star resort development. Enjoy the sunset views from your own private roof terrace with pool, whilst sharing in the profitability of this fabulous boutique hotel. Just three magnificent residences remain, for more information click here.

ADVFN Services