UK/Euro Financial Market Daily Morning Briefing 27-04-2007

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London shares down in early deals, miners weigh; Scottish & Newcastle up

Leading shares fell back in early deals after a lacklustre performance on Wall Street and weaker trading in Asian markets, with mining sector losses applying pressure but Scottish & Newcastle bucking the negative trend on renewed bid hopes, dealers said.
   
At 8.55 am, the FTSE 100 index was 25.4 points lower at 6,444.0, reversing yesterday's 7.5-point gain which saw the Footsie close at 6,469.4. Early volume was fair, with 227.1 mln shares changing hands in 45,293 deals.
   
In the US, Wall Street took a pause Thursday, with stocks closing little changed as strong profit reports from names like Apple and 3M failed to galvanize the market a day after the Dow Jones industrials crossed 13,000. Still, a modest advance in the Dow gave the blue chips another record close.
   
The Dow rose 15.61 points, or 0.12 pct, to 13,105.50 after hitting a fresh trading high of 13,132.80. Thursday marked the Dow's 18th rise in the past 20 sessions and its 36th record close since the start of October. The gains Wednesday and Thursday left the Dow up more than 5 pct for the year.
   
Broader indices ended mixed, with the S&P 500 index slipping 1.17 points to 1,494.25 while the Nasdaq Composite index rose 6.57 to 2,554.46.
   
Over in Asia, the Nikkei 225 index closed down 28.76 points at 17,400.41, while Hong Kong's Hang Seng finished its morning session down 157.09 points at 20,510.20.
   
Turning to London, the Footsie was hit by falls in the mining sector, with the eight top index casualties all mining issues as precious metal prices continued to fall with investors taking profits following recent gains.
   
BHP Billiton fell back 31 at 1,114, Xstrata 62 lower at 2,586, Anglo American 70 behind at 2,612 and Vedanta Resources down 28 at 1,380, among others.
   
Oil heavyweights were also out of favour in early deals, with BP easing 6-1/2 at 564-1/2 and Royal Dutch Shell 12 weaker at 1,778.
   
Elsewhere, Pearson slipped 6 at 857-1/2 as an in-line trading update from the education and newspaper publisher failed to inspire. This morning, the group which owns the Financial Times and Penguin Books said it is confident that 2007 will be another good year.
   
But at the same time, it cautioned that as two-thirds of its revenues come from the US, each 5 cent rise in the average dollar-sterling exchange rate for the year will impact adjusted earnings per share by about 1 pence. In response, UBS reiterated its 'neutral' stance.

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On the M&A front, shares in Royal Bank of Scotland Group were again under pressure amid ongoing concerns over the battle for ABN Amro.
   
RBoS lost 20 at 1,950 after announcing that a consortium comprising itself, Banco Santander Central Hispano and Fortis intends to make a public offer for 100 pct of the Dutch bank.
   
The banks said that under Dutch regulations they cannot disclose full terms of the offer for seven days, but on Wednesday the consortium indicated that it may offer 39 eur per share for ABN, providing that the sale of LaSalle to Bank of America Corporation does not go through.
   
Separately, it emerged this morning that the agreed 140 bln eur merger between Barclays and ABN Amro was thrown into disarray last night as shareholders in the Dutch bank backed a break-up resolution from a rebel hedge fund, the Times reported. Barclays shares took on 1-1/2 at 720.
   
The clear winner on the upside, however, was Scottish & Newcastle, up 2.9 pct with a gain of 17 at 602-1/2 amid ongoing bid speculation following its AGM trading update yesterday.
   
ING highlighted in a note this morning that a merger of the UK brewer and Danish peer Carlsberg appears to be one of only two merger scenarios in the European brewing sector that would seem to make sense. InBev and Anheuser-Busch was the other.
   
Friends Provident also outperformed, 0-1/4 higher at 192-1/2, after revealing new business sales for the three months to end March 2007 rose by 12 pct to 1.497 bln stg, a touch ahead of analysts' expectations of 1.482 bln stg.
   
However, in reaction Collins Stewart said this morning's figures were in-line but reading between the lines raised concerns. The broker cut its fair value target to 190 pence from 230 at the results.
   
Meanwhile, Sage Group added 0-1/4 at 263-3/4 as investors cheered news that chairman Sir Julian Horn-Smith has resigned from his post and that Tony Hobson, a non-executive director, will become the acting chairman with immediate effect.
   
"After careful consideration the board agreed that the differences in styles and culture meant that change was necessary," Horn-Smith said.
   
On the second tier, Colt Telecom Group plunged 8.2 pct, down 14-1/4 at 158-3/4, after its first-quarter update included a warning that market conditions, particularly in Germany, will continue to be difficult throughout 2007.
   
Colt announced it swung to a pretax profit for the first quarter of 8.1 mln eur on higher margins and lower expenses, but added that the mobile termination issue in Germany will remain an additional uncertainty and it expects EBITDA for 2007 to be broadly in line with 2006 levels.
   
Venture Production was also on the back foot, 24-1/2 weaker at 685-1/2 following a disappointing drilling update.  Venture said this morning that its Ash exploration well has failed to encounter hydrocarbons and has therefore been suspended pending further review.

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Among the mid-cap gainers, Spirent Communications led the risers, taking on 5-3/4 at 72-1/2 to surge 8.6 pct, as the group announced it will save 21.5 mln stg annually, with full realisation in 2008, after an operational restructuring.
   
In turn, the company said cost reduction measures will result in a one-off charge of 15 mln stg in 2007.
   
Returning to M&A items, National Express Group added 12 at 1,252 after its trading update was accompanied by news it has agreed to buy Spanish bus group Continental Auto SL for 449.7 mln stg cash from Grupo ACS, and that it expects the acquisition to add to its earnings in its first full year.
   
The company also said it made a strong start to the year and is trading in line with its expectations.
   
And finally, buyers also came for Bodycote International, 3 better at 318, after Sulzer said it has raised its offer for its UK competitor to 344.5 pence per share from a previous 332.0 pence, although no agreement has been reached.
   
Sulzer is intending to go hostile in its bid to acquire Bodycote, according to sources at the Swiss engineering group. A source at Bodycote told Thomson Financial News this morning that the board is "carefully considering" Sulzer's latest offer and would respond later today.
   
On the economic front, with only the release of the UK March motor vehicle production figures midmorning, investors look to the US for inspiration, where economic output in the first quarter is expected to have grown at a 1.9 pct annual rate, down from 2.5 pct in the fourth quarter of last year.
   
Meanwhile, the release of April consumer sentiment, as measured by the University of Michigan, is seen showing a dip to 85 from 85.3. The index has fallen 11.6 points from its 2-year high in January.
   
Finally, the cost of hiring workers is expected to have risen by 0.9 pct in the first three months of this year, after having jumped by 0.8 pct in the last quarter of 2006.

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UK Diary of Events

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PARIS - Market data at 10.15 am:

Major indices:
   
CAC-40 down 7.43 or 0.12 pct at 5,937.01
SBF-80 down 21.48 or 0.29 pct at 7,314.98
SBF-120 down 6.43 or 0.15 pct at 4,346.10

12 CAC-40 stocks up
2 CAC-40 stocks unchanged
26 CAC-40 stocks down

Major gainers:
   
Dassault Systemes up 2.13 or 5.25 pct at 42.73 after Q1 earnings top consensus
   
Peugeot up 0.81 or 1.38 pct at 59.34 as Q1 sales jump signals return to growth
   
Seb up 1.63 or 1.22 pct at 134.90, Q1 sales up 8.2 pct
   
Nexity up 0.55 or 0.84 pct at 65.74

Major losers:
   
Neuf Cegetel down 0.34 or 1.13 pct at 29.78
   
Eiffage down 2.41 or 2.35 pct at 100.20
   
Renault down 1.10 or 1.12 pct at 96.76 as rival Peugeot steals march with sales upturn

Most active stocks:
   
Total down 0.20 or 0.37 pct at 54.12 in 55 mln
   
Peugeot in 40 mln
   
BNP Paribas down 0.08 at 85.95 in 40 mln

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Amsterdam shares at a glance outlook

Forthcoming Events
   
Today   
   
Dutch March PPI (9.30 am)
   
DSM conference call (10.30 am)
   
Rodamco Europe AGM
   
Grolsch AGM
   
Today's Press
   
Unilever, Numico, other food companies trying for last-minute delay of new European packaging rules set to take effect on Jan 1 (Financieele Dagblad)

  
Company News
   
DSM Q1 ebit 192 mln eur vs 206 mln
   
DSM sees FY opg 760 mln eur 'with an uncertainty of plus or minus 5 pct'

RBS Cndortium has notified ABN Amro of intention to make public offer which will be of materially higher value fro ABN Amro shareholders. Offer terms will not disclosed for 7 days.
       
Ahold CEO Moberg to leave co July 1
   
Vedior says to appoint successor to CEO Zach Miles this year
   
Vedior sees strong Q2 after Q1 results beat expectations
   
Crucell extends PER.C6 research agreement with Novartis    
   
Fugro wins share of 21.9 mln usd contract in Mexico from PEMEX
   
ABN Amro confirms shareholders voted for break-up proposal tabled by TCI
   
Market Sentiment
   
DSM, Vedior and OPG Groep will be in focus after reporting first-quarter results

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