UK/Euro Financial Market Daily Morning Briefing 27-09-2006

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London shares climb in early deals after Wall St gains, miners in demand

Leading shares pushed higher this morning, led by fresh gains across the mining sector, with last night's near record highs by Wall Street also encouraging buyers, dealers said.
   
By 9.10 am, the FTSE 100 index was up 28.1 points at 5,901.7, while the broader indices were also firmer in opening deals.
   
On Wall Street last night, the Dow achieved its second-best close ever, as positive consumer confidence data further buoyed a growing sense of economic optimism among investors, traders noted.
   
The DJIA ended 93.58 points higher at 11,669.39, just 53 points short of its all-time high of 11,722.98 set in January 2000.
   
The Nasdaq gained 12.27 points to 2,261.34, while the S&P 500 added 9.97 points to 1,336.34.
   
Overnight across Asia, the Nikkei 225 index closed 390.42 points higher at 15,947.87, while the Hang Seng was up 127.65 points at 17,435.73 by midday.
   
In the UK today, mining stocks were in demand again as commodity prices continued to recover from recent weakness, while a bullish call on the sector from Goldman Sachs also helped.
   
In a note published late yesterday afternoon, the US broker said it sees the recent sell-off as a buying opportunity, as fundamentals remain strong, with Chinese demand seen continuing.
   
"The mining companies' strong cash generation raises the prospect of higher dividends or further buybacks and M&A, which we believe should support a recovery in the shares," Goldman told clients. It picked Xstrata as its 'best buy idea', with a target of 3,400 pence.

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Xstrata shares led the sector higher this morning with a gain of 64 pence to 2,174, while Anglo American gained 61 pence to 2,203, BHP Billiton moved 20 pence higher to 911 and Rio Tinto edged 54 pence higher to 2,488.
   
Kazakhmys was also higher, up 36 pence to 1,173, despite announcing that its outgoing chief executive YK Cha is to place about 2 mln shares of the company's shares via an accelerated bookbuilding.
   
Elsewhere, Hanson shares were higher again, up another 10-1/2 pence to 741, as bid speculation refused to subside, while a glowing report from ABN Amro also attracted further buying.
   
The Dutch-owned broker reiterated its 'buy' recommendation and raised its target on the building materials group to 1,060 pence. "The opportunity lies in its hugely under valued asset base." It told clients.
   
Elsewhere, the earnings season rumbles on with another scattering of results scheduled for release.
   
Smiths Group shares were higher after posting a robust set of figures, up 7-1/2 pence at 894.
   
The defence and security group delivered a pretax profit of 492 mln stg, up from 404 mln previously on sales of 3.5 bln against 3 bln.
   
In reaction, Credit Suisse reiterated its 'outperform' recommendation.
   
Life insurer Standard Life fell back in early deals after the former mutual insurer reported lower than expected first-half profits.
   
The UK's fifth-biggest insurer said pretax operating profit came in at 206 mln stg on a European Embedded Value basis -- below the consensus analyst forecast of 251 mln, and also short of the lowest individual analyst forecast of 208 mln stg.
   
In response, Merrill Lynch reiterated its 'neutral' stance and said the shares have performed strongly since the IPO and it suspects most attention will initially focus on the higher lapses.

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Compass Group shares were also under pressure, down 5 pence at 271-1/4, after the contract catering group accompanied an in-line trading statement with a warning of lower sales growth in the near term.
   
Elsewhere, ITV lost 0-1/4 pence to 100 after HSBC started coverage on the broadcaster with an 'underweight' recommendation and 82 pence target.
   
It argued that it expects content production value to rise but advert-funded broadcasting to fall faster.
   
On the second line, EMI Group jumped 17-1/2 pence to 270 after the Times newspaper reported this morning that Warner Music chief executive Edgar Bronfman has held talks with some of its UK rival's biggest investors in a bid to persuade them of the merits of a merger of the two music labels.
   
Kesa Electricals was weaker however, down 11-3/4 pence at 321, after the retailer tagged a cautious outlook onto its interim results.
   
Europe's third-biggest electricals retailer reported a 29 pct rise in underlying operating profit for its first half, although it warned that profit progression next year will be impacted by the particularly strong demand factors in the current year not being repeated.
   
On the economic front, Bank of England rate setter David Blanchflower painted an altogether softer picture on the outlook for the UK economy, saying that both inflation and growth are likely to come in lower than expected.
   
"I believe there to be more spare capacity in the economy than in the central projection contained in the August Inflation Report, implying lower output growth and lower inflationary risks down the road." he said in a speech to businessmen in Wales.

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 last night's close of trade, click here

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PARIS - Market data at 9.49 am:

Major indices:
   
CAC-40 up 13.37 at 5,232.96
SBF-80 up 21.00 at 5,932.49
SBF-120 up 10.24 at 3,785.34

Volume: 620 mln eur
24 CAC-40 stocks up
14 CAC-40 stocks down
2 unchanged

Major gainers:
   
PPR, up 3.60 eur or 3.2 pct at 117.80 after French daily Les Echos said the company may sell its Fnac media and electronics retailing unit. Analysts said Fnac margins are likely to remain well below those of its core luxury businesses, and a sale would allow PPR to expand its luxury portfolio.
   
Peugeot, up 1.20 or 2.8 pct at 44.75 after outgoing CEO Jean-Martin Folz unveiled a new cost-cutting plan, including 10,000 job cuts, in an effort to stem recent profitability declines.
   
Arcelor-Mittal, up 0.60 or 2.3 pct at 26.54 after setting out a minimum dividend payout plan of 30 pct of earnings, and confirming its 2006 pro forma EBIDTA guidance. In 2008, EBITDA should reach 20 bln usd.

Major losers:
   
Saint-Gobain, down 0.80 eur or 1.4 pct at 56.85 and Lafarge, down 0.70 or 0.7 pct at 101.10; Late yesterday, a rival US cement and gypsum wallboard company, Eagle Materials, sharply cut its fiscal 2007 earnings due to weakening housing market demand.
   
CNP Assurances, down 4.25 or 5.3 pct at 75.70 after posting a 30 pct slide in first half net profit to 269.1 mln eur. Analysts said that although the decline was due to the introduction of IFRS accounting rules, the drop was still beyond expectations, and the insurer trimmed its FY sales growth guidance to "at least" 10 pct instead of "well above" 10 pct previously.
   
Valeo, down 0.19 at 27.80, after Citigroup cut the stock to 'hold' from 'buy' and reduced its target to 30 eur from 35 eur.

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FRANKFURT - Market data at 9:21 am   

Major indices:

    DAX 30 - 5,988.48, up 27.85 points or 0.47 pct
    MDAX - 8,445.20, up 43.54 points or 0.52 pct
    TecDAX - 656.39, up 5.18 points or 0.80 pct
    DAX futures - 6035.5, up 27.0 points or 0.45 pct

Major gainers

ThyssenKrupp, up 0.68 eur or 2.61 pct to 26.70
   
Adidas, up 0.58 eur or 1.58 pct to 37.30
   
Fresenius Medical Care, up 1.61 eur or 1.57 pct to 104.21
   
RWE, up 1.01 eur or 1.43 pct to 71.80
   
BMW, up 0.46 eur or 1.11 pct to 41.85
 
Major losers
   
E.ON, down 1.67 eur or 1.77 pct to 92.42, amid concern it is over-extending itself with its sharply raised bid for Endesa.
   
Altana, down 0.03 eur or 0.07 pct to 44.55
   
Deutsche Postbank, up 0.01 eur or 0.02 pct to 60.22
   
TUI, up 0.010 eur or 0.06 pct to 16.160. TUI says it will intensify cooperation with other airlines.
   
Deutsche Telekom, up 0.01 eur or 0.08 pct to 12.44. Reports said Deutsche Telekom does not want to sell its PTC stake to Vivendi.  

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