UK/Euro Financial Market Daily Morning Briefing 27-10-2006

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London shares cling to early gains as miners, telecoms counter weak WPP

London shares were slightly higher in early deals, encouraged by another record-breaking performance on Wall Street last night, while further strength across miners and telecoms offset a disappointing Q3 statement from WPP.
   
By 9.05 am, the FTSE 100 index was up 9.6 points at 6,194.4, while the broader indices were also higher. Early volume was moderate, with 128.8 mln shares changing hands in 16,928 deals.
   
Wall Street advanced for a fourth straight session yesterday as robust earnings at Exxon Mobil and Aetna and fresh technology buying helped investors look past a mixed bag of economic data, traders said.
   
The DJIA finished 28.98 points higher at yet another record close of 12,163.66, while the Nasdaq added 22.51 points to a fresh 5-1/2 year high of 2,379.10.
   
After the close however, a mixed earnings statement from Microsoft dented sentiment somewhat. The software giant beat expectations on the top and bottom lines during its first fiscal quarter, although cautioned that its Q2 earnings will likely be on the light side.
   
Across Asia overnight, the Nikkei 225 index closed 142.53 points lower at 16,669.07, while the Hang Seng was up 92.72 points at 18,446.46 at midday. Shares in Industrial and Commercial Bank of China, the world's largest IPO, were up nearly 18 pct on their trading debut in Hong Kong.
   
In London today, mining stocks were higher again, shrugging off overnight weakness in metal prices, with news of a further 3 bln usd share buyback by Rio Tinto lifting sentiment across the sector.
   
Rio Tinto climbed 38 pence to 2,896, while Lonmin added 48 pence to 2,916, helped by a 'buy' recommendation from Citigroup, with a raised target of 3,750 pence from 3,500.
   
Elsewhere, Xstrata added 12 pence to 2,268, while Vedanta edged 10 pence higher to 1,462.
   
Telecom stocks also remained in demand, with Vodafone adding 1-1/2 pence to 134-1/2, helped by bullish broker comment.
   
Morgan Stanley repeated its 'overweight' stance and 145 pence target, while Citigroup hiked its target to 143 pence from 124, although stuck with its 'hold' stance.

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BT Group was also higher, up 3-1/4 pence at 281.
   
On the downside, WPP opened over 4 pct lower, down 29 pence at 660, after a disappointing set of third quarter results.
   
The UK-based advertising and marketing conglomerate announced that revenues rose by just over 4 pct on a like-for-like basis in the third quarter, compared with organic growth of 5 pct during the first half.
   
The group blamed pressure in the United Kingdom and a slower rate of growth in Eastern Europe for the disappointment.
   
"Organic revenue momentum has proved disappointing and we expect that the shares will trade off today." Merrill Lynch told clients in an early reaction piece. The broker however, reiterated its 'buy' recommendation and 690 pence target.
   
GlaxoSmithkline and AstraZeneca both remained under pressure today, down 28 pence to 1,423 and 14 pence to 3,248 respectively, following disappointing Q3 pipeline news from both groups yesterday.
   
Brokers continued to lower recommendations and forecasts for the pair, with GSK downgraded by Credit Suisse and Merrill Lynch and AstraZeneca's rating cut by Dresdner Kleinwort, Bear Stearns and Credit Suisse.
   
Investors will be hoping for some soothing news from Shire however, when it posts its Q3 numbers at midday, following yesterday's drug-induced headache for the FTSE. Shire shares were down 5 pence at 941 in early deals.
   
Elsewhere, BP fell 2-1/2 pence to 604, hit by a downgrade to 'hold' from 'buy' by ING.
   
Despite lifting its target to 650 pence from 640 on the back of sound underlying third-quarter numbers and improved EPS estimates, ING told clients that it has cut its recommendation on valuation grounds.
   
Hanson was another early faller, off 12 pence at 732, hit by a double-whammy of another set of disappointing US housing data and talk that oft-rumoured predator Cemex has turned its attention elsewhere.

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Cemex posted a robust set of Q3 numbers yesterday, although failed to provide any acquisition hints.
   
Shares in Australia's top building materials group Rinker however, jumped 6 pct overnight after the Wall Street Journal reported that Cemex plans to launch a takeover attempt.
   
On the second line, John Laing shares jumped 10 pct, up 35-1/2 pence to 390-1/2, after recommending an offer valuing the company at 957.5 mln stg from Allianz Infrastructure Holdings Ltd, a recently incorporated company and a wholly-owned subsidiary of Allianz Alternative Assets Holding GmbH.
   
On the economic front, both UK and US third-quarter readings should provide an insight into economic health on both sides of the Atlantic.
   
The final reading of October University of Michigan consumer sentiment data, due after the opening bell, will also be closely eyed.

UK Diary of Events

For a diary of key UK financial and corporate events 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 9.52 am:

Major indices:
   
CAC-40 down 9.96 points at 5,423.83
SBF-80 down 11.74 at 6,280.11
SBF-120 down 6.77 at 3,935.52

Volume: 433 mln eur
13 CAC-40 stocks up
26 CAC-40 stocks down
1 unchanged

Major gainers:
   
Peugeot, up 0.51 eur or 1.2 pct to 44.34 and leading blue chip gains as investors looked past the automaker's warning that 2006 operating margins would not hit the 2.4 pct target, which many had already anticipated.
   
Soitec, up 0.73 or 3.9 pct at 19.43 after signing technology cooperation deal with ARM.
   
Iliad, up 1.80 or 2.7 pct at 69.50 after posting a 31 pct jump in third quarter sales to 240 mln eur, while announcing over 2 mln ADSL subscribers as of end-September, a target that was reached 3 months ahead of schedule.

Major losers:
   
Eiffage, down 2.30 or 3 pct at 74 as French daily La Tribune reported of ongoing rumours of a deal with Spain's OHL, as a means of diluting the 32 pct stake of Sacyr, the largest Eiffage shareholder.
   
M6, down 0.23 at 24.52 and TF1, down 0.30 at 26.68; both broadcasters posted uninspiring advertising revenues with their third quarter sales announcements late yesterday.
   
PPR, down 0.50 at 118.40 after Fnac president Denis Olivennes said the unit is not for sale, dousing investor hopes that it could be divested in order to focus on high-margin luxury businesses.

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FRANKFURT - Market data at 9.20 am

Major indices:

DAX 30 - up 4.26 or 0.07 pct at 6288.61
MDAX - down 23.38 or 0.27 pct at 8730.96
TecDAX - down 2.05 or 0.29 pct at 689.84
DAX future - down 14 at 6,320.0
Oil - up 24 cents at 60.60 usd a barrel from 60.36
Gold - 595.55-596.05 usd an ounce
Euro/dollar - 1.2702 usd, up from 1.2689.

DAX 30 risers
   
MAN AG, up 0.91, or 1.29 pct at 71.35; Volkswagen signals intent to raise stake to under 30 pct.
   
Allianz, up 1.20, or 0.82 pct at 146.85; offers 1 bln stg for John Laing. ICBC fever hits Hong Kong.
   
Deutsche Telekom, up 0.18, or 1.36 pct at 13.38; continues yesterday's rebound.
   
Hypo Real Estate, up 0.52, or 1.03 pct at 50.80
   
Infineon, up 0.07, or 0.73 pct at 9.62;
     
DAX 30 fallers
   
Lufthansa, down 0.24, or 1.33 pct at 17.78; Deutsche Bank cuts to 'hold' from 'buy' on valuation.
   
Volkswagen, down 1.73, or 2.24 pct at 75.47; lower ahead of 9-month results. Signals intent to raise stake in MAN.
   
SAP, down 0.85, or 0.54 pct at 156.88
   
ThyssenKrupp, down 0.22, or 0.68 pct at 30.62
   
Henkel, down 0.21, or 0.68 pct at 30.62   

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AMSTERDAM - Market data at 10.28 am:

Major indices
   
AEX                 491.80, down 1.14 point
AMX Midcap          626.28, up 3.27 points
Government bonds    narrowly mixed

Major losers:
   
TNT, due to issue third-quarter figures on Monday, was off 1.98 pct at 30.15 amid news it will not appeal a court ruling in favour of its rival Sandd over mail delivery in the Netherlands
   
Philips fell 0.92 pct at 28.11
   
ING lost 0.66 pct at 34.79 after a downgrade to 'hold' from 'buy' at Theodoor Gilissen in "some caution" after the stock's excellent performance in the past 12 months. The broker raised the price target to 39 eur from 37
   
Aegon slipped 0.41 pct at 14.65, Fortis eased 0.36 pct at 32.89
   
Pharming gave up 1.09 pct at 3.64 after the biotech company reported a net loss over the third quarter in line with analysts' expectations amid steady costs     

Major gainers:
   
Randstad surged 7.52 pct to 47.59 after reporting better-than-expected third-quarter results, particularly in the Netherlands, and giving an upbeat outlook. Delta Lloyd and SNS Securities both upgraded their rating to 'buy'.     

The news boosted fellow staffing group USG People, which also has the Netherlands as its main market, with the shares jumping 5.32 pct at 31.09.
   
ASML climbed 1.62 pct at 18.19
   
Univar put on 2.47 pct at 40.65 amid news it acquired Italian chemicals distributor Achimar for an undisclosed sum

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