UK/Euro Financial Market Daily Morning Briefing 27-11-2006

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London shares up in early deals bolster by flurry of M&A activity UPDATE

LONDON  - UK blue chips climbed into positive territory in early deals bolstered by consolidation hopes in the house building sector and a flurry of other M&A activity, dealers said.

At 9.23 am the FTSE 100 was up 3.9 points at 6,126, off of earlier lows, while the FTSE 250 soared 40.5 points to 10,630, topped by Wilson Bowden which is mooted to become the subject of a 2 bln bidding war.

Across the Atlantic the DJIA closed the weekly session lower, off 46.70 points at 12,280.20.

American retailers were in focus as companies such as global giant Wal-Mart kicked off the Christmas rush with with a raft of discounts styled to woo shoppers in what is aptly coined "Black Friday", the beginning of the Christmas shopping season.

Across in Asia, Japan's Nikkei 225 closed the day's trade up 150.78 at 15,734.60 while Hong Kong's Hang Seng finished the morning session down 90.06 points at 19,170.24.

Oil prices rose after further hints that OPEC could cut production again next month in order to support the market, dealers said.

The New York Mercantile Exchange's main contract, light sweet crude for January delivery, was up 0.27 usd at 59.51 usd a barrel.

On October 20, OPEC approved a reduction in the group's output of 1.2 mln barrels a day to stem a fall in crude prices, which have fallen from above 78.00 usd in July.

In reaction BP rose 2 pence to 576-1/2, Shell gained 3 at 1,857 while BG Group put on 1/2 pence at 689-1/2

In London, the FTSE 250 greatly outperformed its larger peer, buoyed by news that Wilson Bowden, up 249 pence at 2,080, confirmed press speculation this morning that it is in preliminary discussions with a number of parties regarding a possible offer for the company.

The Sunday Times said the UK housebuilder, worth 1.73 bln stg, has received three takeover approaches from rivals George Wimpey, Redrow and Bellway.

The newspaper said preliminary financial information about Wilson Bowden has been requested by at least one of the potential buyers and confidentiality agreements were being signed.

The approaches were triggered after David Wilson, chairman and founder of Wilson Bowden, got NM Rothschild to review his family's 33 pct stake in the business -- a development first reported on July 14. Any deal would require his agreement.

Wilson Bowden said discussions are at a "very early stage" and there can be no certainty they will lead to a formal offer being made for the company.

In response the sector climbed, with Persimmon topping the FTSE 100 leader board up 30 pence at 1,411, Barratt better by 23-1/2 at 1,078-1/2, Bovis up 28-1/2 up 1,009 and Wimpey stronger by 11 pence at 530.

On the downside, BAE Systems was the day's worst performer, down 11-1/4 pence at 392-1/2, following a report in yesterday's Sunday Telegraph that the government of Saudi Arabia is set to tear up its 76 bln stg agreement with Britain for Eurofighter Typhoon aircraft and hand the contract to France if the Serious Fraud Office opens up secret Swiss bank accounts allegedly linked to members of the Saudi royal family.

A senior UK defence official is quoted as saying the SFO was unlikely to pull back from its investigation focusing on allegations that BAE bribed Saudi defence procurement officials with millions of pounds worth of lavish gifts to ensure they continued to buy from Britain under an original defence contract, Al-Yamamah.

Meanwhile, Corus Group sunk as uncertainty surrounding recent bid hopes left investors avoiding the stock, down 3-3/4 at 501-1/4.

Corus said it is to give Brazilian steel company Companhia Siderurgica Nacional SA (CSN) more time to weigh up a formal offer for the Anglo-Dutch steel group.

In a statement Corus said, "The Board of Corus has decided that it is in the best interests of Corus Shareholders to allow CSN some additional time to satisfy its pre-conditions and to determine whether it will put forward a formal offer.

Again on the upside, miners were in focus as metal prices improved. Vedanta was up 23 at 1,337, BHP Billiton was better by 14 pence at 977, Antofagasta improved 6-3/4 at 481-3/4, Anglo American was 21 to the better at 2,452 while Rio Tinto climbed 19 to 2,733.

On the second tier, First Choice took off 29-1/4 pence to 256-3/4 after confirming weekend press speculation that it is in preliminary talks with a number of interested parties with a view to selling its main tour operating business, dealers said.

Yesterday's Sunday Times reported that MyTravel is looking to buy the package holiday unit, said to be worth around 500 mln stg, leaving First Choice to focus on specialist and activity breaks.

In reaction, Merrill Lynch repeated its 'buy' recommendation and said it sees the sales as good news for First Choice, noting that its mainstream business continues to be difficult.

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It reminded clients that the group's summer trading, which was better than most operators, was poor with bookings down 5 pct on the back of late booking patterns caused by the World Cup and the hot summer leading to price pressure. The market has long speculated on such a takeover. MyTravel was up 6-1/4 at 206.

Bid speculation also helped lift Premier Oil 26 pence to 1,339. Some traders were suggesting that if the stock went to auction bid offers could be as high as 1,700 pence, dealers said.

Sticking with M&A, Shares in United Business Media surged 5 pct, or 35 pence to 732, on reports private equity group Apax is mulling a 500 mln stg bid for its PR Newswire unit, dealers said.

In response, Goldman Sachs said UBM management has previously stated that it would be willing to sell any asset in the UBM portfolio, including PR Newswire, provided that the price was attractive.

Elsewhere, Mitie Group was in favour with investors, up 7-1/2 pence at 214-1/2 after the business support services group posted reassuring interim numbers and said it expects the full year to come in in-line with expectations.

This morning, the group said pretax profits before goodwill for the period were up 28.3 pct at 28.1 mln stg with sales increased by 30.2 pct.

In response, UBS reiterated its 'buy' advice and said at first glance the figures appear in line with its forecasts.

But, it added, the figures include 1.1 mln stg of integration charges, which if adjusted for, would result in a 5.6 pct outperformance against its estimates.

Meanwhile, Altium Securities stuck to its 'hold' advice, stating that the interim results were in line and that it is maintaining its estimates ahead of the analyst meeting.

Finally, construction materials supplier BSS Group reported a 38.3 pct jump in first half pretax profits, pushing the stock up 17 at 88, on the back of a 14.8 pct growth in sales and said the second half has begun in line with its expectations, but may grow slower than a year earlier because of a strong performance in last year's second half.

Pretax profit rose to 21.3 mln stg from 15.4, a 24.6 pct growth when adjusted for last year's one-off expense for long term incentives, and the company increased its interim dividend by 15 pct to 1.64 pence a share.

Sales rose to 475.1 mln stg in the first half from 413.9 mln a year earlier.

Diary of Events

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Paris shares market data at 9.55 am; Vallourec up after winning CAC-40 spot

Major indices:

CAC-40 up 11.82 points or 0.22 pct at 5,401.28
SBF-80 up 1.08 points or 0.02 pct at 6,542.93
SBF-120 up 7.47 points or 0.19 pct at 3,944.53

Volume: 344 mln eur

19 CAC-40 stocks up
17 CAC-40 stocks down
4 CAC-40 stock unchanged

Major gainers:

-Vallourec, up 3.50 eur or 1.72 pct at 206.40, after Euronext decided to add it to the CAC-40 index next month, displacing Publicis.

-Alstom, up 1.20 eur or 1.43 pct at 85.10

-EADS, up 0.21 eur or 0.90 pct at 23.46, after a source said it is in contact with 5-7 funds in the Persian Gulf on possible financing for the Airbus A350 project.

-Capgemini, up 0.37 eur or 0.79 pct at 47.42

Major losers:

-Technip, down 1.80 eur or 3.23 pct at 53.90, as takeover talk faded following Eni's denial that it is considering an offer.

-Publicis, down 0.31 eur or 1.07 pct at 28.74, after Euronext decided to remove it from the CAC-40 index.

-Renault, down 0.60 eur or 0.64 pct at 92.45, amid a broader slump among auto sector shares.

Most active stocks:

-Total, 52 mln eur, up 0.35 eur or 0.65 pct at 54.30, as oil prices resumed an uptrend.

-LVMH, 34 mln eur, down 0.15 eur or 0.18 pct at 81.75, after Deutsche Bank started coverage at 'sell' with a price target of 72 eur.

-Vallourec, 25 mln eur

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German shares AFX market data at 9.20 am

Major indices:

DAX - down 5.09 points or 0.08 pct at 6,406.87
MDAX - down 18.51 points or 0.21 pct at 8,872.75
TecDAX - down 2.19 points or 0.31 pct at 700.47
DAX future - down 8.5 points or 0.13 pct at 6,419.0

Major underperformers:

-DaimlerChrysler, down 0.54 or 1.19 pct at 45.00

-BMW, down 0.49 eur or 1.14 pct at 42.32

-Continental, down 0.95 eur or 1.07 pct at 88.25

-Deutsche Lufthansa, down 0.19 eur or 0.99 pct at 19.03

-SAP, down 1.41 eur or 0.87 pct at 159.76

Major outperformers:

-RWE, up 2.36 eur or 2.73 pct at 88.90. Russia's Gazprom is not negotiating to buy Centrica or RWE but won't rule out anything, Vice President Alexander Medvedev said in an interview with French daily Les Echos.

-Bayer, up 0.94 eur or 2.41 pct at 39.94, after the company announced its third-quarter EBIT rose to 798 mln eur from 653 mln eur in the same period last year, beating forecasts on on the back of increased selling prices and a strong HealthCare division. The result beat a consensus of analysts polled by AFX News, which forecast 706 mln.

-TUI, up 0.08 eur or 0.50 pct at 16.21

-E. ON, up 0.29 eur or 0.30 pct at 96.52

-Adidas, up 0.10 eur or 0.27 pct at 37.60

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Amsterdam shares market data 10.17 am

MAJOR INDICES

AEX 485.42, up 0.51 points
AMX Midcap  636.63, down 2.49 points
Government bonds Lower

MAJOR GAINERS

-Hagemeyer added 0.71 pct to 3.84 eur

-TNT rose 0.56 pct to 32.42 eur

-Oil-related shares gained. SBM Offshore put on 0.44 pct to 24.88 eur while Royal Dutch Shell added 0.45 pct to 26.97 eur

-ABN Amro lifted 0.22 pct to 22.88 eur amid reports that it intends to invest 100 mln eur in hedge fund MW Tops

MAJOR DECLINERS

-Aegon shed 0.21 pct to 14.08 eur amid reports that it may want to invest 1 bln eur in BMPS's MPS Vita life insurance subsidiary in return for a 50 pct stake

-Corus was off 0.80 pct to 7.41 eur after it said it wants to give CSN time to formalise its takeover offer

-ASMI shed 1.58 pct to 16.18 eur ahead of an EGM on the break-up of the company later today

Forex:
 

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