UK/Euro Financial Market Daily Morning Briefing 28-03-2007

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London shares tick higher in early deals; trading updates mixed; NY lower

UK blue chips ticked higher in early deals this morning as strength in oil issues provided support offsetting a weak showing overnight on Wall Street, and mixed trading updates from two blue-chip retailers, Sainsbury and Alliance Boots, both currently under attack from private equity raiders.
   
At 9.14 am, the FTSE 100 index was 5.7 points higher at 6,298.3, with all the broader FTSE indices higher aside from the techMARK 100 index.  Early volume was fair, with 315 mln shares changing hands in 56,585 deals.
   
Overnight on Wall Street, the DJIA shed 71.78 points to end at 12,397.29, while the S&P 500 index lost 8.89 points at 1,428.61, and the Nasdaq composite index declined 18.20 points to close at 2,437.43.
   
US investors were wary after new data raised the possibility that weakness in the nation's housing market could seep into the broader economy and curb consumer spending.
   
February US durable goods orders will be the big data release today but, in light of the dovish comments from last week's FOMC meeting, the main focus will be on a Congressional testimony due today from Fed chairman Ben Bernanke.
   
Asian markets were weak today, with the Nikkei 225 index ending 110.32 points lower, while the Hang Seng ended its morning session 244.05 points lower at 19,462.74 reflecting Wall Street's decline and futures expiries.
   
Meanwhile oil prices rallied in Asian trading hours, touching a six-month high in a market jittery about the possible consequences of Iran's nuclear programme and its detention of 15 UK naval personnel, dealers said.
   
The New York Mercantile Exchange's main oil futures contract, light sweet crude for delivery in May, was up 0.89 usd at 63.82 usd a barrel from 62.93 usd in late trading in the US overnight. Brent North Sea crude for May was up 0.92 usd at 65.52 usd.
   
Strength in oil issues provided a prop for UK blue chips at the start today, with Royal Dutch Shell a good performer, up 21 pence to 1,701 helped by news its chief executive will continue in his job until June 20 2009, while BP added 7-1/2 pence at 551, and BG Group took on 9-1/2 pence at 733.
   
This strength, however, was offset by weakness in heavyweight mining issues as metal prices eased back and sector consolidation benefits faded, with Vedanta Resources down 25 pence at 1,294, while Rio Tinto lost 35 pence at 2,849, and BHP Billiton shed 8 pence at 111.
   
The main corporate news focus was on diverse trading updates from the two retailers currently under attack from private equity.
   
Shares in Sainsbury, currently at the centre of intense bid speculation after a tentative approach from a CVC-led consortium last month, reported better-than-expected fourth-quarter sales figures.
   
The supermarket firm's like-for-like sales, excluding petrol, increased by 5.9 pct in the 12 weeks to March 24. Analysts' expectations had ranged between 4-5.75 pct.

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But Alliance Boots shares shed 1-1/2 pence at 1,019-1/2 after an in-line trading update, seen by many as a defence document, prompted WestLB to downgrade its stance to 'hold' from 'add'. 
   
The merged group - which rejected an 8 bln stg takeover approach this month from Stefano Pessina, its executive deputy chairman, and private equity group Kohlberg Kravis Roberts - said it expects full year results to come in in-line with expectations.
   
In response, WestLB said the trading update "was not exactly a robust bid defence though the company is confident of delivering full year results in line with management targets".
   
Elsewhere on the high street, shares in Next topped the FTSE 100 leaders board once again, up 54 pence at 2,356 as vague bid talk continued to do the rounds following last week's strong results from the clothing retailer. Sentiment was also helped by results today from Swedish high street peer H&M, with Marks & Spencer shares also up 1 pence at 674.
   
Utilities were also in demand supported by a reassuring trading update from United Utilities, up 6-1/2 pence to 753-1/2. UU's said its results for the full year ending March 31 will be in line with expectations. Chief executive Philip Green said the company is on course to meet the economic level of leakage rolling target for the first time in four years.
   
Among other sector gainers, Severn Trent gained 15 pence at 1,450, Kelda Group took on 4-1/2 pence at 948-1/2, and Scottish & Southern Energy added 6 pence at 1,524.
   
A positive trading update was also the spur to gains in Daily Mail & General shares, up 4-1/2 pence at 798.           
   
Daily Mail unveiled a healthy rise in advertising revenues at its national titles in the fiscal first half, raising hopes that the near two-year recession in the newspaper ad market is nearing an end.
   
The owner of the Mail titles and the London Evening Standard said total advertising revenues at its Associated Newspapers division increased by 10 pct in the five months to the end of February.
   
In reaction Cazenove said it continues to like the long term fundamentals of the group, with its strong market position across the newspaper and B2B sectors and good growth potential but retained its 'neutral' stance on the stock.
   
Mid cap newspapers peer Johnston Press added 10-3/4 pence at 440-1/4 in
sympathy.
   
On the speculative front, ICI was a gainer, up 2 pence to 503 as bid rumours resurfaced, with the chemicals firm linked to Reliance of India today.
   
And Man Group took on 3-1/2 pence at 548 amid talk it could announce the demerger of its brokerage business alongside a trading update due this Friday.

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On the downside with blue chips, ex-dividend factors had an impact, taking 2.06 points off the FTSE 100 index, with the likes of Scottish & Newcastle, Wolseley, Standard Life, and BSkyB all lacking dividend attractions today.  
   
Also on downside, Johnson Matthey was weak, off 14 pence at 1,567 after an uninspiring trading update. Johnson Matthey said trading in the second half of 2006 remained strong, in line with the guidance it gave in January.
   
On the second line, however, positive trading updates helped spur gains in Aberdeen Asset Management, up 7-3/4 pence at 204, and FirstGroup, ahead 24 pence at 681-1/2.
   
But on the downside, Woolworths shares lost 0-3/4 pence at 31-3/4 after the retailer posted an expected slump in full-year profits.
   
The troubled sweets, CDs and stationery group said full year underlying profits fell to 21.8 mln stg, down from 57.7 mln a year earlier and in line with market forecasts of around 21 mln.
   
In response, Dresdner Kleinwort reiterated its 'sell' advice and said the results were broadly in line with expectations while current trading was "okay", with Woolworths like-for-like sales up 0.8 pct in the first seven weeks of the new year.
   
On the UK macro front, the latest Nationwide survey showed house prices up just 0.4 pct in March, down on February's 0.6 pct and below market expectations for a 0.7 pct increase.
   
Slowing monthly growth pushed the annual rate down to 9.3 pct, again below February's 10.2 pct and below expectations of a more modest slowdown to 9.6 pct.
   
The focus later today will be on the final reading for UK Q4 GDP which is expected to be unrevised, plus Q4 balance of payments numbers.
   
Also of interest today will be testimony from UK Treasury officials to the Treasury Select Committee on the 2007 Budget.

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

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AMSTERDAM - Market data at 10.18 am

Major indices
   
AEX                 505.65, down 2.56 points
AMX Midcap          714.83, down 3.98 points
Government bonds    narrowly mixed
   

Major decliners:
   
TomTom dropped 2.2 pct to 30.21. Rabo Securities cut its price target to 27 eur from 29 but kept its 'reduce' rating as the broker believes first-quarter PND volumes will be weak due to inventory cleaning
   
Buhrmann gave up 1.41 pct to 10.52, Arcelor Mittal lost 1.36 pct to 39.11
   
Among financials, ABN Amro eased 0.87 pct to 32.07 as the bank said it will look at alternatives should its merger talks with UK bank Barclays fail. 

ING slipped 1.21 pct to 30.95, Fortis shed 1.13 pct to 33.28 and Aegon traded 0.73 pct lower at 14.90
   
Major gainers:
   
Royal Dutch Shell put on 1.53 pct to 25.27 as investors welcomed news  Jeroen van der Veer will retain his role as the Anglo-Dutch oil group's chief executive until June 30, 2009
   
Oil services group SBM Offshore gained 0.18 pct to 27.17
   
Reed Elsevier firmed 0.76 pct to 13.27 as the Anglo-Dutch publisher was upgraded to 'outperform' from 'neutral' by Credit Suisse

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FRANKFURT - market data at 9.52 am

Major indices
   
DAX - down  23.83 points, or 0.35 pct, at 6,834.51
MDAX - down 51.88 points, or 0.52 pct, at 9,990.47
TecDAX - down 5.25 points, or 0.62 pct, at 838.06
DAX futures - up 18.00 points, or 0.20 pct, at 9,239.00
   
Major decliners:
   
Siemens, down 1.11 eur or 0.97 pct at 112.89, after the Handelsblatt newspaper reported the electronics giant will hold an extraordinary meeting of its supervisory board to discuss the state of the company
   
Deutsche Bank, down 0.14 eur or 0.69 pct at 20.16
   
SAP, down 0.27 eur or 0.57 pct at 46.89
   
Hypo Real Estate, down 0.44 eur or 0.40 pct at 109.00
   
Continental, down 0.27 eur or 0.35 pct at 77.82
 
Major advancers:
   
Henkel, 1.05 eur or 0.97 pct at 108.81
   
Bayer, up 0.30 eur or 0.65 pct at 46.31, after Morgan Stanley raised its target to 54 from 50 eur per share and reiterated its 'overweight' stance on the pharmaceutical giant
   
Lufthansa, up 0.10 eur or 0.50 pct at 20.25, amid reports that British Airways is mulling a bid for low-cost airline bmi, in which Lufthansa holds a 30 pct stake.
   
BASF, up 0.33 eur or 0.41 pct at 81.80
   
Linde, up 0.20 eur or 0.25 pct at 79.21

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