UK/Euro Financial Market Daily Morning Briefing 28-08-2007

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London shares weak in early deals on NY profit-taking falls after data UPDATE

LONDON - Leading shares fell back in early deals this morning after Wall Street ran into some profit-taking yesterday following weak US existing home sales data, with the DJIA having jumped higher Friday after stronger than expected data, leaving investors confused over the path of the world's biggest economy.

At 9.04 am, the FTSE 100 index was 35.6 points lower at 6,184.5, having closed 23.2 points firmer on Friday.

The broader FTSE indices were all lower as well.

Early volume was fair, with 209 mln shares changing hands in 60,612 deals.

Overnight in the US the DJIA ended 56.74 points weaker at 13,322.13, while the broader S&P 500 index closed 12.58 points lower at 1,466.79, and the Nasdaq composite index shed 15.44 points to end at 2,561.25.

US stocks gave back some of last week's gains after news that sales of existing homes slipped in July for a fifth straight month.

Pre-weekend the DJIA had ended 142.99 points higher, with the S&P 500 ahead 16.87 points, and the Nasdaq composite index up 34.99 points, as investors took heart from a stronger-than-expected reading on US new homes sales for July, and news of sharp rises in US durable goods orders in the same month.

Initially US investors had been unsure on Friday whether the strong data could put a dampener on a hoped-for Fed rate cut to lift the current sub-prime worries but the gloom lifted as the market focused on the good news for the economy.

In Asia today, the Nikkei 225 index ended 13.90 points lower at 16,287.49, slipping back after yesterday's 52.42 point advance as investors took a breather, awaiting fresh leads from overseas markets.

Meanwhile the Hang Seng at midday was 157.39 points lower at 23,420.34 hit by some profit-taking after the Hong Kong index leapt 655.84 points yesterday to end at a new all-time peak of 23,577.73.

The Hang Seng had been boosted on Monday by robust first-half corporate earnings and expectations of strong inflows from Chinese investors after the mainland government allowed them to invest abroad.

Crude oil prices were slightly higher in Asian trade after sharp gains overnight in New York amid fears that the US credit woes may lead to an economic crisis receded.

New York's main oil futures contract, light sweet crude for delivery in October, was 23 cents higher at 72.20 dollars a barrel from 71.97 dollars in late US trades on Monday. Brent North Sea crude for October delivery was up 24 cents at 71.19 dollars a barrel.

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In London, there were few blue chip features in opening deals with little news around for the big board players.

Weakness in financials was the main drag on blue chip sentiment as worries over the impact of the sub-prime lending crisis continued to weigh on banks and insurers, particularly after the problems reported by Germany's SachsenLB late last week.

Barclays was a notable faller, down 8 pence at 603 after the Financial Times reported that the bank has exposure of several hundred million dollars to failed debt vehicles created by its investment banking arm amid growing scrutiny over its links to SachsenLB.

SachsenLB was bailed out by and sold to its public-sector peer LBBW on Sunday.

Barclays was also hit by concerns about the impact of the credit crunch on its bid battle for Dutch bank ABN Amro, with weekend press reports suggesting that both the contesting bids could be impacted.

Royal Bank of Scotland, leader of the rival consortium bid for ABN Amro, was down 7 pence at 574.
 
Among other weak financials, mortgage bank Alliance & Leicester was also a big blue chip faller, down 18 pence at 1,031, with insurer Royal & Sun Alliance off 1.6 pence at 139.0, and fund manager Schroders down 16 pence at 1,319.

Elsewhere, supermarket group Sainsbury was 10-1/2 pence lower at 534 amid uncertainties over a Qatar-backed bid for the firm.

The Sunday Times reported that the 10.4 bln stg Qatari offer hangs on satisfying UK competition authorities that the company will not be left overburdened with too much debt after the deal.

Meanwhile plumbing supplies group Wolseley shed 19 pence at 1,031 in reaction to the disappointing US existing home sales data yesterday.

Among the minority blue chip risers, Standard Chartered bucked the easier banking sector trend, recovering 4 pence at 1,498 after sharp falls at the end of last week amid worries over subprime exposure.

Credit Suisse reiterated its 'outperform' rating on Standard Chartered today and recommended buying the stock after Friday's weakness as it believes the market over-reacted to the rumours about Whistlejacket, one of its units, which had been reported to be in financial trouble.

Elsewhere Whitbread added 4 pence at 1,579 after the Mail on Sunday reported that the leisure firm is expected to announce a potential 900 mln stg return of cash to shareholders this week alongside a trading update.

Cadbury Schweppes shares gained 0-1/2 pence at 569-1/2 after the Sunday Express said the group is working towards a flotation of its US soft drinks arm in the first quarter of next year as bids for the unit have so far failed to get off the ground.

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On the second line, London Stock Exchange shares took on 32 pence at 1,345 on reports that it could face a renewed takeover battle after Nasdaq sells its 31 pct stake in the UK bourse operator.

The Mail on Sunday said Nasdaq's advisers have received approaches from a number of exchanges, including Deutsche Boerse, Borse Dubai and the Singapore government investment vehicle Temasek.

The Observer said Nasdaq is seeking to sell up to half of its stake to Deutsche Boerse which has previously made an unsuccessful attempt to buy the LSE.

And the Sunday Times also named the New York Stock Exchange and the Chicago Mercantile Exchange as other possible candidates to buy Nasdaq's stake.

Nasdaq, which also failed last year in an attempt to acquire the LSE, is selling the shareholding to help fund its battle against Borse Dubai for Scandinavian stock exchange, OMX.   

Among other mid cap gainers, well-received results lifted shares in John Wood Group and Avis Europe.

Wood Group shares added 17-3/4 pence at 354-1/2 after the oil services company reported a surge in first half profit and said it expects results for the full year to beat forecasts.

Benefiting from strong oil and gas prices, Wood Group reported first half pretax profit up 64 pct to 124 mln usd on sales up 35 pct to 2.177 bln usd.

Merrill Lynch said the results were well ahead of its expectations on the back of a solid performance across the board. 

Avis Europe shares took on 0-3/4 pence at 46 after it said its overall expectations for the full year 2007 remained unchanged as it posted group underlying pretax losses excluding discontinued operations of 1.9 mln eur against losses of 4.5 mln last time.

Avis had already revealed that full-year underlying pretax profits in its Portuguese operation would be about 2 mln eur lower than expected due to alleged malpractice in the division.

Avis said a forensic investigation of its Portuguese operations by KPMG had confirmed that "certain actions" had been taken in the division which did not comply with group policy.

On the macro front, no major UK data is due for release today, so the main focus today will be across the Atlantic on the release of the minutes from the Federal Open Market Committee's last meeting on August 7.

However given subsequent moves by the Fed to cut the discount rate in an attempt to calm the subprime crisis turmoil, the minutes are unlikely to cause too many concerns.

US August consumer confidence numbers will also be released today.

US Summary

For a summmary of US stocks at yesterday's close of trade, click here

UK Diary of Events

For a diary of key financial and corporate events in the UK next week, click here

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Unibail extends drop, utilities higher

CAC-40 index:

-down 46.42 points or 0.83 pct at 5,544.12

-34 stocks lower

-6 stocks higher

Major losers:

-Unibail-Rodamco, down 3.39 eur or 1.85 pct at 179.71, as profit-taking after yesterday's first half results continued to erode last week's rise.

-Societe Generale, down 2.00 eur or 1.67 pct at 117.99

-ArcelorMittal, down 0.78 eur or 1.67 pct at 45.90, after announcing a Mittal Steel share buyback program to offset shares issued to buy out minorities of Arcelor Brasil.

Major gainers:

-Suez, up 0.18 eur or 0.47 pct at 38.50, as utilities gained across the board amid a report that Suez has told the French government to resolve its stalled merger with Gaz de France.

-EDF, up 0.28 eur or 0.38 pct at 74.24

-GDF, up 0.04 eur or 0.12 pct at 34.01

Most active stocks:

-France Telecom, 2.3 mln shares, down 0.04 eur or 0.18 pct at 21.91

-Alcatel-Lucent, 1.6 mln shares, down 0.07 eur or 0.87 pct at 7.97

-Total, 1.2 mln shares, down 0.28 eur or 0.52 pct at 53.60

Zurich 

lower across the board on Dow losses

Major Indices

Swiss Market Index 8,786.36, down 59.84 points Swiss Performance Index 7,158.58, down 43.87 points

Major losers

-Synthes, down 2.20 sfr or 1.6 pct 134.20

-Nobel Biocare, down 4.75 sfr or 1.5 pct at 316.25

-Julius Baer, down 1.10 or 1.4 pct at 79.20

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DAX - down 23.33 points, or 0.31 pct, at 7,462.66
MDAX - down 87.35 points or 0.87 pct at 9,994.70
TecDAX - down 8.25 points or 0.91 pct at 874.63
DAX futures - down 16.50 points, or 0.22 pct, at 7,483.50
   
Major Advancers:
   
E.ON, up 0.88 eur or 0.75 pct at 118.77
   
DaimlerChrysler, up 0.43 eur or 0.68 pct at 63.55
   
Lufthansa, up 0.07 eur or 0.34 pct at 20.69
   
SAP, up 0.11 eur or 0.29 pct at 38.56
   
RWE, up 0.18 eur or 0.22 pct at 80.36

Major Decliners:
   
Deutsche Post, down 0.69 eur or 3.21 pct at 20.79 eur after Goldman Sachs cut its recommendation on the stock to 'sell' from 'buy' and lowered its target to 18 eur from 24 eur, saying a delay in German mail liberalization planned for 2008 now seems unlikely, pointing to future volume losses and margin erosion for the company.
   
Deutsche Postbank, down 0.72 eur or 1.34 pct at 52.96
   
TUI, down 0.23 eur or 1.25 pct at 18.24
   
Siemens, down 1.09 eur or 1.20 pct at 89.66
   
Adidas, down 0.42 eur or 0.98 pct at 42.28

Vienna

Main Indices

ATX down 0.54 pct or 24.64 points at 4,511.35

ATX Prime down 0.65 pct or 14.48 points at 2,217.92

Main Losers
   
BWIN down 2.39 pct at 20.40 eur, on profit-taking
   
A-TEC down 1.85 pct at 134.95 eur
   
Raiffeisen International down 1.32 pct at 105.65 eur, as credit crunch concerns reemerge
   
Wienerberger down 1.24 pct at 50.17 eur, on bearish signals from US housing market
   
Andritz down 1.14 pct at 47.71 eur
   
Zumtobel down 1.09 pct at 27.30 eur
   
Erste Bank down 1 pct at 53.56 eur, tracking banking sector on subprime concerns
   
Verbund down 0.74 pct at 35.11 eur, tracking European utilities sector
   
EVN down 0.60 pct at 84.60 eur

Main Gainers
   
OMV up 0.30 pct at 44.13 eur, in-line with oil stocks on rising crude prices
   
voestalpine up 0.12 pct at 57.62 eur, on bargain hunting

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MAJOR INDICES
AEX                512.79, down 5.33 points
AMX Midcap         710.14, down 4.12 points
Government bonds   mixed

MAJOR DECLINERS
   
Laurus fell 4.54 pct to 4.42 eur as investors were disappointed with the group's reiteration of its break-even guidance for its Super de Boer unit
   
Arcelor Mittal shed 2.01 pct to 45.72 eur after it said it will launch a share buyback programme to offset an earlier share issue
   
SBM Offshore dropped 1.28 pct to 28.52 eur ahead of first-half earnings expected after market close today
   
Royal Dutch Shell dropped 0.36 pct to 27.38 eur amid reports that Lukoil is to sell 600,000 tonnes of oil
   
USG People shed 2.46 pct to 24.20 eur
   
Wereldhave lost 1.95 pct to 86.06 eur
   
Stork dropped 1.22 pct to 47.62 eur amid news reports that Iceland's Marel will continue to expand its stake in the Dutch company and may put out a bid on Stork in October
   
Heineken was off 0.30 pct to 45.94 eur but outperformed the AEX ahead of earnings tomorrow
  
MAJOR GAINERS

LogicaCMG added 0.87 pct to 2.32 eur ahead of earnings tomorrow
   
Getronics put on 0.16 pct to 6.11 eur
   
Unit 4 Agresso rose 1.54 pct to 19.80 eur following a price target upgrade at Petercam

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