UK/Euro Financial Market Daily Morning Briefing 29-08-2006

London shares open higher as Antofagasta beats estimates

Leading shares were higher in opening deals, flirting with the key 5,900 level, as better-than-expected numbers from copper miner Antofagasta added to a bullish start to the week on Wall Street, dealers said.
   
At 9.04 am, the FTSE 100 was 14.8 points firmer at 5,8934, but off initial highs of 5,912.4, mirroring the positive wider sentiment.
    
Meanwhile, Wall Street closed higher, boosted by a sharp fall in oil prices as severe weather fronts were expected to miss vital production facilities in the Gulf of Mexico.
   
The news offset caution ahead of a slew of economic data due over the next few sessions, with focus today turning to the the release of the minutes from the latest Federal Reserve meeting.
   
The DJIA jumped 67.96 points to 11,352.01, the Standard & Poor's 500 up 6.69 to 1,301.78 and the Nasdaq gained 20.41 to 2,160.70.
   
The upbeat mood spilled over into Asia, with the Nikkei closing up 127.97 at 15,890.56, while Hong Kong's Hang Seng ended its morning session 141.34 higher at 17,063.63.
   
Back in London, Antofagasta took on 9-1/2 pence at 442-1/2 after the Chilean-based group saw profits soar 79 pct in the first half as strong copper prices more than made up for the decline in output and molybdenum prices.
   
Pretax profit in the half-year to June rose to 1.3 bln usd, beating the consensus figure of 1.067 bln usd, while turnover rose 64 pct to 1.85 bln usd, ahead of the consensus forecast of 1.55 bln usd.
   
In response, Merrill Lynch reiterated its 'neutral' stance and said the figures were ahead of its top-of-consensus forecasts.
   
The news helped to lift sentiment across the sector, with Vedanta 23 higher at 1353. Kazakhmys gained 13 at 1234, Xstrata added 19 at 2,357 and BHP was 8 to the good at 1,008.

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Elsewhere, M&A talk also helped to lift the mood after the long weekend holiday with banks continuing to reap the benefit of sector consolidation hopes.
   
Banca Intesa and Sanpaolo IMI agreed over the weekend to a 44 bln stg meger to create an Italian banking champion capable of competing with Europe's financial.
   
Alliance & Leicester took on 3 at 1,018, Barclays gained 2 at 651-1/2, HBOS added 9 at 1,007, Lloyds TSB was up 1 at 527 and Standard Chartered firmed 11 at 1321, further boosted by solid stock market gains in Asia this morning.  
   
Vodafone was also in demand, 1/2 better at 112-3/4, after a report in The Times said the phone giant is mulling the sale of its 25 pct stake in Swisscom Mobile, valued at around 1.7 bln stg, by the year end.
   
This follows the group's exit on Friday from the Belgian market with the 1.4 bln stg sale of its 25 pct stake in Proximus to majority shareholder Belgacom.
   
And BAE Systems gained 3 at 366 after the Sunday Express said the defence group is eager to press ahead with the 2 bln stg sale of its stake in Airbus to EADS.
   
But the top riser was British Airways, up 7-1/2 to 405-1/2 as oil prices continued to slide this morning after Hurricane Ernesto was downgraded to a tropical storm and was expected to avoid the key oil platforms in the Gulf of Mexico.
   
Cruise ship operator Carnival was also given a fillip by the news, 32 firmer at 2,151.
   
Earlier, this morning, New York's main contract, light sweet crude for delivery in October, was down 19 cents at 70.42 usd, having slumped 1.90 on Monday.
   
But in contrast, the oil price slump hit BG, off 1/2 at 694-1/2, Royal Dutch Shell down 1 at 1,932 and peer BP, down 2 at 603-1/2.
   
BP was further hit by a report in the Wall Street Journal claiming federal investigators in the US are examining whether the group manipulated crude-oil and unleaded-gasoline markets.
   
The paper added the move signals a rise in the regulatory scrutiny of the UK energy giant.

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AB Ports was also unwanted, down 3-1/2 at 827, folliwng a report in the Sunday Times the food manufacturing was hit by vague whispers its UK sugar unit may face new price-fixing allegation.
   
On the second-line, Bunzl took on 7-1/2 at 651 after a pleasing set of interim results and acquisition news.
   
The distribution group posted a 9 pct rise in group pretax profits to 88.1 mln stg on a 17 pct increase in revenues to 1.6 bln stg, while EPS increased by 8 pct to 19.3 pence.
   
Bunzl also announced the acquisition of Toronto-based food service distribution business Morgan Scott and Ohio-based industrial and construction personal protection supplier United American Sales Inc.
   
In reaction, Citigroup repeated its 'buy' recommendation and 680 pence target, adding that the results were ahead of its expectations at both the EBITA and EPS level.
   
EasyJet was also higher, 13 to the good at 448, as the airline industry was under the spotlight on confirmation yesterday that the Irish national carrier, Aer Lingus, will float in the London and Dublin stock exchanges next month.
   
Up to 60 pct of the company will be up for grabs in the IPO with analysts saying the flotation would value Aer Lingus at between 700 mln and 1 bln eur.
   
In contrast, Signet  slumped 8-1/2 at 106-3/4 after private equity groups  Apax and KKR pulled out of the race for control of the Anglo-US US jeweller.
   
But according to a variety of papers, Baugur chief executive Jon Asgeir Johannesson is eying up units H Samuel and Ernest Jones while Gerald Ratner is said to be mulling a 200 mln stg bid for Signet's UK operations.
   
And fading bid hopes also hit MFI after the Sunday Express reported talks between the company and Merchant Equity Partners, which is looking at buying its retail business, have stalled over possible UK job losses. Shares fell 1-1/4 at 87-1/2.

UK Diary of Events

For a list of key financial and corporate events in the UK today, click here

US Summary

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AMSTERDAM - Market data at 10.11 am
   
Major indices

AEX                467.91, up 0.13 points
AMX Midcap         581.10, down 0.07
Government bonds   Flat to lower

Major gainers
   
Buhrmann added 2.19 pct to 10.26 eur after announcing an agreed bid for Nordic office supplies company Andvord Tybring-Gjedde
   
ASML gained 1.58 pct to 16.73 eur
   
LogicaCMG put on 1.28 pct to 2.38 eur ahead of earnings tomorrow
   
Local fund Laurus jumped 6.03 pct to 2.46 eur after its CEO resigned
 
Major losers
   
Crucell fell 4.10 pct to 15.89 eur after second-quarter earnings came in at the low end of expectations, while the company kept its earlier full year sales outlook
   
SBM Offshore shed 1.79 pct to 21.97 eur on profit-taking after reporting well-received first-half earnings
   
Ahold dropped 1.08 pct to 7.36 eur after a downgrade to 'hold' from 'buy' at Rabo Securities

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PARIS - Market data at 10.20 am:

Major indices:
   
CAC-40 up 0.33 points at 5,148.85
SBF-80 up 15.98 at 5,759.91
SBF-120 up 0.99 at 3,721.39

Volume: 404 mln eur
18 CAC-40 stocks up
21 CAC-40 stocks down
1 unchanged
Arcelor was removed from the benchmark in July, no replacement yet.

Major gainers:
   
EADS, up 0.46 eur or 2 pct at 23.10 and leading blue chip gains, on a report that Russian bank Vneshtorgbank has acquired a 5 pct stake in the company.
   
STMicroelectronics, up 0.12 at 12.82, tracking solid gains by semiconductor issues in the US overnight.
   
Suez, up 0.21 at 33.61 after CEO Gerard Mestrallet said the terms of the merger with GDF could be revised so that Suez ends up paying less for the company. GDF was down 0.02 at 29.05.

Major losers:
   
Renault, down 0.65 at 89.70 after Exane BNP Paribas downgraded the stock to 'neutral' from 'outperform' on valuation grounds.
   
Total, down 0.30 at 53.95 as oil prices continued to retreat from recent highs.
   
M6, down 0.05 at 25.34 as profit-taking followed yesterday's strong gains, after the broadcaster announced an 8 pct slide in first-half operating profit to 122 mln eur. Most analysts had been expecting a larger decline, since the company absorbed heavy programming costs from its acquisition of Football World Cup broadcasting rights.

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German shares AFX at a glance outlook

Forthcoming Events
   
Today
   
QSC Q2 results   
   
GfK consumer climate index (8.10 am)
   
KEK Media Commission on Monopoly news conference (4.00 pm)
   
Bertrandt Q3 results
   
Cewe Color Q2 results
   
Demag Cranes Q3 results
   
Telegate H1 results
   
Zapf Creation AGM

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Freenet.de AGM
   
July wholesale sales (8.00 am)
   
HSH Nordbank H1 results news conference (10.00 am)
   
Deutsche Bank Real Estate AGM

Market News/Sentiment
   
Bayer lower pre-open after reporting mixed Q2 results
   
Commerzbank removed from Morgan Stanley's Model Portfolio
   
Postbank higher on report again favourite for DAX membership

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