UK/Euro Financial Market Daily Morning Briefing 31-08-2007

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London shares up in early trade; Hong Kong at a record; miners gain

Leading shares stayed higher in early trade, after Asian markets enjoyed another positive session, boosted by US computer giant Dell posting better-than-expected second quarter numbers, and miners gaining on strong commodity prices.
   
At 9.12 am, the FTSE 100 index was 29.5 points higher at 6,241.5, having been up as much as 44.3 points earlier in the session. It rose 79.8 points yesterday to 6,212. The index is set to finish the month at its highest level in three weeks. The FTSE 250 was up 86.3 points at 11,185.8. Volume was fair, with 214 mln shares having changed hands in 53,980 deals.
   
Dell's earnings, released after US markets closed, look to have more than offset a weak finish last night on Wall Street. US stocks finished a mixed session Thursday as investors weighed the chances of the Federal Reserve lowering interest rates.
   
Fed Chairman Ben Bernanke is expected to speak today at the central bank's annual conference and said in a letter Wednesday to Senator Charles Schumer that Fed policymakers are "prepared to act as needed" if the market's turmoil damages the economy. The Fed's next meeting is September 18, but some on Wall Street believe that the central bank could act sooner.
   
The Dow fell 50.56, or 0.38 pct, to 13,238.73 after dropping about 100 points early in the session. It was up just 3 points as London markets were closing.
   
Broader stock indicators finished mixed. The Standard & Poor's 500 index fell 6.12, or 0.42 pct, to 1,457.64, while the Nasdaq rose 2.14, or 0.08 pct, to 2,565.30.
   
On Asian markets, Hong Kong's Hang Seng rose 499.6 points to close at a record 23,984.14, Japan's Nikkei 225 index closed up 415.27 points, or 2.6 pct, ahead at 16,569.09.
   
Dell's second quarter earnings bolstered expectations for technology companies across the region, offsetting an otherwise sluggish performance on Wall Street. Dell earnings were an early focus and a positive for its Asian suppliers, said Kirk Yang, analyst at Citigroup in Hong Kong. These include Taiwan's Asustek, a maker of mainboards, and Quanta and Microstar, which provide video cards and other accessories.
   
In Asian trading hours, oil prices were little changed on Thursday, still relatively high following the surprisingly steep declines in US energy stockpiles earlier in the week.
   
New York's main futures contract, light sweet crude for delivery in October, was trading at 73.56 usd a barrel, while Brent North Sea crude for October delivery was at 72.00 usd a barrel.
   
In London, BG Group, the best performer in the FTSE 100 yesterday, was a further 7-1/2 pence higher at 789-1/2 pence after UBS upgraded it to 'buy' from 'neutral'. The broker said it had increased its estimate for recoverable reserves for the giant Tupi field in the Campos Basin, offshore Brazil.
   
Banking giant Barclays was up 4-1/2 pence at 602 pence despite admitting that it has borrowed hundreds of millions from the Bank of England's emergency lending facility. The company said it is a technical matter.
   
Fund management group Schroders was up 18 pence at 1,329 as the outlook for equity markets picked up. Anglo American was 50 pence up at 2,821 as precious metal prices gained. Other miners to have gained included Rio Tinto, up 40 pence at 3,307.

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Cadbury Schweppes fell 6 pence to 573 pence after Lehman Brothers downgraded it to 'equal-weight' from 'overweight'.
   
The mid-caps have provided most of the earnings news and trading statements.  Davis Service Group, the textile maintenance company, was 14-1/2 pence higher at 603-1/2 pence after announcing that its first-half adjusted pretax profit rose 2 pct helped by a combination of strong organic growth and benefits from acquisitions.
   
First-half profit -- before exceptional items and amortisation of customer contracts and intellectual property rights -- reached 40.1 mln stg, up from 39.2 mln on a 12 pct increase in revenue to 387.4 mln. The company said it expects good trading conditions to prevail into the second half of the year.
   
In reaction, Panmure Gordon said that Davis Service Group's top-line results were ahead of expectations. The broker added that the company's UK business is performing well and its European business is in line. It reiterated its 'hold' rating.
   
Residential property website operator Rightmove rose 7 pence to 569-1/2 pence after it reported a 60 pct increase in first-half profit as it recruited more estate agents to advertise their properties through the group's online portal.
   
Rightmove, which advertises residential homes on behalf of estate agents and property developers, said underlying operating profit for the six months to June 30, 2007 came in at 13.2 mln stg, up from 8.3 mln stg in the same period last year.
   
The increase came on the back of stronger revenues, which were up 68 pct on the year at 25.4 mln stg.
   
"Whilst the equity and debt markets have been turbulent in recent weeks, the outlook continues to be positive in terms of our 2007 performance," the group said in a statement.
   
Rightmove is paying an interim dividend of 2 pence per share, up from 1.5 pence a year earlier.
   
JKX Oil & Gas was 7-1/2 pence higher at 383-1/4, and has touched a new 12-month high, after announcing the results of drilling operations in Ukraine. JKX may also have been boosted by the strong oil price, which saw Premier Oil rise 40 pence to 1,035. Tullow Oil, a strong candidate for promotion to the FTSE 100 in the quarterly reshuffle next month, rose 7-1/4 pence to 503-1/2. UBS reiterated its 'neutral' rating ahead of Tullow's interim results on Tuesday.
   
Holiday company Thomas Cook Group rose 1 pence to 279-1/2 pence. The company, formed earlier this year by the merger between the KarstadtQuelles holiday division and UK rival MyTravel, said it believes the group's financial performance in 2007 will be in line with its expectations.

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In a trading update, Thomas Cook said that while the recovery in the UK in summer 2007 has not been as strong as it had expected, it anticipates that the Northern Europe and Airlines Germany divisions will exceed its expectations.
   
The group also said it is "increasingly confident" that synergies achieved from the merger will exceed the 140 mln eur originally forecast.  In addition, Thomas Cook said its customers are having to pay about 60 mln eur of additional air passenger duty, which has acted as a brake on prices.
   
In Northern Europe, the group said cumulative bookings for summer 2007 are currently 2 pct ahead of the prior year on similar capacity, and average selling prices are 4 pct up year-on-year.
   
Homeserve rose 52 pence to 1,728 pence after it announced a deal with FirstEnergy Solutions, a unit of FirstEnergy Corp, to market home emergency policies to 1.1 mln electricity households in its New Jersey service areas.
   
On the economic front, consumer confidence is forecast to have deteriorated further in August as increases in interest rates take their toll on the consumer.
   
Today's GfK/NOP consumer confidence index is forecast to worsen to minus 8 in August from minus 6 the previous month.
       
The EU Commission's economic sentiment indicator is expected to decline to 110.0 in August from 111.0 in July, with all of the main components easing slightly.
   
The industrial confidence indicator is forecast to weaken to +4 from +5, the consumer confidence indicator to minus 3 from minus 2, and the services confidence indicator to +20 from +21.
   
Euro zone inflation is forecast to remain unchanged at 1.8 pct in August, while unemployment is projected to decline to 6.8 pct in July from 6.9 pct the previous month.

US Summary

For a summary 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 today, click here

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MILAN - market data at 9.45 am

Main indices:
   
Mibtel rose 0.44 pct to 31,137
   
S&P/Mib gained 0.49 pct to 40,038

Main S&P/Mib gainers:
   
Impregilo up 1.45 pct at 5.32 eur after signing Libyan jv
   
BPM up 1.22 pct at 10.79 after key fund shareholders called for improved governance   
   
STMicroelectronics rose 1.21 pct to 12.76 on positive semiconductor sector sentiment
   
Bulgari was up 1.10 pct at 10.18 after Deutsche Bank raised its rating yesterday to 'hold' from 'sell', with a target of 10.5 eur.
   
Eni up 1.08 pct at 25.22 eur after EU energy commissioner said Brussels backs Eni over Kashagan dispute
   
Fiat up 0.10 pct at 19.17 eur on reports of interest in Jaguar, Land Rover alongside Tata Motors

Main S&P Mib losers:
   
Alitalia down 0.64 pct at 0.84 eur after new business plan which reports say includes 1,000 redundancies
   
Pirelli down 0.41 pct at 0.82 eur following delay in sale of Olimpia stake in Telecom Italia
   
Telecom Italia down 0.02 pct at 2.06 eur with reports saying Telco shareholders will meet today
   
Mediaset down 0.19 pct at 7.75 eur as Morgan Stanley reiterated 'underweight'.

Stocks in the news:
   
Terna up 0.80 pct after energy authority consultation paper for new regulatory period indicated little impact on tariffs

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FRANKFURT - market data at 10.37 am
 
DAX - up 19.73 points, or 0.26 pct, at 7,539.67
MDAX - up 41.82 points or 0.41 pct at 10,170.24
TecDAX - up 2.73 points or 0.30 pct at 902.02
DAX futures - up 52.50 points, or 0.70 pct, at 7,560.50
  
Major Advancers:
   
Infineon, up 0.23 eur or 2.09 pct at 11.24, after the chipmaker announced yesterday that it and IBM have agreed in principle to sell their shares in joint venture Altis Semiconductor to Advanced Electronic Systems AG (AES) for an undisclosed amount.
   
Siemens, up 1.06 eur or 1.18 pct at 91.03, profiting from a general demand for tech stocks this morning
   
Adidas, up 0.38 eur or 0.90 pct at 42.47
   
Hypo Real Estate, up 0.34 eur or 0.86 pct at 39.87
   
SAP, up 0.30 eur or 0.77 pct at 39.25, also benefiting from a rise in demand for tech stocks
   
Major Decliners:
   
Deutsche Post, down 0.20 eur or 0.96 pct at 20.74, A report in Financial Times Deutschland said the mail carrier might oust its CFO in the wake of complaints about transparency problems
   
Metro, down 0.38 eur or 0.59 pct at 63.87, as the retailer retreated from earlier gains after German retail sales rose 0.3 pct in real terms in July compared with June and fell 1.5 pct from July last year, according to preliminary figures from the Federal Statistics Office.
   
Lufthansa, down 0.09 eur or 0.42 pct at 21.19, extending earlier losses
   
Linde, down 0.32 eur or 0.37 pct at 85.80
   
Deutsche Postbank, down 0.16 eur or 0.31 pct at 52.21

Other Major Movers:
   
MDAX-listed Arcandor, up 1.48 eur or 8.24 pct at 19.44, after the retail giant released its second-quarter results which showed the company swinging to an operating profit, helped by the first-time full consolidation of tourism unit Thomas Cook Group PLC.

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