UK/Euro Financial Market Daily Evening Briefing 06-06-2007

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London shares close sharply lower in tandem with NY amid rate concerns

Leading shares closed sharply lower, posting triple digit losses, as fears over the US and China economies comes back to haunt the market, and amid caution over UK interest rate news out tomorrow,
dealers said.
   
At the close, the FTSE 100 index was 110.1 points weaker at 6,522.7, the biggest one day fall since March this year.
   
Meanwhile, the FTSE 250 index ended 283.8 points lower at 11,782, with all the other indices also lower. Volume was firm with 3.47 bln shares changing hands in 606,741 deals.
   
On Wall Street, US indices showed heavy losses, as U.S. investors' uneasiness about interest rates grew after a rate hike in Europe. At the UK close, the Dow Jones was down 107.00 at 13,488.50.0, while the Nasdaq Composite was 22.67 lower at 2,588.60 and the S&P 500 index fell 11.80 at 1,519.15.
   
Data showing that productivity waned in the first quarter did little to alleviate US investors' worries that the Federal Reserve -- which has repeatedly cited curbing inflation as its primary goal -- might lean toward raising rather than lowering rates later this year.
   
Declines in European stocks after the European Central Bank raised rates also weighed on U.S. stocks.
   
Back in London, retailers saw big falls today over worries that the Bank of England might yet surprise the market with another UK interest rate hike tomorrow and after yesterday's poor British Retail Consortium survey.
   
Marks & Spencer was down 19 pence at 674 amid worries off the impact of any such move on the UK high street, while Next shed 71 pence at 2,123, and Home Retail Group lost 16-3/4 pence at 460-1/4.
   
Ex-dividend factors also weighed on the FTSE 100 index today, accounting for around 12 points of the index's overall decline with Daily Mail & General Trust, Enterprise Inns, National Grid, Punch Taverns, Vodafone, and WPP all losing their payout attractions.
   
Elsewhere, heavyweight mining blue chips were lower again as copper prices edged weaker with Lonmin giving away 141 at 3,753, Rio Tinto down 126 at 3,550, Xstrata down 97 pence at 2,853, Antofagasta falling back 18 pence to 561-1/2, and Kazakhmys down 24 pence at 1,291.

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Kingfisher was also a big faller, dropping 6-3/4 pence lower to 238-1/4 upset by news as well that Morgan Stanley was undertaking a placing of 57 mln shares in the DIY retailer at a range of 238-241 pence each via an accelerated book-build.
   
Dealers reported that a price of 238 pence had been struck for the placing but also suggested that the broker had been left with 20 mln of the shares.
   
Also dropping back was Cable & Wireless, down 4.2 at 194.8, after a key institutional shareholder in the company said that proposals to lift the cap on incentives available to its top executives could be viewed as "regressive".   
   
The FTSE re-shuffle decision put Bradford & Bingley under pressure, down 12-1/2 at 407-1/2, as the company is the favourite to exit the FTSE 100 when the decision is made after the close today.
   
In earning news, Severn Trent shares fell back 34 pence to 1,529 after the water utility announced in-line full-year results, with Merrill Lynch retaining its 'neutral' stance.
   
Severn Trent posted full-year pretax profits before exceptionals up 9.5 pct to 252 mln stg.
   
And among broker comment, Northern Rock shares shed 36 pence at 1,034 after JP Morgan cut its stance to 'underweight' from 'neutral' as part of a wider review of the effect of Independent Financial Advisors and the remortgage market on the UK banking sector.
   
JP Morgan upgraded Lloyds TSB to 'neutral' from 'underweight' in the same review. Lloyds TSB shares were down 8-1/2 pence at 570-1/2, reflecting the market trend.
   
But peer Royal Bank of Scotland managed to buck the trend to be one of the only FTSE risers of the day, adding 4-1/2 pence at 645 - reflecting yesterday's upbeat trading statement, the ABN Amro bid situation, and JP Morgan's reiteration of its 'overweight' stance in today's sector review.
   
Turning to the mid caps, JJB Sports was the biggest FTSE 250 faller, down over 11 pct, or 30-3/4 pence at 242-1/2 after a disappointing trading update from the sportswear retailer prompted Numis to downgrade its rating to 'sell' from 'reduce'.
   
JJB said its total revenue for the 18 weeks to June 3 fell 1.2 pct compared with the same period last year, as like-for-like revenues declined 1.8 pct.
   
Numis said JJB's like-for-like sales were worse than the flat figures the broker had factored in, and thought this was partly due to the tough comparative from last year due to the World Cup effect.

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Meanwhile, ahead of tomorrow's Bank of England interest rate decision, housebuilders Galliford Try and Bellway were lower, down 6-1/2 at 162 and 65 pence weaker at 1,321 respectively as some investors speculated that another UK rate hike could be on the cards after recent economic data. 
  
And Carpetright shed 43 pence at 1,043 in a weak retail sector, knocked too by news Deutsche Bank has trimmed its target to 1,050 pence from 1,150 on concern that the retailer could be hit by a likely downturn in house sales due to rising interest rates.
   
On the upside, SThree was 1 pence ahead at 507 after the group said it continues to perform strongly in the first half with trading conditions in specialist staffing markets supporting healthy growth across the business.
   
The international specialist staffing business said permanent placements during the first half grew 31.8 pct over the same period last year while it registered 14.7 pct growth in active contractors over the previous year.
   
Panmure Gordon reiterated its 'buy' stance and 585 pence price target on SThree.
   
News that temporary chairman Philip Rogerson will assume the role on a permanent basis with immediate effect, helped commercial vehicle hire company Northgate, up 4 at 1,078.

UK Diary of Events

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

UK Small Cap Report

For a summary of today's trading on the FTSE 250 and the AIM, click here

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Paris shares close sharply down; rate fears, M Stanley note rattle market

The CAC-40 index closed down 100.67 points or 1.66 pct at 5,977.87 on volume of 7.6 bln eur. All 40 members of the index ended in the red. On the Matif, June CAC-40 futures were trading down 87.5 or 1.44 pct at 5,976.5.
   
Renault led losses on the CAC-40 -- down 4.50 or 3.97 pct at 108.88 -- as  record trading levels this week made it a clear choice for profit-taking. The carmaker has been buoyed by high expectations about its series of product launches, starting this month.
   
Rival auto stock Peugeot also gave ground, shedding 1.72 or 2.92 pct at 57.17.
   
Another heavy faller was Air France-KLM, which like Renault has been trading at historically high levels. The airline ended down 1.36 or 3.70 pct at 35.40, adding to yesterday's drop of nearly 4 pct which was partly due to Ryanair's warning of lower profit growth this year.
   
Carrefour dropped 1.59 or 2.94 pct at 52.50, with dealers pointing to a falling off in speculation about the property assets of retailers.
   
Rival retailer Casino was down 1.44 or 1.75 pct at 80.80. One local dealer also noted an impact on Carrefour from its failure to acquire Spanish supermarket chain Caprabo, which has been bought by another Spanish retailer, Eroski. He added that fading speculation about Carrefour has turned attention back to its weak trading in France, where it faces tough price competition.
   
Other falling blue-chips included Vallourec, which was down 2.55 or 1.10 pct at 229.45.
   
In an interview with Les Echos, management board chairman Pierre Verluca cooled speculation about a takeover offer for the steel tube maker, arguing that it has the means to remain an independent company, although it would consider an offer "if we are officially approached".
   
Arcelor Mittal, which has been rumoured to be interested in Vallourec, fell 1.09 or 2.31 pct at 46.07.
   
Banks were also out of favour in view of concerns about interest rate rises in the months ahead. BNP Paribas was down 2.13 or 2.39 pct at 86.97, Dexia was off 0.40 or 1.67 pct at 23.49, and Societe Generale was off 2.37 or 1.67 pct at 139.61.
   
Outside the CAC-40, one of the few climbers on the Paris market was Zodiac, up 0.58 or 1.01 pct at 58.26 after being upgraded to 'buy' from 'hold' at SG Securities, with a raised target of 64 eur from 60 eur, dealers said.
   
In a note published this morning, SG Securities said it is very encouraged by Zodiac's proposed sale of marine activities to Carlyle.

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Amsterdam shares close lower on negative Wall Street, TomTom outperforms

The AEX closed 7.24 points or 1.33 pct lower at 537.51, after opening at 543.93 and trading in a range of 536.89-545.01. Government bonds traded higher and the euro stood at 1.3494 usd versus 1.3522 usd late yesterday.
   
Rodamco Europe led decliners, closing 3.63 pct lower at 103.81 eur a little over an hour after the real estate company held its extraordinary shareholders meeting to discuss the planned merger with Unibail.
   
DSM was 3.19 pct lighter at 37.08 eur. Earlier today the company said that, together with Crucell, it had signed a licensing deal with Germany's Sartorius Biotech for Crucell's PER.C6 vaccine technology. Crucell meanwhile declined 0.53 pct to 16.78 eur.
   
Staffing stocks Vedior and Randstad were down 2.67 pct at 21.18 eur and 2.60 pct at 58.10 respectively, while midcap peer USG People declined 2.33 pct at 33.49.
   
Ahold, which is due to present first-quarter results tomorrow, dipped 2.47 pct at 9.07 while Arcelor Mittal was 2.27 pct weaker at 46.05 and Philips was off 1.87 pct at 30.91.
   
TNT shed 2.02 pct at 32.03 amid mixed analyst reactions to yesterday's passage of a postal liberalisation law in parliament.
   
Corporate Express, meanwhile, gave up 0.62 pct at 9.64 after it was maintained at a 'hold' rating with its price target cut to 10 eur from 11 at Deutsche Bank as the brokerage thinks a takeover of the company will not happen in the near future.
   
ASML weakened 0.96 pct at 18.62. Just before closing, the company said it has placed a 600 mln eur ten-year eurobond to further optimise its debt-to-equity ratio.
   
ABN Amro was off 1.06 pct at 35.41. The Dutch bank was in the news again today as employees met with finance minister Wouter Bos to discuss concerns relating to the ongoing bidding war for the bank and present him with a petition asking for attention to the fate of staff.
   
Among other key financial stocks, ING was down 0.84 pct at 32.97 while Aegon declined 2.11 pct to 14.88 and Fortis, which is part of a consortium that has put out a bid for ABN Amro, slipped 1.19 pct at 30.74. Today that consortium said it will be contacting the UNI Confederation of Trade Unions to seek a meeting to discuss its bid.
   
The lone blue-chip gainer, personal navigation device maker TomTom, closed 0.03 pct higher at 34.07 eur.
   
BAM led decliners, settling 3.85 pct lower at 20.96 eur while peer Heijmans lessened 2.95 pct at 45.80 eur as the construction sector cooled down from yesterday's rise on positive turnover statistics.
   
Market maker Van der Moolen gave up 3.47 pct at 3.90 and SNS Reaal lost 3.46 pct at 17.28.
   
Stork's losses were lighter, as the share closed 0.25 pct lower at 40.63 eur following reports in Le Figaro that the company is offering to acquire Airbus production sites, due to be spun off as part of the Power8 restructuring plan of parent company EADS.
   
Among local listings, pharmaceutical share OPG stood out, rising 0.68 pct to 26.66 eur. Earlier, the share was reiterated at 'hold' with a raised price target of 28.3 eur from 22.8 at Kempen Research, based on the company's pharmacy margins.
   
Arcadis meanwhile slid 1.25 pct to 62.31 eur one day ahead of the termination of its Nasdaq listing. Its price target was also increased, to 70 eur from 62 at AFS Brokers on valuation grounds following the company's announcement yesterday that a new gas extraction facility has gone online in Brazil.

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German shares close lower led by Thyssenkrupp and BASF

The DAX was down 189.78 points, or 2.40 pct, at 7,730.05, while the MDAX lost 302.87 points, or 2.71 pct, to 10,855.44. The TecDAX shed 26.71 points, or 2.90 pct, to 893.25. DAX futures were down 174.00 points, or 2.20 pct, at 7,736.50 while bund futures added 0.30 points, or 0.27 pct, to 111.76.
   
German markets also took their lead from their US counterparts, tracking opening US losses. German indices were also weighed down as many investors are cashing in on recent gains before leaving for a long weekend, dealers said.
   
On the Frankfurt trading floor, Thyssenkrupp was the worst performer, down 1.91 eur or 4.21 pct at 43.49. BASF was close behind, losing 3.82 eur or 4.14 pct to 88.44.
  
TUI, was the third worst performer on the index, dipping 0.80 eur or 3.97 pct to 19.36, as traders said it was correcting after making strong gains during the first half of the year.
   
"In the first half of the year, TUI was one of the DAX index's top performers; then, after falling below an important support level of 20.80-20.90 eur per share recently, the stock started to dip," said a local trader.
   
Deutsche Boerse was also in negative territory, losing 6.64 eur or 3.80 pct to 168.05.
   
Deutsche Bank slid 2.74 eur or 2.45 pct to 109.01, on rumours Germany's largest investment bank may be posting unspecified losses in its proprietary trading operations due to trade associated with a special dividend paid out by DAX-listed Altana late last month, dealers said.
   
Industry sources said, however, there was no indication the bank will be posting losses in its proprietary trading or derivative operations. 
   
Over on the MDAX, Kloeckner and Co lost 3.47 eur or 6.27 pct to 51.85.  Wacker Chemie was at its heels, losing 8.80 eur or 5.50 pct to 151.20.  Salzgitter was also in the negative zone, dipping 7.51 eur or 5.13 pct to 139.01. Kontron led the decliners on the TecDax, down 0.78 eur or 5.70 pct to 12.90.

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