UK/Euro Financial Market Daily Evening Briefing 13-06-2007

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London shares close higher; NY firm; Miners buoy blue chips amid M&A talk

Leading shares closed higher today after a volatile session, reflecting a firm showing on Wall Street, with miners helping to pull UK-listed blue chips higher amid ongoing sector consolidation talk.
   
At the close, the FTSE 100 index was 39.2 points stronger at 6,559.6, today's session high, having spent the morning in negative territory.
   
All the broader indices were also higher, aside from the FTSE All-share index. Volume was solid with 3 bln shares changing hands in 595,927 deals.
  
On Wall Street, by London's close, the DJIA was 66 points higher at 13,361, with the Nasdaq composite index up 10.96 points at 2,560.73, albeit with both below session highs.
   
Investors welcomed the combination of strong US retail sales data, which showed the largest increase in 16 months, and import prices data which showed that outside of rising volatile commodity prices, inflation seemed to be tame.
   
In London, mining stocks helped to pull the blue chips higher, amid rumours Xstrata may bid for Rio Tinto, along with an upbeat 2007 outlook from Antofagasta, with the company also saying copper and molybdenum prices remain strong, and a Citigroup price target hike for Xstrata to 3,500 pence from 3,000.
   
At the close, Antofagasta was at the top of the blue-chip leaderboard, up 28 pence at 594.5, while Xstrata took on 138 pence to 3,007, Lonmin was 179 pence higher at 3,931, Vedanta Resources climbed 52 pence to 1,528, Rio Tinto took on 161 pence to 3,721, Anglo American moved 88 pence higher to 3,039, BHP Billiton took on 34 pence to 1,325, and Kazakhmys was up 21 pence at 1,270.
   
Sainsbury also featured on the FTSE 100 leaderboard at the close, up 8-1/2 pence at 559-1/2, as dealers noted talk that Qatari investors were bidding for shares in the market at 610 pence each in an attempt to amass a 29.9 pct stake in the UK firm.
   
Back on April 24, Quatari-backed investment fund Delta (Two) confirmed it had acquired a 17.41 pct interest in Sainsbury, making it the UK supermarket's biggest shareholder.
   
Delta added that, together with the interest of 300,000 shares in the company held by Qatar's foreign minister Sheikh Hamad Bin Jassim Bin Jaber Al Thani, its total interest in Sainsbury was 17.42 pct.
   
Elsewhere, still on the M&A front, Royal & Sun Alliance Insurance (RSA) shares were up 5.5 pence at 155.9, lifted by rumours of a possible bid by American International Group (AIG) according to traders.

Lafite 1998:  06-07.. +91%  v  House Price Index:  06-07..  +7%
Latour 1996: 06-07.. +72%  v  Dow Jones:  06-07..  +14%
Liv-ex 100:   06-07.. +45%  v  Ftse 100:  06-07..  + 9%
CGT - 0% vs CGT- 40%

Source: The Times, December 2006. Free Information Pack Click Here

RSA had been touted as a takeover target ever since the disposal of its US business, one trader noted. In March, RSA completed the disposal of its troubled US operation, ending its exposure to asbestos-related claims potentially worth hundreds of mlns of dollars.
   
One analyst thought it was unlikely that AIG would consider such a takeover so shortly after its share buyback.
   
"AIG is always linked with UK life and non-life insurers", the analyst pointed out. "This is because of its favourable credit rating and the fact that it is underrepresented in the UK."
   
Turning to today's blue-chip fallers, a number of shares traded ex-dividend aiding blue-chip losses, with Johnson Matthey the biggest blue-chip loser at the close, down 37 pence at 1,658, while Cable & Wireless finished 1.7 pence lower at 199.8, Punch Taverns was down 5 pence at 1,260, International Power 6 pence lower at 428-1/2, and Unilever was down 11 pence at 1,528.
   
Turning to the mid cap risers, ARM Holdings closed the biggest gainer, up 6-1/4 pence at 140-3/4, with CSR also ending the session higher, 17-1/2 pence firmer at 744-1/2, following upgrades by JP Morgan as part of a review of the semiconductor sector.
   
JP Morgan upgraded ARM to 'overweight' from 'underweight', and CSR to 'neutral' from 'underweight', with the broker citing strength in the market for high-end mobile phone handsets, which use the companies' chips.
   
Also benefiting from positive broker comment was Burberry Group, closing 13 pence ahead at 648-1/2, after Merrill Lynch raised its stance to 'buy' from 'neutral'.
   
The broker said that notwithstanding the anniversary of the Taiwan and Spanish buybacks, it thinks Burberry should continue to report double-digit ex-royalty revenue growth in the first quarter.
   
Elsewhere, Quintain Estates & Development ended the session 35 pence higher at 80 after the property developer announced a 25.8 pct increase in full year adjusted profit to 20 mln stg, but said it is facing a "less buoyant" commercial property sector.
   
The company said NAV was up 25.5 pct to 660 pence, with EPRA NAV up 28.1 pct to 784 pence.
   
Quintain said it is well-positioned to outperform in the years ahead, in terms of core measure of total return, regardless of market environment.

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Cazenove have upgraded the company to 'outperform' from 'in-line', while KBC Peel Hunt upgraded its stance to 'buy' from 'reduce'.

And finally, turning to the midcap fallers, Biffa was still a casualty at the close, down 7 pence at 286, extending yesterday's losses on the back of in-line full-year results.
   
Biffa yesterday reported a weak second half of the year in its collection division, its biggest alongside landfill and resource recovery, with its chief executive saying that the benefit of actions taken in the division will take time to come through.
   
In reaction, Lehman Brothers cut its stance to 'equal-weight' from 'overweight', with a lowered target of 310 pence from 350, with the broker citing downbeat guidance on the company's collections division.
   
In a note to clients, Lehman said that the guidance on collections disappointed the market, and it believes this will lead to consensus downgrades.

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Paris shares close higher as retail sales, import prices reassure Wall St

The CAC-40 index finished up 36.11 points or 0.61 pct at 5,934.27.Volume for the day was 6.5 bln eur. Among CAC-40 stocks, 25 closed higher and 14 closed lower. On the Matif, June CAC-40 futures were trading up 30.5 or 0.52 pct at 5,390.5. On the broader indices, the SBF-80 index closed up 28.77 or 0.40 pct at 7,191.01 while the SBF-120 ended 25.02 or 0.58 pct higher at 4,333.13.
   
Arcelor Mittal led blue chip risers mid-afternoon, adding 1.36 eur or 2.95 pct to 47.43, helped by ongoing takeover speculation surrounding the steel sector.
   
This speculative interest was fed by Nippon Steel's decision to lift its stake in Godo Steel to over 15 pct from around 9.5 pct, which some dealers saw as a defensive measure meant to protect the Japanese companies against M&A moves by Arcelor Mittal.
   
Other stocks benefiting from today's slight rebound included Vinci, up 1.27 or 2.38 pct at 54.67, and Danone, up 1.13 or 2.03 pct at 56.85.
   
Food manufacturer Danone reassured the markets yesterday regarding its litigation with Chinese partner Wahaha, saying it thinks an amicable settlement remains possible.
   
In a note this morning, Fideuram Wargny analysts said they think the impact on Danone shares will fade by the end of the summer. They reiterated their 'buy' rating on the stock, arguing that "the fundamentals have never been so good for the group's three divisions".
   
Dexia rose 0.09 or 0.38 pct, after moving as high as 24.17 in the afternoon, following yesterday's gains when rumours of a possible takeover bid from Societe Generale reignited speculation about Dexia as a prime target.   
   
Societe Generale was up 1.56 or 1.12 pct at 141.13, recovering from a drop yesterday after SocGen cooled speculation about its interest in its French rival BNP Paribas -- up 0.30 or 0.34 pct at 88.36.
   
EADS rose 0.34 or 1.52 pct to 22.76. In an upbeat interview published in La Tribune today, Airbus CEO Louis Gallois said the A380 superjumbo "will be delivered on time" and that all the major industrial partners for the future long-haul A350 will be chosen "by the summer." 
   
Outside the CAC-40, Eutelsat Communications rose 0.40 or 2.29 pct to 17.84, spurred by a price target upgrade at Morgan Stanley, to 19 eur from 16 eur.
   
French market regulator AMF also announced today that asset manager Franklin Resources has raised its stake in Eutelsat to over 10 pct following the purchase of shares on June 7.
   
Eurotunnel jumped 0.24 or 34.29 pct to 0.94 as the stock was squeezed amid declining liquidity ahead of tomorrow's closure of the second offer period for the one-for-one swap into Groupe Eurotunnel shares.
   
On the downside, Accor led bluechip fallers -- down 0.71 or 1.07 pct at 65.55 -- with dealers reporting a placement of shares by Credit Suisse, which would have diluted the share price.
       
EDF, meanwhile, shed 0.59 or 0.84 pct to 69.31 after yesterday's strong gains spurred by news the EU is to launch an inquiry into France's regulated electricity tariffs, which raised the prospect of bigger margins for EDF.

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German shares close flat, rebounding from earlier losses

The DAX closed 2.50 points or 0.03 pct higher at 7,680.76, after trading between 7,595.69 and 7,701.01 in today's session.
   
The MDAX added 9.30 points or 0.09 pct to 10,737.14, while the TecDAX was up 2.76 points or 0.31 pct at 902.29.
   
DAX futures were 50.00 points or 0.65 pct higher at 7,685.00. The euro traded at 1.3293 usd, against 1.3297 usd in late London trade.
   
Traders said German indices recovered from early losses as Wall Street opened in positive territory helped by higher than expected US retail sales.
   
Bayer led blue chips higher, gaining 0.87 eur or 1.63 pct at 54.32.
   
Infineon followed, adding 0.17 eur or 1.49 pct to 11.57, after Goldman Sachs maintained the shares on its 'conviction buy' rating list and kept its price target of 14.5 eur per share saying that investors will likely benefit from the chipmaker's probable reduction of its 86 pct stake in US unit Qimonda.
   
Volkswagen added 1.28 eur or 1.18 pct to 109.87 after its shares were boosted by a media report that said the German automaker's ailing US unit has limited its losses over the first half of 2007 by reduced spending.
   
ThyssenKrupp ascended 0.37 eur or 0.85 pct to 43.69, while Siemens rose 0.83 eur or 0.85 pct to 98.26.
   
At the other end, Altana lost 0.22 eur or 1.22 pct to 17.76.
   
Hypo Real Estate fell 0.57 eur or 1.18 pct to 47.83, as the sharpest decliner, due to technical trading reasons. "Its shares were, in general, part of a solid upwards trend, but fell below their 90 and 200 day average over the past few days," said a local trader. 
   
Allianz dropped 1.86 eur or 1.11 pct to 166.03. Continental declined 1.08 eur or 1.05 pct to 101.54, while TUI dropped 0.19 eur or 1.00 pct to 18.72.
   
Over on the MDAX, Wacker Chemie was 5.85 eur or 3.79 pct higher at 160.15 as the best performer.
   
At the other end of the index, Heidelberger Druckmaschinen lost 0.97 eur or 2.64 pct at 35.83, after the company gave a cautious outlook for the current year to March.
   
Heidelberger Druck, which is the world's market leader in offset printing machines, said it expects its operating margin to rise to 5 pct in the current year to March, up from 4 pct a year earlier, and operating profit to be in a range of 330-345 mln eur.
   
TecDAX-listed Wirecard was the worst performer on the index, down 0.35 eur or 3.35 pct at 10.09, while Draegerwerk was on the top of the other end, gaining 2.34 eur or 3.37 pct at 71.80.

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Amsterdam shares close higher, rebounding on Wall Street gains

The AEX closed 2.29 points or 0.43 pct higher at 536.40 after trading in the range 530.53-537.32. Government bonds traded lower, while the euro stood at 1.3307 usd, against 1.3322 usd late yesterday.
   
Arcelor Mittal led blue chip gainers, up 2.93 pct to 47.41 eur, boosted by positive investor interpretations of peer Nippon Steel Corp's expansion of its stake in Godo Steel LTD.
   
Rodamco Europe closed the day 2.27 pct up at 103.53 eur on speculation that Australia's Westfield Group could launch a counter offer to Unibail's merger plans with the Dutch property group.
   
ASML gained 1.44 pct to 19.08 eur, as JP Morgan lifted its rating on the European Semiconductors sector to 'overweight' from 'underweight' and highlighted ASML as a favourite stock. The stock shrugged off a report from the Semiconductor Industry Association saying sharp declines in average selling prices for microchips in several key market segments will contribute to slower growth in worldwide sales of semiconductors in 2007. Peer ASMI gained 0.63 pct to 19.20 eur.
   
SNS Reaal led midcap gainers, up 2.31 pct to 17.72, following the company's announcement it will issue 350 mln eur in new ordinary shares. The group indicated that a share issue was forthcoming when it announced earlier this month that it had agreed to by AXA SA's Dutch insurance operations for 1.7 bln
eur.
   
Fortis gained 0.83 pct to 30.34 eur, while ABN Amro rose 0.71 pct to 35.35 eur. Earlier, Dutch shareholders association VEB said it has lodged an appeal to the Supreme Court to be used in the event that the court rules in favour of ABN Amro's arguments over the disputed sale of its US unit LaSalle to Bank of America Corp., while the governing council of the city of Amsterdam said it would like to see Barclays buy ABN Amro, newspaper Het Parool said.
   
TomTom led decliners, off 1.43 pct to 35.77 eur, while Wolters Kluwer fell 0.89 pct to 22.30 eur. TNT was off 0.62 pct at 31.83 eur, as the postal group said in a statement that an independent study by the Boston Consulting Group has shown that its cost-cutting plans for its TNT Post Dutch mail operations are "sound and necessary".
   
On the midcap, Getronics was 0.77 pct of at 5.18 eur, as a Dutch court said a government contract awarded for the creation of electronic medical dossiers, to be created for all Dutch children born in the Netherlands from 2008, should be given to Ordina. Ordina finished the day 0.31 pct up at 16.34 eur.
   
Vopak closed off 0.56 pct at 44.57 eur after saying it has reached an agreement with oil storage and distribution firm Puma Group to acquire a recently built terminal in Suape, Brazil and has closed a long-term liquids handling agreement with Kreido Biofuels Inc in the US.

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