UK/Euro Financial Market Daily Evening Briefing 14-06-2007

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London shares close stronger near late highs; NY up; US PPI benign overall
 
Leading shares closed stronger, just off late session highs with Wall Street posting good gains as above-forecast headline US PPI data proved mainly to be due to fuel price rises, with a benign inflation picture seen overall.
   
At the close, the FTSE 100 was 90.3 points firmer at 6,649.9, having reached a peak of 6,654.3, well above an opening low of 6,562.0. All the broader indices ended higher, with the FTSE 250 index up 211.5 points at 11,809.8.
   
Volume was strong with 3.719 bln shares changing hands in 560,961 deals.
   
On Wall Street, by London's close, the DJIA was 67.00 points higher at 13,549.30, while the broader S&P 500 index was up 7.10 points at 1,522.75, and the tech-laden Nasdaq composite index was ahead 16.33 points at 2,598.64.
   
US inflation at the wholesale level rose almost twice as fast as expected in May, while core inflation increased for the first time in three months, the Labor Department said today.
   
However, the headline increase in wholesale inflation came after the biggest jump in gasoline prices in six months and inflation outside energy remained fairly benign.
   
The May PPI rose 0.9 pct well above expectations for a rise of 0.5 pct, but core PPI rose 0.2 pct, in line with forecasts after remaining unchanged in the prior two months.
   
In other US data, the number of people filing new claims for unemployment insurance was steady in the latest week, with first time claims remaining at 311,000 in the week ended June 9, matching the prior week.
   
Investors were also focused ahead to the June Philly Fed survey, due at 5.00 pm GMT, which should provide more clues as to the health of the world's biggest economy.
   
In London, Bradford & Bingley was the top blue chip riser today, 23-1/4 pence higher at 423 helped by a Credit Suisse upgrade to 'neutral' from 'underperform'. The broker said it believes the recent decline in B&B shares is coming to an end.
   
The mortgage bank's shares were also bouncing back today ahead of its demotion to the FTSE 250 index with effect from the close of play tomorrow.

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Fellow blue chip bank Alliance & Leicester was also in demand again, up 26 pence at 1,144 following yesterday's well-received trading update.

Away from the banking sector, Centrica shares took on 16-1/4 pence to 379-1/4 aided by a Citigroup upgrade to 'buy' from 'hold' with the broker believing the gas distributor's shares appear to offer good value again after their recent decline.
  
Citigroup noted that a lack of a price war in the UK retail energy sector and a steadying of UK forward gas prices have removed much of the near-term risk to earnings for Centrica.
   
Broker comment also supported Reed Elsevier shares, up 6 pence at 653 after a Goldman Sachs upgrade to 'neutral' from 'sell' as part of a review of the European business publishing sector.
   
The broker noted that business publishers have re-rated in the year to date, driven by asset disposals and related cash returns, leveraged buyout speculation and proposed industry consolidation following the Thomson/Reuters news last month.
   
And Marks & Spencer shares climbed 12 pence to 691-1/2 rallying after a poor run following disappointment in the Q4 numbers released in May helped by a Panmure Gordon upgrade to 'hold' from 'sell'.
   
Panmure Gordon said it was upgrading M&S on the basis of its proximity to the broker's target of 650 pence and because it believes that in unstable markets, M&Ss defensive characteristics could prove increasingly attractive to investors. HSBC also upgraded its rating on M&S today to 'neutral' from 'underweight'.
   
Elsewhere on the high street, Home Retail Group shares added 1-1/2 pence to 461-1/4 following an upbeat trading update.
   
Home Retail reported improved first-quarter sales and margins, with total sales at the 683-store Argos high street catalogue chain up 4.5 pct at 893 mln stg for the 13 weeks to June 2.
   
Among the handful of blue-chip fallers, Experian Group -- formerly part of GUS together with Home Retail -- stood out, losing 5 pence to 611 on profit-taking following recent good gains after several broker initiated coverage on the stock.

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Among the mid caps, Ladbrokes pushed ahead in good volume, up 19 pence at 453 amid fresh rumours of a possible private equity bid for the gaming firm.
   
Elsewhere a big price target rise helped to move Soco International shares higher, up 67 at 1,872 after UBS raised its price target to 2,100 pence from 1,860 pence on the company.
   
The broker said that for the group this is now a call on exploration success, which is notoriously difficult to predict. However, given the encouraging news on the E prospect to date, it believes the balance of probabilities lies on the upside.
   
And retailer HMV Group added 2-3/4 pence to 115-1/4 after ABN Amro raised its rating on the company to 'hold' from 'sell' on valuation grounds, with HMV shares having lost about 25 pct over the last year.
   
ABN said possible news on a disposal of its business in Japan may reassure on the medium-term sustainability of the group's dividend, which now yields 6.7 pct.
   
On the downside Pendragon shares shed 3 pence to 101-1/4 after Panmure Gordon downgraded its recommendation to 'hold' from 'buy' with a reduced price target of 113 from 135.
   
The broker said it believes the possibility of private equity purchasing brands such as Land Rover and Jaguar may prove unsettling, while it feels the company appears to be underperforming the sector.

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 summmary of today's trading on the FTSE 250 and the AIM, click here

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

Paris close sharply up on Wall St gains; Sanofi down on Acomplia setback

The CAC-40 index finished up 112.96 points or 1.90 pct at 6,047.23, on volume of 9.7 bln eur. Among CAC-40 stocks, 28 closed higher and 1 closed lower.
   
On the Matif, June CAC-40 futures were trading up 92.0 or 1.55 pct at 6,028.0. On the broader indices, the SBF-80 index closed up 105.12 or 1.46 pct at 7,296.13 while the SBF-120 ended up 79.63 or 1.84 pct at 4,412.76.
   
Sanofi-Aventis was the only faller in the CAC-40, closing down 4.26 eur or 6.33 pct at 63.00 after a US Food and Drug Administration (FDA) panel of experts failed to recommend approval in the US of weight loss drug Acomplia.
   
The FDA will make its decision in late July and generally follows the opinion of its experts.
      
All other bluechip stocks finished the day in positive territory, with Air Liquide among the biggest risers, up 3.98 or 4.46 pct at 93.13. Dealers pointed to yesterday's share split and a recent weakness in the stock as reasons behind the rise.
   
"Usually, a stock split should not have an effect on the price, but it does make the shares look cheaper," one Frankfurt-based trader said.
   
Michelin ended the day up 4.83 or 5.05 pct at 100.45, leading the gains on the CAC-40 as investors showed renewed interest in the automobile sector. The group recently announced restructuring measures at its Japanese plant, while Deutsche Bank analysts anticipate more in months to come, which should lead to significant cost savings.
   
Elsewhere among auto stocks, Renault finished the day up 4.56 or 4.18 pct at 113.64 as investors brushed off an expected drop in May European sales to continue focusing on the company's new product offensive, which starts tomorrow when the latest version of the Twingo goes on sale.
   
Yesterday, the carmaker also reported a strong sales performance outside its European market, with total sales rising 6.8 pct year-on-year, driven by a sharp 27.8 pct jump in sales in Latin America.
   
Rival car maker Peugeot added 1.53 or 2.66 pct to end at 59.03, while auto-parts supplier Faurecia ended the day up 2.10 or 3.69 pct at 59.06.
   
Outside the CAC-40, Aeroports de Paris (ADP) rose 3.50 or 4.17 pct to 87.50, extending its gains from yesterday when Societe Generale analysts raised their target to 106 eur from 74 in anticipation of a complete privatisation of the airport operator.
   
On the second line, state-owned nuclear group Areva surged just before market close, ending up 56.29 or 7.68 pct at 789.00. A local dealer said there was no real explanation for the rise, but added that "Areva's free float is extremely small, so there's a lack of liquidity, so any movement on the share can cause a sharp fluctuation."

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German shares close higher led by Siemens, BMW and EON

The DAX closed 168.40 points or 2.19 pct to 7,849.16, after trading between 7,752.04 and 7,850.73.  The MDAX gained 214.57 points or 2.00 pct to 10,951.71, while the TecDAX was 16.15 points or 1.79 pct higher at 918.44. DAX futures were 110.50 points or 1.43 pct higher at 7,844.50, while bund futures lost 0.09 or 0.08 pct at 110.14.
   
Trader Stefan Soellner from Deutsche Postbank spoke of "fireworks" on US trading floors, which helped drive markets upwards. The momentum continued as fears of possible interest rate increase waned.
   
Ralf Groenemeier, equity strategist at Commerzbank, said recent US economic data has shown "economic growth is possible without a dramatic increase in inflation", which calmed "massive interest rate fears".
   
On the Frankfurt trading floor, shares in Siemens continued to lead blue chips higher adding 4.52 eur or 4.60 pct at 102.78.
   
Traders attributed its gains largely to technical trading grounds.
   
BMW rose 1.68 eur to 49.05, while EON climbed 4.00 eur to 118.11.
   
ThyssenKrupp and EON, both shareholders in RAG, saw gains after the coal consortium decided on a model to accelerate spinning off profitable parts of the coal giant by the middle of next year.
   
The company said today it will set up a foundation, a key step in the conglomerate's plan to launch an initial public offering (IPO) of its shares.
   
It will use the IPO proceeds, as well as funds from future share sales, to cover liabilities from RAG's German mining activities, including pension payments, clean-up costs and damage claims from property owners.
   
ThyssenKrupp shares added 0.86 eur to 44.55.
   
Altana was the sole decliner, slipping 0.03 eur or 0.17 pct to 17.73.
   
On the MDAX, Fraport added 2.62 eur or 5.13 pct to 53.69 as the best performer on the index after reporting that May passenger traffic at all of its six airports, including Frankfurt, totaled 6.360 mln people, up 3.6 pct year-on-year.
   
Frankfurt Airport passenger traffic for the month was 4.665 mln, up 0.6 pct from May last year.
   
On the other end of the index, Zapf Creation lost 0.07 eur or 1.01 pct to 6.89.
   
Solon was the top performer on the TecDAX, up 2.25 eur or 5.65 pct at 42.05, while Conergy lost 1.46 eur or 2.44 pct at 58.34 at the other end.

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Amsterdam shares close higher tracking Wall St; TomTom rises
 
The AEX closed 8.94 points or 1.67 pct higher at 545.34, after trading in a range of 540.49-545.34. Government bonds were higher while the euro traded flat at 1.3307 usd.
   
The AEX was boosted by gains among several index heavyweights. Royal Dutch Shell put on 2.33 pct to 28.99 eur, ING rose 1.50 pct to 32.58, and ABN Amro added 0.93 pct to 36.58 eur.
   
TomTom led gainers, adding 2.68 pct to 36.37 eur. Dealers said the stock was benefiting from US investors buying the share after US markets opened.
   
Wolters Kluwer added 2.56 pct to 22.87 eur following an upgrade to 'buy' at Goldman Sachs, which also upgraded Reed Elsevier to 'neutral'; the share ended 1.13 pct higher 14.30 eur.
   
Vedior ended 2.55 pct pct higher at 21.75, with an analyst at SNS Securities saying speculation about a change in strategy was Vedior's main share price driver.
   
Philips added 2.53 pct to 31.24 eur, Ahold gained 2.52 pct to 9.76 eur and ArcelorMittal added 2.49 pct to 48.59 eur.
   
TNT put on 2.36 pct to 32.58 eur and SBM Offshore added 2.14 pct to 27.18 eur.
   
Hagemeyer added 0.58 pct to 3.49 eur, Corporate Express rose 0.58 pct to 10.42 and Heineken lifted 0.39 pct to 43.64 eur.
   
Among midcap shares, Crucell led gainers, adding 2.63 pct to 16.76 eur, ASMI added 2.60 pct to 19.70, Tele Atlas put on 1.97 pct to 16.04 and BAM added 1.66 pct to 21.38.
   
USG People added 0.51 pct to 33.69 after news that it secured a 700 mln eur loan.
   
There were few decliners. Wereldhave shed 0.56 pct to 103.64 eur and Vopak lost 0.79 pct to 44.22 eur after a downgrade to 'add' from 'buy' at Petercam.

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