UK/Euro Financial Market Daily Evening Briefing 15-06-2007

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London shares close sharply up as NY soars on CPI data; UK miners jump
 
Leading shares closed sharply up, as Wall Street soared after the week's most anticipated economic reading indicated inflation remained tepid last month, with UK miners powering ahead after base metals came off lows on the CPI data.
   
At the close, the FTSE 100 index was up 82.5 points at 6,732.4. The FTSE 250 index rose 190.4 at 11,999, while the broader indices remained higher. Volume was firm with 2.96 bln shares changing hands in 450,645 deals.
   
In the US, meanwhile, Wall Street leapt ahead after core inflation data eased some of the concerns that have jolted stock and bond markets in recent sessions.
   
The Dow Jones was up 108.60 at 13,662.30 by the London close, while the Nasdaq Composite was 25.75 ahead at 2,625.16 and the S&P 500 index added 12.25 at 1,535.20.
   
The US consumer price index showed prices rose at the fastest pace in 20 months last month as gas prices increased.
   
However, the so-called core personal consumption price index, which excludes often-volatile food and energy prices, rose a lower-than-expected 0.1 percent. The figure, which the Federal Reserve watches closely, was below the 0.2 percent increase Wall Street expected.
   
Back in London, miners helped to push blue-chips higher, after base metals came off day lows as US inflation concerns eased, with Lonmin up 192 at 4,169; the company also benefited from a broker comment as Morgan Stanley said the group was its top metals pick.
   
Elsewhere in the sector, Xstrata added 74 at 3,130, Antofagasta rose 15 at 624, Vedanta Resources was up 42 at 1,591 and Anglo American gained 108 at 3,163.
   
Meanwhile, M&A news saw J Sainsbury close up 25 at 590, after Delta (Two) Ltd today acquired a further 123 mln shares in the supermarket chain, equivalent to a 7.07 pct stake, taking its total stake to more than 25 pct.
   
In reaction, Citigroup upgraded the company to 'hold' from 'sell' with an increased price target of 600 pence from 450.
   
The broker said the fundamentals would not justify its new target, but that Delta appears to be here to stay and that should see Sainsbury's shares underpinned for the foreseeable future.
   
The move raised speculation of fresh M&A activity in the sector. Other UK supermarkets traded higher with Morrison Supermarkets up 7-3/4 at 308-1/2, while Tesco climbed 7-1/2 to 460-1/4.

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Broker Panmure Gordon also upgraded Morrison to 'hold' from 'sell' and lifted its price target on the stock, saying Delta's stake-building in Sainsbury will refocus investors on the value to be extracted from the property assets of supermarket groups.
   
Continuing on M&A news, Wolseley was up 58 at 1,328 at the close, on a positive read-across on reports that Home Depot could receive bids of up to 10 bln usd for its Hughes Supply division.
  
Bid rumours also helped shares in International Power tick up 7-1/4 higher to 442-1/2 after the Financial Times reported talk of predatory interest from French utility company EDF.
   
On a very quiet day for Footsie fallers, Cadbury Schweppes was 5-1/2 lower at 709-1/2, after the confectionary group pleaded guilty to charges brought by Birmingham City Council in relation to salmonella contamination in some of its products last year.
   
In a statement, the confectionery giant admitted that, mistakenly, it did not believe there was a threat to health and, thus, any requirement to report the incident to the authorities. "We accept that this approach was incorrect," it said.
   
A broker downgrade saw Drax give away 10-1/2 at 763-1/2, after Goldman Sachs cut it to 'neutral' from 'buy' as part of a utilities review.
   
Tate & Lyle fell back 1-1/2 at 582-1/2 after Morgan Stanley cut the firm to 'underweight' from 'equal-weight' and cut its price target to 520 pence from 650.
   
Morgan Stanley said it has downgraded Tate & Lyle to reflect a lower growth outlook and lack of visibility. The broker added it is forecasting a 10 pct decline in sucralose profits in 2008, which compares to consensus expectations of flat to slightly up.
  
On the second line, Carpetright the UK's largest floor coverings retailer, soared 30 pct higher, up 314 at 1,340 after the group said Lord Harris of Peckham, its founder, chairman and chief executive has been granted permission by its board to explore a possible bid.
    
A statement from Carpetright stressed that no offer has yet been received from Harris and there can be no certainty that one will be forthcoming. Deutsche Bank has been appointed to advise an independent committee of Carpetright's board.
   
Elsewhere, an upgrade by UBS helped Speedy Hire gain 44 at 1,319. UBS upgraded its stance to 'buy' from 'neutral' with a raised target of 1,500 pence from 1,370.

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UBS pointed out that Speedy Hire's acquisition of Hewden Tools takes out a significant competitor and considerably accelerates the growth of the UK tool hire business.
   
Positive broker comment saw shares in National Express edge 32 higher at 1,173 with Goldman Sachs upgrading the group to 'neutral' from 'sell' with an unchanged price target of 1,100 pence.
   
Goldman Sachs said given National Express' recent share price weakness, it no longer views the stock as expensive.
   
M&A news aided shares in Avis Europe up 2-3/4 at 60 after the Financial Times reported its biggest shareholder, the Belgian company D'Ieteren, might team up with a buy out group and take Avis private.
   
On the downside, a broker downgrade saw Laird Group end the day as the biggest 250 faller, down 14 to 577, after Citigroup cut it to 'hold' from 'buy' and reduced its price target of 590 pence from 605.
  
Citigroup said Laird's shares have risen sharply following a strong 2006 data and the successful disposal of its Security Systems division.

Diary of Events

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Paris shares close sharply up, tracking opening gains on Wall St

The CAC-40 index finished up 58.05 points or 0.96 pct at 6,105.28, on strong volume of 11.34 bln euro. Among CAC-40 stocks, 33 closed higher and 6 closed lower.
   
On the Matif, June CAC-40 futures were trading up 50.5 or 0.83 pct at 6,099.5. On the broader indices, the SBF-80 index closed up 79.97 or 1.10 pct at 7,376.10 while the SBF-120 finished up 43.25 or 0.98 pct at 4,456.01. 
           
EADS led CAC-40 risers, closing up 0.85 eur or 3.63 pct at 24.28. The aeronautics group was lifted by expectations that next week's Paris Air Show will bring in a batch of orders, while investors were also reassured by French prime minister Francois Fillon's comment in Le Figaro this morning that EADS is "strategic" for both France and Europe.
   
Natexis Bleichroeder analysts raised their target to 28 eur on the grounds that EADS' recovery potential has not yet been priced in by the market.
   
Outside the CAC-40, Dassault Systemes put in a strong performance, surging 1.85 or 4.12 pct to 46.70, on unconfirmed M&A rumours. A local dealer said there was talk that Groupe Industriel Marcel Dassault (GIMD) is looking to sell its 44 pct Dassault Systemes stake to IBM, although he added "we really don't believe it."
   
Back in the CAC-40, automobile stocks continued to find favour, with Renault ending the day up 1.77 or 1.56 pct at 115.41, Peugeot closing up 1.26 or 2.13 pct at 60.29 and Michelin ending up 1.55 or 1.54 pct at 102.00.
       
Steel tube-maker Vallourec added 4.70 or 2.01 pct to close at 239.00 on continuing takeover speculation.
   
In a note to clients today, Societe Generale analysts raised their price target on the stock to 220 eur from 200, stressing that shares should hold firm "given the recent M&A moves in the pipe industry and repeated speculation about tyhe company being a candidate for takeover."
   
However, they stressed that the group's growth momentum is waning and volume growth will be negligible due to capacity constraints, while prices have reached a plateau. 
   
On the second line, mid cap Zodiac rose 1.80 or 3.07 pct to finish 60.47 after it met expectations with its nine-month sales and also confirmed its full-year guidance for earnings per share growth of more than 10 pct.
   
On the downside, Sanofi-Aventis was among the main blue-chip fallers, dropping 0.35 or 0.56 pct to 62.65.
       
Elsewhere, TF1 fell 0.48 or 1.77 pct to 26.68 after Goldman Sachs downgraded the broadcaster to 'sell' from 'neutral', according to dealers, with a reduced price target of 24.60 eur from 25.
   
In a review of the French TV sector published today, the broker said French television industry sources are suggesting "much lower advertising growth". It said it has cut its forecasts for TF1's 2007 advertising sales growth to 4.3 pct from 5.8 pct.

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German shares close higher Deutsche Boerse, Hypo Real Estate lead
       
The DAX ended 181.48 points or 2.31 pct higher at 8,030.64 after trading between 7,860.33 and 8032.97. The MDAX was up 137.84 points or 1.26 pct to 11,089.55 while the TecDAX was 19.13 points or 2.08 pct higher at 937.57. DAX futures were higher 186,00 points or 2.35 pct at 8,117.00 while bund futures were up 0.05 at 110.11.
       
Deutsche Boerse was the top performer, adding 4.28 eur or 5.05 pct at 88.99 followed close by Hypo Real Estate, up 2.13 or 4.41 pct at 40.53.

Morgan Stanley raised its price target for Hypo Real Estate to 60 eur per share from 54 and reiterated it 'overweight' stance. TUI added 0.70 or 3.68 pct at 19.72. On the downside, SAP was down 0.02 or 0.05 pct at 35.56.
   
Banking stocks were the focus of investor interest after Berlin city announced it is selling its 81 pct stake in Landesbank Berlin to state-owned DSGV German Savings Banks Association for 4.622 bln eur.
   
Commerzbank, one of the bidders for Landesbank Berlin, gained 1.29 or 3.63 pct at 19.72 after Berlin city announced it is selling its 81 pct stake in Landesbank Berlin to state-owned DSGV German Savings Banks Association for 4.622 bln eur. Traders thought DSGV's winning bid was too steep.
   
Siemens was up 4.40 at 107.18 after US private equity firm KKR appointed former Siemens CFO Heinz-Joachim Neubuerger as an adviser, sparking rumours a takeover of its VDO unit may lie ahead.
   
EON closed up 3.68 or 3.12 pct at 121.79. JP Morgan added the utility to its Analyst Focus list, saying further analysis of EON's growth target suggests it can be comfortably beaten.
   
On the MDAX, Norddeutsche Affinerie led with a gain of 3.38 or 11.45 pct at 32.90 on news A-TEC Industries has acquired a 10 pct stake in the copper specialist.
   
IVG Immobilien was down 0.78 or 2.61 pct at 29.15.
   
TecDAX-listed Kontron was up 0.78 or 5.65 pct at 14.58 while Aixtron lost 0.10 or 1.54 pct at 6.39.

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Amsterdam shares close higher on Wall St data; ASML leads gainers

The AEX closed 6.57 points or 1.20 pct higher at 551.91, after trading in a range of 546.22-552.37. Government bonds were lower while the euro was 1.3363 usd compared with 1.3307 late yesterday.
   
ASML gained 4.22 pct at 20.02 eur after its price target was upgraded at Rabo Securities and ING Research on its 960 mln eur capital restructuring programme, which involves an 8-for-9 reverse share split. Midcap semiconductor peer ASMI also profited, rising 0.41 pct to 19.78.
   
Blue chip staffing stocks also performed well, with Vedior closing 4.18 pct higher at 22.66 and Randstad up 2.12 pct at 59.38, while midcap peer USG People lost 1.45 pct to 33.20.
   
Corporate Express climbed 2.78 eur to 10.71, Unilever put on 2.35 pct to 22.68 and Royal Dutch Shell climbed 2.10 pct to 29.60.
   
Rodamco Europe finished 2.66 pct higher at 107.28. The stock gained almost 6 eur this week amid speculation that Australia's Westfield could launch an alternative bid for the property group, outbidding France's Unibail.
   
Among financials, Aegon performed best, rising 1.89 pct to 15.09, while ING put on 1.78 pct to 33.16 after an upgrade to 'buy' from 'hold' at Theodoor Gilissen.
   
Takeover target ABN Amro rose 0.64 pct to 35.91 amid news that some of its shareholders are suing Bank of America over the sale of its unit LaSalle, while news emerged yesterday that Bank of America's US damages lawsuit against ABN Amro has been postponed until July 27.
   
Fortis gained 0.29 pct to 30.75 amid a downgrade to 'hold' from 'buy' at Theodoor Gilissen and an upgrade to 'accumulate' from 'reduce' at KBC Securities.
   
Heineken rose 1.99 pct to 44.51 after yesterday's announcement that the Dutch beer giant will buy a Czech brewery from Radeberger Gruppe KG.
   
KPN rose 1.61 pct to 12.62 eur after it was upgraded to 'overweight' from 'equal-weight' at Morgan Stanley, with an increased price target of 14 eur from 12.50.
   
Getronics led midcap gainers, surging 3.07 pct to 5.37 eur the company said it will sell its Spanish and Portuguese operations to Tecnocom for 95 mln eur. Tele Atlas closed up 3.05 pct at 16.53 eur, Wereldhave gained 1.06 pct to 104.74 and Stork put on 0.93 pct to 41.29.
   
There were few decliners. DSM fell 2.56 pct to 36.87 amid news it will restructure its medical business and that it expects a 110 mln eur impairment after tax in Q2.
   
Arcelor Mittal shed 0.86 pct to 48.17 as it said statements by minority shareholders in a dispute over the exchange parity for Arcelor shares are "inaccurate and misleading".

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