UK/Euro Financial Market Daily Evening Briefing 20-06-2007

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London shares close flat; NY mixed, lower oil offsets yield concerns

UK blue chips closed flat after Wall Street fluctuated as pleasing news about declining oil prices and Home Depot Inc's stock-repurchase plan was offset by the direction of bond yields remaining uncertain.
   
At the close, the FTSE 100 index was flat, a marginal 0.9 points lower at 6,649.3, having retreated from a high of 6,692. The FTSE 250 index was down 19.7 lower at 11,797, while the wider indices were also down. Volume was firm, with 3.46 bln shares changing hands in 553,796 deals.
   
In the US, meanwhile, stocks fluctuated, as Wall Street's movements were small as investors kept a cautious eye on Treasury bond yields.
    
By London's close, the Dow Jones Industrial Average index was 1.80 points lower at 13,637.20, while the tech-dominated Nasdaq lost 1.31 points at 2,625.45. The Standard & Poor's 500 index edged down 2.95 points at 1,530.75.
   
Wall Street's choppy start came as investors kept a cautious eye on Treasury bond yields, but were encouraged as oil prices lost more than 1 usd after the US reported a hefty surprise rise in crude oil inventories and a rise in gasoline stocks.
       
Back in London, mining stocks rose after Goldman Sachs reviewed the sector. The broker said it expects rising global growth in 2008 and tightening supply/demand balances to lead to accelerating demand growth for metals. Xstrata climbed 4 pence to 3,082, with Goldman Sachs upgrading the group to 'buy' from 'neutral' and raising its price target to 3,730 pence from 3,365.
   
However, Vedanta Resources was the top FTSE riser, adding over 3 pct, or 53 pence to 1,624, while Kazakhmys was up 22 pence to 1,309. BHP Billiton added 19 pence to 1,384, Antofagasta was 6 pence firmer at 629 and Lonmin was 75 pence higher at 4,254. Sector peer, Anglo American also gained, up 21 to 3,100.
   
Elsewhere, Man Group moved up 13-1/2 pence to 625-1/2 after the group said yesterday the net asset value of AHL Diversified Futures Ltd as at the close of business yesterday was 32.37 usd, up 3.55 pct from last week and up 5.3 pct over the last 12 months.
   
News that Rolls Royce Group has won a 300 mln usd engine order boosted its shares, up 7 at 552. Rolls Royce said its Trent XWB engine will power the seven Airbus A350 XWBs ordered by US leasing company CIT Aerospace, at the Paris Air Show.
   
Fellow airshow attendee British Airways also gained, up 7-1/4 at 431-3/4, as the airline benefited from a credit rating upgrade at Standard & Poor's.
   
BA said its long-term corporate credit rating rose to 'BBB-' from 'BB+', citing the airline's strengthening financial profile and expectations of improving operational performance.
   
On the downside, Carnival gave away 40 pence to 2,494, after brokers Merrill Lynch and Morgan Stanley cut EPS forecasts for the cruise group following yesterday's results.

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Merrill Lynch said in a note to clients it is reducing its 2007 EPS estimates for Carnival to 2.9 usd from 3.0 usd and for 2008 to 3.25 usd from 3.4 usd, saying rising fuel prices will result in higher costs for the group.
   
Morgan Stanley, meanwhile, is trimming its 2007 EPS estimates for Carnival by 0.05 usd to 2.95 usd and 3.30 usd in 2008, as 1.5 mln tons of fuel consumed in the second half takes 0.10 usd off EPS.
   
Also falling back were shares in Standard Chartered, slipping 8 pence to 1,658 following its trading update, in which it said it is performing "very strongly" but costs remain high.
   
Europe's largest electricals retailer, DSG International, fell back 1.00 pence to 169.50, after the company's preliminary results which were in-line with market expectations, and on news it has dropped its Russian bid. In reaction, Citigroup downgraded its recommendation to 'hold' from 'buy' and its price target to 175 pence from 210.
   
Earlier today, DSG said it has decided not to enter the Russian market after giving up an option to acquire Russian electronics retailer Eldorado.
       
News that Dutch chemicals firm Akso is considering a higher bid for ICI weighed on its shares, down 5-1/2 pence to 633-1/2.
   
British newspaper The Times reported today that Akzo Nobel is considering a higher bid for ICI, possibly in the range of 620-630 pence after ICI rejected its 600 pence offer last weekend.
   
Earlier today, Lehman Brothers cut its stance to 'underweight' from 'equal-weight'. The broker said it does not believe Akzo Nobel can offer significantly higher than its rejected 600 pence-per-share bid because of value constraints and requirement for shareholder approval.
   
On the second line, Tullow Oil was the top riser, up 57-1/2 pence or 12.86 pct at 504-1/2 after Merrill Lynch added the group to its Europe 1 list and increased its net asset value based price objective by 35 pence to 560 pence per share.
   
Merrill Lynch pointed out that for Tullow Oil the market has failed to appreciate Monday's announcement of the successful Mahogany-1 exploration well.
   
The broker said that announcement has transformed Tullow Oil into one of the strongest-in-sector M&A candidates.
   
A Credit Suisse upgrade helped CSR climb over 6 pct, up 47 at 784,  after the broker raised its recommendation to 'overweight' from 'neutral', with a raised target of 900 pence from 817 pence.

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Credit Suisse said Nokia is gaining market share with two of its phones, the N95 and the Nokia 6300, among the top selling phones in Europe, both of which use CSR Bluetooth.
      
Broker comment also helped shares in Halma rise 3-1/2 pence to 232-1/4, with Bridgewell Securities upgrading the engineering company to 'neutral' from 'underweight' following yesterday's results which were slightly ahead of the broker's expectations.
   
Yesterday, Halma reported adjusted full-year pretax up 14 pct to 66.1 mln stg from 58.1 mln.
   
Misys was also on the rise, up 4-3/4 pence to 239-1/4, after a trading update in which the group said its underlying full-year revenue would be flat, but announced margins that were better than expected. 

Turning to the 250 fallers, Johnston Press slipped back 3-1/2 pence to 421, following the company's trading update in which it said it sees a satisfactory full-year result as advertising sales declines slow, with Bridgewell Securities retaining its 'neutral' recommendation on the stock.
   
Earlier, Johnston Press said in the five months to June 2, like-for-like UK advertising revenues, including digital, fell by 2.3 pct, compared to a 2.9 pct fall flagged for the first nine weeks of the financial year.
      
Losing in sympathy were shares in Trinity Mirror, down 8 pence at 535.
   
Finally, ITE Group fell back 8 pence to 171 on profit-taking following recent gains after the appointment of Bill Dye as chief executive.
   
In economic news today, the BoE's minutes to the most recent rate-setting meeting on June 7 showed the Monetary Policy Committee voted 5-4 in favour of keeping its key repo rate unchanged at 5.50 pct. The vote was much closer than anticipated, increasing fears of a further rate rise. 

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Paris shares close higher, tracking Wall St, EDF leaps on UK prospects
      
The CAC-40 index ended up 21.62 or 0.36 pct at 6,093.29 on volume of 6.6 bln eur. 23 CAC-40 stocks closed up and 17 were lower. On the Matif, July CAC-40 futures were trading up 22.5 poits at 6,018.5
  
EDF was lifted by Areva's announcement this morning it has begun the pre-licensing process for its European Pressurised Water Reactor (EPR) project in the UK and will work with EDF should the project be approved.
   
EDF closed up 2.81 or 3.94 pct at 74.10, an all-time closing high, while Areva investment certificates were up 35.25 or 4.48 pct at 821.25.
   
Areva said it has applied to UK regulators for the EPR design to be considered for the forthcoming Generic Design Assessment (GDA) process. The nuclear power group confirmed it plans to conduct the three-year GDA project jointly with EDF if its application proves successful.
   
After the UK government recently came out in favour of building new nuclear plants, EDF announced last month it would propose EPR reactors with Areva to the UK authorities.
      
Alcatel-Lucent also put in sharp gains, up 0.19 or 1.86 pct at 10.41, adding to a string of gains in recent sessions. The company announced three new contracts in the US: two to provide fibre to the home networks -- for Connexion Technologies and for Momentum -- and another to maintain Global Crossing's network.
   
Arcelor Mittal ended up 0.51 or 1.04 pct at 49.46, boosted by comments from its chief executive, Lakshmi Mittal, that the group is ahead of schedule with merger synergies. Steel tube maker Vallourec also benefited from the news, adding 0.86 at 237.85.
       
Construction stocks also rose, with Lafarge up 1.89 or 1.44 pct at 133.44 and Saint-Gobain up 0.26 or 0.31 pct at 83.66.
   
Elsewhere, oil giant Total added 0.32 or 0.54 pct at 59.27 as crude prices remained at high levels.
   
On the downside, Sanofi-Aventis dropped 0.45 or 0.72 pct as investors weighed up the propect that the group's successful defence of the US patent on its Plavix blockbuster could be followed by a bid for partner Bristol-Myers Squibb (BMS), which dealers said could be dilutive for the Sanofi shares.
   
An analyst at a leading European brokerage, meanwhile, said that the market is worried about the dilutive impact of a Sanofi move for BMS, although he cautioned that there is only "a small probability" of a bid.
   
In a separate development, a Sanofi spokesman confirmed that the company's challenge to the non-reimbursement of Acomplia by the German government was rejected last week in a summary ruling by a Berlin court.
   
Profit-taking hit Renault, off 1.35 or 1.14 pct at 117.44 and Unibail, down 1.95 or 0.98 pct at 196.60.

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German shares close higher as DAX near 7-yr high due to M&A talk

The DAX was 56.97 points higher or 0.71 pct at 8,090.49 after trading between a high of 8,131.73 and a low of 8,046.64. The MDAX gained 45.19 points or 0.41 pct to 11,153.33, while the TecDAX was up 7.42 points or 0.80 pct at 937.36. DAX futures were up 33.00 points or 0.41 pct higher at 8,176.00, while bund futures dropped 0.37 or 0.33 pct at 110.23.
  
Infineon, up 0.38 eur or 3.09 pct at 12.66, led the blue chip DAX30 higher as market talk surfaced that investment firm Dodge & Cox has lifted its stake in the group.
     
Traders said Infineon has been the subject of on-again, off-again takeover speculation. Last February, shares in the German technology firm rose after a report the chipmaker was approached at least three times in the previous six months by different private equity funds interested in acquiring the company.
   
Allianz was a leading outperformer, up 3.59 or 2.05 pct at 178.64, on speculations it is considering selling its banking unit Dresdner Bank AG to Deutsche Bank AG.
   
Traders however played down the rumour, saying the chances of sale coming in the near future were slight as Allianz insurance business benefits from cross sales from its banking operations. Spokesmen for Deutsche Bank and Allianz declined to comment.
   
Lufthansa, up 0.47 or 2.30 pct at 20.89, was another high flyer on the blue chip board after a Wall Street Journal report said it has discussed a possible bid for Iberia SA together with the London private equity firm APAX Partners Worldwide rekindling speculation of a possible bid.
   
BASF benefited from the statement of US chemical group Huntsman Group that it might be interested in acquiring either Ciba or Clariant. BASF closed up 1.70 or 1.80 pct at 96.36.
   
Deutsche Telekom rose 0.08 or 0.58 pct at 13.84 after it and Verdi trade union announced an agreement on pay and conditions of 50,000 workers to be outsourced to a separate company.
   
ThyssenKrupp gained 0.32 or 0.71 pct at 45.44 as rumours of a possible bid for SSAB Svenskt Stal AB largely evaporated.
   
SAP improved 0.26 or 0.69 pct at 38.15. Credit Suisse raised its target on the software manufacturer to 45 eur per share from 40 and reiterated its 'overweight' rating on valuation grounds.
   
On the downside, RWE was the weakest, falling 1.47 or 1.81 pct at 79.79, with Henkel following suit, down 0.17 or 0.43 pct at 39.63.
   
Among MDAX companies, Gea Group led outperformers with a gain of 1.71 or 7.29 pct at 25.16 after UBS raised its price target to 31 eur per share from 26. Gagfah fell 0.47 or 2.60 pct at 17.61.
   
On the TecDAX, United Internet was up 0.51 or 3.40 pct at 15.50, while IDS Scheer fell 0.33 or 1.81 pct at 17.92.

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Amsterdam shares close higher, TomTom leads gainers 
 
The AEX closed 1.78 points or 0.32 higher at 552.14, after trading in the range 551.31-554.96. Government bonds traded mainly lower while the euro stood at 1.3418 usd versus 1.3409 usd late yesterday.
   
TomTom surged 4.22 pct to 38.06 eur after the company was initiated by Citigroup at 'buy' with a 46.50 eur price target. TomTom's gains also lifted digital map maker Tele Atlas, which led midcap gainers, closing 3.30 pct higher at 16.57.
   
Akzo Nobel gained 3.37 pct to 63.15 amid reports it is considering a higher bid for the UK's Imperial Chemical Industries.
   
Hagemeyer was the third highest blue chip gainer, gaining 1.93 pct to 3.69 amid talk of private equity interest in the sector.
   
Arcelor Mittal moved 1.08 pct higher to 49.47 after its chief executive said the group is ahead of schedule with merger synergies and amid expectations that a cut in Chinese export rebates will lead to higher prices.
   
On the midcap, ASMI closed 1.95 pct higher at 19.88, Boskalis Westminster rose 1.89 pct to 29.65 and Vopak gained 0.82 pct to 44.20. Local issue TKH rose 4.03 pct to 21.95.
   
Among AEX decliners, Corporate Express closed 1.30 pct off at 10.60 eur and SBM OffShore dropped 1.19 pct to 27.36.
   
Trading in Rodamco Europe shares was suspended at 3 pm upon completion of Unibail's tender offer. The stock was 1.14 pct lower at 101.98 at the time of the suspension. An announcement on the number of shares tendered is expected tomorrow.
   
On the midcap, SNS shed 1.69 pct to 17.45, CSM fell 1.58 pct to 26.14 and LogicaCMG was 1.28 pct lower at 2.32. New issue Amsterdam Molecular Therapeutics was flat at 10.00 eur after trading commenced with an open of 10 eur at 11.00 am.

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