UK/Euro Financial Market Daily Evening Briefing 25-05-2007

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London shares close up, off lows, ITV gains on BSkyB stake sale talk

Leading shares closed the week marginally higher, having recovered from earlier lows following a solid start on Wall Street, with ITV firmer amid rumours -- largely dismissed by analysts -- that BSkyB was in talks to sell its stake in the commercial station to RTL, dealers said.
   
By the close, the FTSE 100 index was up 5.1 points at 6,570.50, rebounding from a low of 6,532.5, but retreating from a peak of 6,575.4. All the broader indices closed mainly lower with the FTSE 250 off 72.9 at 12,057.6.
   
Across the Atlantic, Wall Street was higher as investors adjusted positions ahead of the Memorial Day long weekend, and drew optimism from the Nasdaq Stock Market Inc's deal to acquire Sweden's OMX AB.
   
A short while ago, the Dow rose 63.89 to 13,504.02. with the Standard & Poor's 500 index up 6.53 to 1,514.24, and the Nasdaq composite index up 15.31 at 2,553.23.
   
In London today, ITV rose 4.5 to 119.1 amid rumours that BSkyB was in talks to sell its 17.9 pct stake in the free-to-air broadcaster to RTL following speculation on a Channel 4 news programme last night.
   
According to Channel 4's More 4 News programme, talks between Sky and European broadcaster RTL were ongoing over the sale of the satellite broadcaster's share of ITV.
   
The programme said if Sky were to succeed in swapping their stake in ITV for control of Channel Five it will be one of the biggest deals in British broadcasting history.
   
In reaction to the speculation, one London based analyst said that he doubted the veracity of the rumours as the DTI's referral of BSkyB's acquisition to the Competition Commission had effectively "frozen the stake" for the time being.
   
He also said that BSkyB's stake in ITV is a long-term investment and so he could not see a reason why they would they want to sell now ahead of an investigation.

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Six months ago the satellite giant bought its ITV stake for 940 mln stg, effectively blocking an attempt by cable group NTL, now rebranded as Virgin Media, to buy the free-to-air broadcaster.
   
Elsewhere, afternoon takeover talk pushed Rio Tinto up 145 pence at 3,675, while British Airways climbed 3-1/2 pence to 461, after the Times reported that a key Iberia shareholder, Caja Madrid, has asked Credit Suisse to seek rival offers for the Spanish airline amid concerns that the approach led by the UK national carrier is too low.
   
Elsewhere, Royal Bank of Scotland gained 16-1/2 to 642-1/2 after speculation grew ahead of Tuesday's decision whether or not it plans to make a formal bid for the Dutch bank ABN Amro.
   
On the downside, Land Securities lagged the index, off 35 at 1,858 after JP Morgan cut its target in the property group to 1,700p from 1,770 as the broker rerated the European property sector.
   
Also weighing on the FTSE 100 index was Mitchells & Butlers, down 10-1/2 pence at 864-1/2, with Deutsche Bank downgrading the pubs and restaurant group to 'hold' from 'buy', but raising the price target to 974 pence from 820.
   
The broker said in a note this morning it sees potential delays in the company's decision to push its capital structure to new levels, adding that the shares have already risen in anticipation of its completion, despite the uncertainty over final details.
   
Elsewhere, International Power was also under pressure, 4-1/2 pence lighter at 452-1/2, after the power station operator announced it has exercised its option to acquire the remaining 50 pct of the Energy Australia and International Power (Australia) retail energy partnership, for which it will pay 142 mln aud.
   
On the second tier, Computacenter lead the fallers, off 14-1/4 pence at 240-1/4 after Goldman Sachs initiated coverage of the IT infrastructure service provider with a 'sell' recommendation and 250 pence target.
   
The broker said Computacenter's efforts to transform itself into a services-led business and to contain the decline in its products business continue to prove challenging.
   
Returning to earnings, pubs group and brewer Marston's lost 10 to 455 as the investment community reacted negatively to the pub and brewers decision not to pursue a REITs model as adopted by some of its peers.

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In reaction, Citigroup said with Enterprise Inns exploring a tenanted REIT model and Mitchell & Butlers appearing well on the way to an op co/prop co separation, the market -- especially private equity -- may not let Marston's escape a value accretive trade proved possible by peers.
   
Turning to the mid-cap gainers, Pennon Group stood out, up 36 to 699 ahead of next Thursday's results which are expected to be strong with ongoing M&A speculation fuelling gains.
   
Similarly, Woolworths had a good day, taking on 0-3/4 to 28-1/2, after the retailer said its entertainment wholesale subsidiary, Entertainment UK (EUK), is to supply entertainment products to Wal-Mart Store's Asda stores in a deal that is expected to provide annual revenue of about 200 mln stg for the UK group.
   
Upbeat broker comment helped mid-caps elsewhere, with Shaftesbury 5-1/2 higher at 697 after JP Morgan upgraded the stock to 'overweight' from 'neutral' as part of a European property review, in which the broker focused on a higher required return following recent interest rate increases in the UK and the euro zone area.
   
Finally, back with those issuing trading updates today, Aegis Group added 3 to 148-1/2 after announcing in an AGM statement that 2007 has started well with strong organic revenue growth across its businesses, and saying it remains confident of good underlying progress in the coming year.
   
The media buying and market research group said first-quarter organic revenue growth rose to 8.5 pct, while total revenue rose 10.8 pct at constant currencies, and by 4.6 pct at reported rates, mainly helped by strong growth in both the Asia-Pacific and Europe, Middle East and Africa markets.

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Paris shares close higher, buoyed by M&A talk, Wall St gains

The CAC-40 index finished up 9.18 points or 0.15 pct at 6,057.49, on volume of 5.3 bln euro. Among CAC-40 stocks, 23 closed higher, 2 were unchanged and 14 closed lower. On the Matif, June CAC-40 futures were trading up 7.5 or 0.12 pct at 6,034.0. On the broader indices, the SBF-80 index closed down 14.38 or 0.19 pct at 7,423.32, while the SBF-120 closed up 4.41 or 0.10 pct at 4,430.56.
  
The CAC-40 index made a tentative break into positive territory following the US market opening to end the day marginally higher, but still below the record highs registered earlier in the week.
   
Carrefour led the gains on the CAC-40, finishing up 1.23 eur or 2.31 pct at 54.58 after rumours resurfaced of a possible leveraged buyout (LBO).
      
Axa closed up 0.36 or 1.14 pct at 32.06 after completing the sale of its entire stake in clothing retailer Camaieu to investment fund Cinven. French business daily La Tribune also reported that Axa Private Equity, a unit of Axa, is to buy French food and pet food producer Diana Ingredients for more than 700 mln eur from investment fund Cognetas.
   
Other bank stocks posted gains as investors took advantage of yesterday's pullback in the sector to build positions. Societe Generale closed up 0.37 or 0.26 pct at 145.18, while BNP Paribas added 1.41 or 1.58 pct to close at 90.87 and Credit Agricole rose 0.20 or 0.63 pct to 31.80. Dexia, meanwhile, shed 0.08 or 0.33 pct to finish at 23.83, adding to yesterday's drop when investors reacted to a fall in first-quarter profit.
   
Small cap Ingenico ended the day at 21.60, up 0.56 or 2.66 pct and taking its gains since the start of the week to 8.92 pc. The stock is being boosted by vague talk of a buyout, with both Thales and investment fund Cinven cited as potential candidates.
      
Business Objects ended the day up 0.78 or 2.64 pct at 30.33 after WestLB upgraded the software publisher to 'Buy' from 'Add' and increased its target to 37 eur from 33 in the belief the stock has "a very good chance of enjoying a positive re-rating."
   
In a note to clients today, WestLB analysts said "the company is committed to increasing its operating margin by an average of 2 percentage points per annum up to 2010. We believe it has a convincing strategy for attacking the mid-market that offers excellent growth prospects."
   
On the downside, Schneider Electric was hit by profit-taking after yesterday's gains, shedding 2.18 or 2.01 pct to end at 106.05. The group today announced it has acquired Ritto GmbH & Co Kg, a German firm that makes door-entry and intercom systems for residential and small tertiary buildings.
   
EDF also finished down, 0.35 or 0.51 pct weaker at 68.09 after gaining 5 pct in the previous two sessions, lifted by its intention to develop new-generation nuclear power plants in the UK as well as general speculation about consolidation among energy groups.
       
Outside the CAC-40, Air France-KLM fell 0.43 or 1.15 pct to 36.82, giving up some of this week's gains resulting from its strong full-year results and speculation about a possible move for Spanish carrier Iberia.

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German shares close higher led by cars, insurers

The DAX ended up 41.82 points or 0.54 pct at 7,739.20, while the MDAX added 1.58 points or 0.01 pct to 10,909.94. The TecDAX declined 1.93 points or 0.22 pct to 885.87. DAX futures were up 71.00 points or 0.92 pct at 7,760.00 while bund futures shed 0.33 point or 0.20 pct to 112.27.

Car stocks led sectoral gains, recovering from a pullback yesterday, with DaimlerChrysler adding 1.21 eur or 1.83 pct at 67.20, automotive supplier Continental AG up 1.94 or 1.89 pct at 104.37 and Bayerische Motoren Werke improving 0.50 or 1.02 pct at 49.75.
   
M&A speculation gave a fillip to Continental, which has reportedly indicated its interest to offer around 10 bln eur for Siemens automotive unit VDO. Continental has already said several times before that it is interested in buying VDO but both sides have not provided any figures so far. Siemens itself was up 1.27 or 1.31 pct at 97.91.
   
Munich Re led the DAX30 with a gain of 3.17 or 2.34 pct at 138.37 while fellow insurer Allianz added 1.24 or 0.77 pct at 162.91.
   
Deutsche Boerse was up 2.98 at 171.50 on M&A hopes in the sector amidst Nasdaq Stock Market's 3.7 bln usd takeover offer for Scandinavian exchange operator OMX, dealers said.
   
On the downside, Deutsche Bank was off 3.61 eur or 3.12 pct at 112.00 as it traded ex-dividend of 4.00 eur today.
   
Deutsche Post eased 0.21 or 0.89 pct to 23.44. Germany's Federal Cartel Office head Bernhard Heitzer said the office still aims to abolish Deutsche Post's monopoly on letter delivery as of Jan 1 and rejected proposals to selectively allow only some competitors on Germany's mail market.
   
On the MDAX, Hugo Boss gained 0.65 or 1.47 pct at 44.93 as CEO Bruno Saelzer said in an interview that he does not expect the company to be incorporated into its parent Valentino Fashion Group if Permira buys more of the Italian fashion giant.
   
MLP was the biggest loser, off 0.48 or 2.78 pct at 16.79. Fresenius added 1.11 or 1.97 pct at 57.46.
   
TecDAX-listed Wirecard gained 0.21 eur at 10.28 while Freenet fell 0.39 eur to 23.20.

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Amsterdam shares close lower amid lacklustre trade; Vedior leads

The AEX closed 0.51 points or 0.10 pct lower at 535.48, after trading in a range of 531.65-535.89.  Government bonds traded lower while the euro stood at 1.3454 usd versus 1.3426 usd in late yesterday.
   
Trading volumes were low as investors prepared for a long weekend which includes the Pentecost bank holiday on Monday, dealers said.
   
Arcelor Mittal edged 0.02 pct lower at 43.32 eur after the company said it was leaving its joint venture with Russian market peer Severstal.
   
Reed Elsevier shed 0.14 pct to 14.48 eur and ASML dropped 0.16 pct to 18.49 eur.
   
Fortis dropped 0.16 pct to 30.96 eur as the share traded ex-dividend, and while investors were moving from Fortis to ABN Amro in anticipation of a possible bid announcement by the RBS consortium for ABN Amro on Tuesday, dealers said. ABN Amro rose 0.85 pct to 35.80 eur.
   
Rodamco Europe shed 0.81 pct to 104.85 eur and Akzo Nobel lost 0.85 pct to 59.55 eur. Corporate Express led decliners, shedding 0.93 pct to 9.62 eur.
   
On the other end of the spectrum, ING rose 0.64 pct to 32.90 eur, Aegon added 1.14 pct to 15.06 eur after it said it has started its share buyback programme, and Vedior led gainers, adding 3.48 pct to 22 eur.
   
Among midcap shares, Getronics dropped 4.15 pct to 5.54 eur, Crucell shed 3.32 pct to 17.18 eur and Ordina lost 2.73 pct to 16.39. Wereldhave dropped 0.80 pct to 107.04 eur after a downgrade to 'underweight' from 'neutral' at JP Morgan. Tele Atlas rose 0.64 pct to 15.75 eur, Oce added 1.45 pct to 14.71 and ASMI led gainers, adding 2.83 pct to 19.96 eur.

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