UK/Euro Financial Market Daily Evening Briefing 29-05-2007

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London shares close higher; NY firm; Vodafone top blue-chip gainer
 
UK blue chips closed higher, having stayed in positive territory throughout the session, reflecting a strong showing on Wall Street sparked by takeover talk and a rebound in consumer confidence, with Vodafone the top FTSE 100 gainer, dealers said.
   
At the close, the FTSE 100 index was 36 points stronger at 6,606.5, just down from the afternoon peak of 6,613.4, and well off the opening low of 6,570.8. All the broader indices also closed firmer. Volume was solid, with 3.57 bln shares changing hands in 459,051 deals.

Vodafone accounting for a good chunk of the total -- with 1.14 bln Vodafone shares traded in the session, just over three times the average daily volume of trades.
  
On Wall Street, by Londons close, the DJIA was 34.2 points higher at 13,541.5, with the Nasdaq composite index 18.43 points higher at 2,575.62, as merger and acquisition talk buoyed sentiment, with media reports pointing to Avaya and Archstone-Smith as the latest takeover targets.
   
Investors also focused on US consumer confidence which bounced back unexpectedly in May, despite higher gasoline prices that could raise shoppers' worries about inflation, a private research group said.
   
The New York-based Conference Board said its Consumer Confidence Index rose to 108.0 in May, up from a revised 106.3 in April. Analysts had expected the reading to fall to 104.5. The May reading was the highest since March when the index was at 108.2.
   
In London, at the close, Vodafone shares topped the FTSE 100 leaderboard, up over 5 pct or 8.3 pence at 159.7, after posting 2006/7 results which were roughly in line with consensus forecasts and with guidance for operating profit at the top end of estimates.
   
The mobile phone network operator said it has met or exceeded its expectations for the year in all areas, and it is confident of delivering its capital and operating expenditure targets in Europe in fiscal 2008. Vodafone's underlying pretax profit eased back to 8.75 bln stg from 8.79 bln a year earlier.
   
UBS said Vodafone's results were solid and slightly ahead of consensus and, crucially, guidance that suggests consensus needs operating profit and earnings to increase around 2 pct to reach its mid-point. The broker raised its price target for Vodafone to 175 pence from 170 and reiterated its 'buy' rating.
   
Meanwhile, British Airways also closed higher, up 21-1/2 pence at 482-1/2 on vague bid speculation sparked by news late Friday that Goldman Sachs holds a 5 pct stake in the UK airline group. The US broker also suspended its research coverage of BA today.
   
Easier crude prices also added support, with cruises operator Carnival -- another gas guzzler -- higher as well, up 56 pence at 2,625.
   

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Elsewhere, BSkyB shares closed higher, up 20-1/2 pence to 660-1/2 after UBS raised the price target on the pay-TV provider to 900 pence from 750 and repeated its 'buy' rating.
   
The broker said it expects Sky's market share in the UK 'triple play' market to rise to 44 pct in 2015 from 23 pct last year, with up to 400,000 subscribers of Virgin expected to switch to Sky and 20 pct of non-subscribing households forecast to sign up.
  
Also benefiting from broker comment was publishing group Reed Elsevier, which took on 16 pence at 675-1/2 after Deutsche Bank upgraded its stance to 'buy' from 'hold' with a new price target of 715 pence from 600.
   
Deutsche Bank said it anticipates a solid "as-is" operational performance from Reed, possibly underpinned by another round of restructuring, with potential upside from leveraged buyout approaches.
   
On the downside, GlaxoSmithKline closed the top FTSE 100 faller, 28 pence lower at 1,306, on news its oral anti-diabetic Avandia drug market share had slumped to nearly zero from 10 pct, according to daily prescription data from Impact Rx which Deutsche Bank said was worse than it had expected.
   
Deutsche Bank said the Avandia data suggests that there could be as much as 22 pct downside risk to GSK's near-term earnings and share price, which has depreciated by around 9 pct, since the news broke.
   
RBS was also among the top blue-chip fallers at the close, down 5 pence at 637-1/2 after the consortium it is heading tabled a formal 71.1 bln eur offer for Dutch bank ABN Amro. The consortium said its offer is 79 pct in cash, with the remaining 21 pct in RBS shares. That represents 30.40 eur in cash plus 0.844 new RBS shares for each ABN AMRO share.
   
The consortium -- which also includes Banco Santander Central Hispano SA and Fortis -- said its offer represents a 13.7 pct premium to the value of the proposed offer for ABN Amro from Barclays.The announcement was accompanied today by a trading statement from RBS in which it said underlying earnings growth for the first half of 2007 is to outstrip market forecasts.
   
Elsewhere, Vedanta Resources shares fell back 21 pence to 1,469, with Xstrata off 13 pence at 2,757 after ABN Amro cut both groups' ratings to 'hold' from 'buy' in a sector review with the broker saying the recent resurgence in base metal prices is running out of steam. The broker also downgraded its stance on Anglo American.
   

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On the second line, Invensys was the top gainer at the close, up 22-1/4 pence to 393 after being upgraded to 'neutral' from 'underweight' by HSBC with a raised target to 390 pence from 290 pence and by Goldman Sachs to 'neutral' from 'sell' following the firm's fourth-quarter results last week.
   
Broker comment also lifted IMI shares higher, up 13 pence to 597-1/2 after being upgraded to 'buy' from 'hold' by Citigroup, with a price target hike to 650 pence from 550 pence.
   
Meanwhile, shares in LogicaCMG took on 4-1/2 pence to 161-1/2 after the company said CEO Martin Read will step down and that a search for a successor is underway.
   
In a note to clients, Merrill Lynch reiterated its 'buy' stance and said it believes the change in CEO potentially represents a positive catalyst as over the past few years the company has stagnated.
   
On the downside, shares in Dairy Crest fell back 24 pence to 677 after the company said it is taking its dairy spread Clover off the shelves, but it added that it expects the costs of the recall to be covered by its insurance policy.
   
Dairy Crest said it has initiated the recall of Clover after the spread developed an unpleasant taste towards the end of its shelf life due to the formation of mould.

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Swiss close slightly higher on US, led by Richemont, Swatch, Nestle

At the close, the Swiss Market Index was 14.67 points higher at 9,396.01, and the Swiss Performance Index rose 12.87 points to 7,641.63.
   
The euro lost some ground against the Swiss franc, at 1.6483 sfr, as did the dollar, to 1.2221 sfr.
   
Luxury goods groups outperformed the market in what has been an overall low-volume lacklustre trading session, boosted by news that Swiss watch exports for April reached 1.151 bln sfr, up 11.7 pct from the same period in 2006. The top gainer here was Richemont up 1.2 sfr or 1.6 pct at 74.5 sfr, further supported by a target hike to 90.00 sfr from 75 sfr at Kepler. Runner-up was Swatch, up 0.75 sfr or 1.1 pct at 70.
   
ABB added 0.25 sfr at 25.95 sfr, after it said it has won a four-year contract worth 26 mln usd from Chilean copper producer Compania Minera Dona Ines de Collahuasi SCM.
   
Among heavyweights, Nestle gained 3.50 sfr at 473.25 sfr.
   
Drugmakers succumbed to slight profit-taking with Roche off 0.8 sfr at 226.4 sfr and Novartis 0.25 sfr lower at 68.65 sfr.
   
Banks were mixed. Julius Baer was the second biggest loser, down 1.35 sfr or 1.5 pct at 89.9 sfr, handing back recent gains, while UBS added 0.45 sfr at 79.45 sfr.
   
Credit Suisse ended the session flat at 91.5 sfr, little impacted by news that it is under investigation by the Financial Supervisory Service for a possible breach of South Korean disclosure rules, after it purchased a stake in building materials company Byucksan Corp. 
   
Elsewhere among insurers, Zurich Financial shed 0.5 sfr at 377 sfr, while Swiss Re was barely in positive territory, up 0.1 sfr at 114.1 sfr.  
   
Top faller was Synthes, down 3.70 sfr, or 2.3 pct, at 154.2 sfr, after the US public health insurance system indicated that it will refuse to pay for any artificial spinal disc replacements in people over the age of 60.
   
Outside the SMI, Ypsomed ended 4.0 sfr or 3.5 pct lower at 111 sfr after the pharmaceutical group issued disappointing full-year results with net profit of 2.7 mln sfr, below analysts' forecasts of 6.8 mln sfr.

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

German shares close higher led by Deutsche Boerse, automotive stocks

The DAX closed 41.84 points or 0.54 pct higher at 7,781.04 points, having traded between 7,735.80 points and 7,787.55 points today. The MDAX gained 50.58 points or 0.46 pct to 10,960.52, while the TecDAX added 15.32 points or 1.73 pct to 901.19. DAX futures were up 20.50 points or 0.26 pct at 7,795.00, while bund futures slipped 0.02 points or 0.02 pct to 112.21.
   
Deutsche Boerse was the biggest gainer, adding 4.00 eur or 2.33 pct to 175.50 eur on speculation the London Stock Exchange Group could launch a new attempt to merge the two exchanges and may be considering a bid of around 210 eur per share. Fresenius Medical Care gained 2.33 eur or 2.19 pct to 108.50.
   
Automotive stocks also shone, with Volkswagen advancing 2.21 eur or 1.97 pct to 114.14 eur after the German state of Lower Saxony bought 367,000 shares in the automaker for about 41 mln eur to prevent its stake in the company from dropping below a blocking minority of 20 pct.
   
Traders said the automaker's shares were also boosted by the fact the period for Porsche's mandatory bid of 100.92 eur per ordinary share will expire tonight at midnight and free up the larger sports car manufacturer from buying a larger stake in the company. "Porsche can buy up to 50 pct in Volkswagen before it will once again have to make an offer for the company," a local trader explained.
   
BMW was 0.85 eur or 1.71 pct higher at 50.60 eur after dealers largely discounted speculation the German luxury car manufacturer might purchase Swedish car unit Volvo. According to several media reports, current owner Ford Motor Corp is planning to sell Volvo, and BMW is one of the the leading contenders to buy it. DaimlerChrysler was underperforming the general market, having advanced 0.12 eur or 0.18 pct to 67.32 eur.
   
Deutsche Telekom's shares rose 0.24 eur or 1.79 pct to 13.65 eur as investors speculated on the possibility of a quick end to strikes at the telecom giant. Deutsche Postbank was up 0.86 eur or 1.32 pct to 66.25 eur due largely to technical trading and higher banking sector valuations, dealers said.
       
Bucking the positive trend, Continental AG slumped 0.76 eur or 0.73 pct to 103.61 eur.
   
EON lost 0.41 eur or 0.35 pct to 115.52 eur after a report the utility probably will not pay a special dividend as the market had previously hoped but will reinvest monies it raised for its botched takeover attempt of Endesa SA to expand into new markets. "The news is having a negative effect on EON shares because some analysts had expected shareholder returns of around 5-10 bln eur," said a local trader.
   
A report in Euro am Sonntag magazine said the utility company will in all likelihood not issue a special dividend this year and instead will concentrate on "aggressive expansion" rather than "organic growth". Peer RWE, meanwhile, gained 0.68 eur or 0.84 pct to 81.81 eur.
   
Over on the MDAX, Kloeckner & Co jumped 1.74 eur or 3.4 pct to 52.87 eur to lead the index higher.
   
Hugo Boss gained 1.42 eur or 3.16 pct to 46.35 on speculation private equity fund Permira plans a bid of 57.5 eur per share to buy the 50.9 pct stake Valentino Fashion Group SPA owns in the German clothing manufacturer. Douglas Holding fell 0.66 eur or 1.34 pct to 48.73 eur.
   
Among tech stocks, Solarworld rose 3.15 eur or 5.19 pct to 63.84 eur as the top gainer on the TecDAX after its shares benefited from speculation Spain's Acciona is interested in buying the solar energy company. GPC Biotech slid 0.56 eur or 2.61 pct to 20.90 eur.

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Amsterdam shares close flat; ABN Amro, Fortis fall after consortium bid

The AEX closed down 0.37 points or 0.07 pct at 537.19 after trading in the range 535.82-538.42. Government bonds were mostly lower while the euro stood at 1.3483 versus 1.3455 usd late yesterday.
   
ABN Amro fell 0.80 pct to 35.81 eur on news the RBS-led consortium is offering 38.40 eur per ABN Amro share, of which 79 pct would be paid in cash and the remainder in RBS shares. Dresdner Kleinwort noted that ABN will have to host an EGM now that the bid from the consortium is firm rather than an indicative proposal. The brokerage added that it is looking to a Supreme Court ruling at the end of June and a possible counter bid.
   
Fortis fell 0.29 pct to 31.21 eur, while peer ING was 0.03 pct lower at 32.99 and Aegon was 0.33 pct down at 15.15. Numico led decliners, slipping 1.47 pct to 36.80, while Vedior dipped 1.35 pct to 21.90, and peer Randstad lost 0.21 pct to 60.14 eur.
   
Philips led bluechip gainers, gaining 1.45 pct to 30.78 eur, boosted by bullish comments from Lehman Brothers which has added the consumer electronics group to its European Recommended Portfolio, dealers said.
   
Reed Elsevier climbed 0.48 pct to 14.64 after it was upgraded to 'buy' from 'hold' by Deutsche Bank, with the brokerage saying in a note it anticipates a solid "as-is" operational performance from Reed, possibly underpinned by another round of restructuring. KPN added 1.20 pct to 12.62 eur and Heineken gained 0.73 pct to 42.64 eur.
   
On the midcap, BAM added 0.65 pct to 20.26 eur after saying its UK unit Edmund Nuttall Ltd won an order worth a total of 75 mln eur in a joint venture combination with Van Oord UK Ltd to construct Great Yarmouth outer harbour and that it would transfer ownership of UK public-private partnership projects with receivables totaling 250 mln eur to a joint venture with the Dutch Infrastructure Fund.
   
On the local markets, Unit 4 Agresso soared 4.77 pct to 20.20 after it announced a record 40 pct increase in high-end orders so far this year.

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