UK/Euro Financial Market Daily Evening Briefing 30-05-2007

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London shares close weaker, off lows; NY rallies; China concerns overdone

Leading shares closed a touch weaker today, well off session lows in-line with a rally from lows on Wall Street with concerns about the impact of China's decision to triple stamp duty seen as being overdone, dealers said.
   
At the close, the FTSE 100 index was 4.4 points lower at 6,602.1, just off the late peak of 6,605.3, well above the midmorning low of 6,533.5.
   
All the broader FTSE indices ended weaker, aside from the FTSE Small Caps, with the FTSE 250 index the worst off, down 83.5 points at 12,023.2. Volume was solid with 3.459 bln shares changing hands in 551,418 deals.
   
On Wall Street, by London's close, the DJIA was 2.60 points lower at 13,518.70, while the Nasdaq composite index was down 3.84 points at 2,568.22, and the S&P 500 index added 0.35 points at 1,518.45 as earlier concerns over the China move faded. Investors focused ahead to the release later today of minutes from the last FOMC meeting, due around 7.00 pm BST.
       
In London, GlaxoSmithKline was an afternoon feature, staging a late turnaround from early sharp falls to end 22 pence higher at 1,328 after medical journal The Lancet published a letter from the company's chief medical officer, highlighting data which the group said clarified the safety record of diabetes drug Avandia.
   
Shares in Europe's biggest drug maker touched two year lows earlier in the wake of safety fears prompted by an article in rival publication New England Journal of Medicine earlier this week, which claimed the drug increased the risk of heart attack.
   
Analyst Paul Diggle at Nomura Code Securities said while the situation around Avandia remains unclear ahead of a regulatory review, any comment is being scrutinised by the market.
   
Glaxo shares had been weak earlier in reaction to news of a downgrade in rating to 'sell' from 'neutral' by Merrill Lynch, with the broker saying it only sees downside as a result of concerns over Avandia.
   
Elsewhere, defensive considerations still remained a big factor behind other FTSE 100 risers at the close, with property firms standing out, Land Securities adding 34 pence at 1,888 and British Land gaining 25 pence at 1,425, while Imperial Tobacco took on 48 pence at 2,195, and Severn Trent firmed 13 pence at 1,577. 
   
In earnings news, Antofagasta took on 4-1/2 pence at 544-1/2 after its first-quarter results beat expectations, with Numis Securities raising its target for the Chilean miner to 674 pence from 654 in response.
   
Antofagasta reported a 20 pct increase in first-quarter results helped by stronger copper and molybdenum prices and lower cash costs. Full year EBITDA jumped to 625.0 mln usd, from 522.7 mln in the first quarter of 2006, beating the 550 mln usd figure. Numis said the results were above the consensus of 561 mln usd and reiterated it 'buy' stance on the group.

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Other mining blue chips ended mixed after some late recoveries having earlier been knocked by concerns in China over the government's decision to triple the stamp duty paid on equity market transactions.
   
BHP Billiton shares closed 5 pence firmer at 1,210, while Rio Tinto ended up 2 pence at 3,635 and Xstrata rallied 23 pence higher to 2,780. But Anglo American shares stayed weak, down 27 pence at 2,915, as did Lonmin, off 17 pence at 3,864, and Vedanta, down 7 pence at 1,462. 
   
Back among the blue chip gainers, Capita shares moved 9-1/2 pence higher to 728 buoyed by news of an outsourcing deals with Resolution. The firm has signed a 580 mln stg contract for more than 12 years involving both Resolution closed and open book life policies.
   
Separately, Resolution said it will invest 140 mln stg over four years in the partnership with Capita, a business process outsourcing provider, to offer reduced unit costs. Resolution, however, was the top FTSE 100 faller, down 18 pence at 627 albeit also trading ex-dividend trade today.
   
Among other blue chip casualties, Royal & Sun Alliance shares shed 2.6 pence at 159 after Sampo chief executive Bjorn Wahlroos yesterday ruled out a move for the UK insurer, according to a report in Finnish business daily Kauppalehti.
   
The newspaper said the comments were made in London where Sampo was hosting an investor meeting.
   
Peer Friends Provident fell back 2-3/4 pence to 197-1/2 impacted too by fading bid hopes, with mortgage bank Alliance & Leicester suffering similarly after yesterday's speculative run, dropping 17 pence at 1,180. And British Airways shed 9-1/2 pence at 473 as Tuesday's vague bid interest dissolved.
   
On the second line, British Energy was the top faller, losing 32-1/4 pence at 537 after the UK government launched a book-built placing today to sell approximately 400 mln shares it owns in the power generator, cutting its stake to 39 pct 64.
   
The move came after British Energy posted strong full year results boosted by high electricity prices and revealed it is talking to potential partners about building new nuclear power stations.
   

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Shaftesbury was also a big mid cap faller, down 30 pence at 665, after the group said adjusted pretax profit fell 17.3 pct in the first half due to increased costs and interest from its new projects but added these projects will deliver significant shareholder value in the medium term.
  
In reaction, KBC said its forecast would remain unchanged given the upside potential of development schemes and the effective premium given the combined value of the portfolio versus the aggregate of the individual building valuations on which the historic NAV is based.
   
On the upside, London Stock Exchange shares topped the FTSE 250 fallers list, 55 pence firmer at 1,393 as fresh speculative interest swirled around amid rumours that Dubai international Finance Center could be about to trump Nasdaq's takeover bid for Scandinavian bourses operator OMX.
   
A sector takeover battle could turn attention back to the LSE, in which failed bidder Nasdaq holds a 30 pct stake, dealers said.
   
And LogicaCMG shares added 6-1/4 pence to 167-3/4 following UK press reports private equity firm Permira is investigating a takeover bid after news Martin Read is to step down as chief executive.
   
Permira was recently believed to be involved in a possible bid for computer services group Atos Origin, although the company announced it had terminated all talks earlier this month.

UK Diary of Events

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UK Small Cap Report

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Paris shares close down in reaction to China tax move; early losses pared

Sharp early losses that pushed the CAC-40 index below the 6,000 mark were pared, and the index was down 14.24 points or 0.24 pct at 6,042.15 at the end of the day. There were 24 CAC-40 decliners and 15 risers. Volume for the day was 5.4 bln eur.
   
The SBF-80 index closed down 41.69 points or 0.56 pct at 7,399.40, and the SBF-120 index was down 12.6 points or 0.28 pct at 4,418.88. On the Matif, June CAC-40 futures were trading down 16.5 points or 0.27 pct at 6,023.0.
   
Vallourec was the largest decliner in the CAC-40, closing down 6.03 eur or 2.62 pct at 224.47. Dealers attributed the loss to profit-taking that affected several shares, with the steel pipe maker falling more than most following earlier gains on takeover speculation.
   
Thomson closed down 0.23 eur or 1.6 pct at 14.14 after news it will lose its place in the CAC-40 index next month.
   
Airbus parent company EADS closed 0.34 eur or 1.46 pct lower at 22.90, recovering modestly after its Airbus unit secured two major orders. Qatar Airways signed a 16 bln usd order for 80 Airbus A350 aircraft, while Colombia's Avianca placed a firm order for 38 planes in the A320 and A330 families, with an option to buy 32 more.
   
Among other blue chip decliners, luxury goods company LVMH was down 1.20 eur or 1.37 pct at 86.30, and Alcatel-Lucent closed 0.12 eur or 1.17 pct lower at 10.17.
   
Second-liner Areva fell 16.24 eur or 2.18 pct to 729.00. After the market closed, the company announced the creation of a joint venture to make transformers in China, but no financial details were disclosed.
   
Eiffage closed down 1.93 eur or 1.87 pct at 101.41. It said it would appeal against any decision by French markets authority AMF to allow Sacyr Vallehermoso SA's full bid for the French property group to proceed.
       
Broadcasting and media placement company shares fared poorly across the board, with most underperforming the market. NRJ Group closed down 0.30 eur or 2.22 pct at 13.20, while Canal Plus ended down 0.14 eur or 1.68 pct at 8.21.  TV broadcasters M6 closed down 0.22 eur or 0.84 pct at 25.92, and TF1 closed down 0.22 eur or 0.83 pct at 26.32.
   
Michelin led the gains among the blue chips, up 3.52 eur or 3.85 pct to close at 94.97, after Morgan Stanley reiterated its 'overweight' stance on the tyre maker and lifted its price target to 108 eur from 94 eur.
   
Gaz de France was up 1.20 eur or 3.31 pct to 37.40. A report in Le Figaro rekindled speculation about possible changes in its planned tie-up with Suez.
   
Without naming sources, the paper said Suez is now proposing the option of a takeover deal rather than a merger as previously agreed, and has lobbied the new French government on the matter. Suez closed up 0.18 eur or 0.43 pct at 42.12.
   
Air France-KLM jumped 0.89 eur or 2.39 pct to close at 38.09 on news it will enter the CAC-40 index next month.

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German shares close lower as Shanghai plunge weighs
 
Shares closed in negative territory after the Shanghai exchange lost 6.5 pct earlier today as the Chinese government moved to triple taxes on stock trades, dealers said.
   
The DAX closed down 16.07 points or 0.21 pct at 7,764.97, while the MDAX finished off 90.36 points or 0.82 pct to 10,870.16. The TecDAX gained 2.02 points or 0.22 pct to 903.21. DAX futures were down 3.00 points or 0.04 pct at 7,784.00.
   
On the Frankfurt trading floor, Altana dropped 0.50 eur or 2.66 pct to 18.29 as it was the stock strongest hit by profit taking.
   
TUI lost 0.50 eur to 20.22, as momentum that had built up yesterday, ahead of the retailer exercising an over-allotment of a convertible bond, came to an end, dealers said.
   
BMW shed 0.72 eur or 1.42 pct to 49.88 after speculation over a possible purchase of Ford Motor Co's Swedish car unit Volvo largely evaporated.
   
Traders pointed to comments from a Ford speaker who denied previous media reports that the US auto maker was in talks to sell the unit.
   
"We pointed out yesterday that a possible purchase of BMW by Volvo is not a natural fit and these comments reinforce our opinion that, even if Volvo were up for sale, we doubt BMW would be a natural buyer," said a trader.
   
Volkswagen shed 1.58 eur to 112.56, as traders said it shares corrected after yesterday's advances due to the expiration of Porsche's mandatory bid.
   
Linde dropped 0.84 eur at 80.40 eur to round out the bottom five.
   
Bucking today's trend, EON added 1.83 eur or 1.58 pct to 117.35. MAN advanced 1.58 eur to 105.58.
   
Hypo Real Estate rose 0.43 eur to 50.63, and Adidas gained 0.34 to 46.77.
   
Henkel was also up 0.27 eur at 114.27, after the household goods manufacturer said it plans to pursue a 1-to-3 stock split on June 18.
   
Among mid-caps, Wacker Chemie lost 4.65 eur or 3.06 pct to 147.20, making it the sharpest decliner on the MDAX, as its shares traded ex-dividend of 2.50 eur.
   
STADA climbed 0.68 eur or 1.47 pct to 46.90. Software AG gained 2.70 eur or 4.16 pct to 67.57 and led the TecDAX higher, while Aixtron fell 0.18 eur or 3.01 pct to 5.80.

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Amsterdam shares close lower as Wall St dips on Asian markets' pullback

The AEX closed down 2.18 points or 0.41 pct at 535.01 after trading in the range 531.31-535.40. Government bonds traded higher while the euro stood at 1.3430 versus 1.3483 usd late yesterday.
   
Hagemeyer led bluechip decliners, losing 1.11 pct to 3.56 eur, while Shell fell 0.94 pct to 27.33 eur and Corporate Express declined 0.73 pct to 9.57.
   
TNT closed 0.48 pct down at 32.94 eur amid news that a parliamentary majority will likely endorse postal liberalisation legislation next week. While some brokerages responded positively, Rabo Securities said postal liberalisation will compound lower volumes with pricing pressure for TNT.
   
Aegon lost 0.08 pct to 15.14 eur as it has entered into exclusive talks with Poland's BRE Bank SA on a possible merger of their two Polish pension funds and the eventual acquisition by Aegon of the combined fund.
   
Among other financials, Fortis gave up 0.67 pct to 31.0 eur and ING shed 0.42 pct to 32.85. Earlier, sources told Thomson Financial News that ING unit ING Wholesale Banking is one of the banks involved in underwriting the financing of the Royal Bank of Scotland Group-led consortium's bid for ABN Amro.
   
ABN Amro also fell, losing 0.61 pct to 35.59 eur after the takeover target announced it has set up a transaction committee to liaise with the board of management and the supervisory board over the merger offer from Barclays and the takeover bid from the Royal Bank of Scotland Group-led consortium.
   
At the other end of the index, TomTom gained 3.53 pct to 33.15 eur after Goldman Sachs initiated the stock with a 'buy' rating, placing it on its 'conviction buy list'. In other news, the company said it is investigating news reports that Encyclopedia Britannica has launched legal action against the Dutch maker of personal navigation devices, alleging breach of patent rights.
   
Reed Elsevier added 0.48 pct to 14.71 eur, continuing yesterday's rise after being upgraded to 'buy' from 'hold' by Deutsche Bank.
   
Rodamco Europe rose 0.65 pct to 104.78 eur after the NYSE Euronext announced that Unibail, the French real-estate firm taking over Rodamco Europe, will join the CAC-40 on June 18.
   
LogicaCMG led midcap gainers, gaining 3.80 pct to 2.46 eur on press reports suggesting that private equity firm Permira is investigating a takeover bid.

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