(repeating to clarify that Sanofi Aventis alerted the FDA of issues with Acomplia)
LONDON (Thomson Financial) - Leading European shares edged higher in morning trading, helped by gains in the chemical, telecom and metals and mining sectors, but Sanofi-Aventis underperformed on concern it may not receive final approval to market its weight-loss drug Acomplia in the US.
At 9.38 am, the Dow Jones STOXX 50 Index was up 6.70 points to 3,894.24 while the DJ 600 Index edged up 0.85 points at 389.73. The DJ Euro STOXX 50, which tracks the performance of some of the largest companies in 12 countries using the euro, added 2.90 points at 4,418.40.
In companies news, shares in Sanofi-Aventis dropped 1.5 pct after the company told the US Food and Drug Administration its rimonobant anti-obesity drug, also known under the Acomplia brand, brings a higher risk of suicidal thoughts than placebo and does not recommend the treatment for patients suffering from major depression.
The news came as part of a briefing document, which will be used by an FDA committee to help it decide whether or not to approve the drug for the US.
Keppler Securities said it is still confident the FDA committee responsible for approving Acomplia will give the green light for commercialisation of the drug in the US. The drug has been available in Europe since June 2006.
But Citigroup said failure to gain US approval may present a 4 eur a share downside while JP Morgan said the US market for the drug is worth 11 pct of its 78 eur price target.
The banking sector is likely to remain a focus throughout the day as investors mull this morning's earnings guidance from UK bank HBOS and earnings from US investment banking giant Lehman Bros later this afternoon.
Shares in HBOS fell to their lowest level in nearly three months after the company said its share of total net mortgage lending in the first six months of the year will be below 10 pct, down sharply from the normal 15-20 pct range. Last year, HBOS had a 17 pct share of net lending.
Its warning came in a trading update where it said it expects to meet market expectations for a 10 pct increase in full-year underlying earnings.
Rival UK mortgage lenders also traded lower in the wake of HBOS's update, with Alliance & Leicester slipping 0.7 pct, Northern Rock off 1.9 pct while shares in Bradford & Bingley were down 0.9 pct.
Among European banks, shares in Commerzbank were off 1.5 pct after analysts at equinet said the German bank was unlikely to emerge as the winner in the takeover battle over Landesbank Berlin.
Elsewhere, Merrill Lynch started coverage on Wacker Chemie with a 'buy' rating and 180 eur price target and on Yara with a 'sell' recommendation and 155 nkr price target as part of a resumption of coverage of the chemicals sector.
The broker said the sector will benefit from high oil prices over the medium term, merger and acquisition activity especially in the fragmented coatings sector as well as a strong investment cycle in emerging markets.
Wacker Chemie's exposure to solar energy applications and its attractive valuation relative to its peers is behind the broker's 'buy' rating on the company. Wacker is a major producer of polysilicon, a raw material for solar energy makers. Wacker Chemie shares were last up 4.1 pct.
Merrill Lynch also resumed coverage on Johnson Matthey with a 'buy' rating and a 1,850 pence price target, citing the company's strength in diesel and process catalyst technology. Johnson Matthey shares were last up 3 pct.
In the coatings, ICI shares were up 2.9 pct as Merrill resumed coverage on the company and on its peer Akzo Nobel, with a 'buy' rating.
ICI has been the subject of frequent takeover speculation in recent months, with Akzo and BASF both touted as potential bidders.
In other broker action of note, shares in Siemens AG were up 2 pct after brokers Credit Suisse and Morgan Stanley lifted their price targets on the electronics manufacturing giant to 100 eur and 130 eur from 90 eur and 110 eur respectively.
Rolls-Royce shares climbed 3.2 pct in early trading. Negotiations between Airbus and GE to supply a competitor to the Rolls-Royce Trent engine on the A350 XWB have stalled, according to trade press.
Merrill Lynch reiterated its 'buy' stance on the group.
Shares in Lagardere were up 2 pct after Exane BNP Paribas upgraded the stock to 'outperform' from 'neutral' on the grounds of an impending disposal of the EADS stake.
According to Exane analysts, a disposal would generate cash returns of up to 1.8 bln eur, and transform the group into a pure media player, prompting them to reduce the 10 pct conglomerate discount they currently apply to the stock.
Lagardere has already reduced its stake in EADS from 15 pct to 7.5 pct, but has stressed in the past that it has no intention of selling its remaining holding.
The energy sector, led by oil services stocks, was broadly higher after the International Energy Agency raised its 2007 global oil product demand forecast by 2 pct to 86.1 mln barrels per day and said tighter OPEC supply is adding to US gasoline shortages to push up the price of crude.
Among the main gainers, Seadrill was up 1.3 pct, Statoil gained 1.1 pct, Cairn Energy rose 1.6 pct while Acergy added 1.8 pct. BP was up 0.8 pct, Total climbed 0.2 pct but Royal Dutch Shell was off 0.2 pct.
In other news, shares in telecommunications group TeliaSonera rose 3.6 pct after the announcement of the departure of its chief executive Anders Igel.
Analysts considered that as 'good news' as the decision making in the company has been going on a 'slow pace'.
'This was expected...,' said OKO's Kimmo Stenvall. 'The company has not been able to proceed in growing its ownership in Turkey's Turkcell, in which it has 37 pct or Russia's Megafon in which it has 44 pct.'
Mark.cotton@thomson.com mc1/mc1/slm COPYRIGHT Copyright AFX News Limited 2007. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.
© 2007 AFX News
