Shares in Smith & Nephew PLC are expected to drop by as much as 3 pct in opening deals after the orthopaedic devices group warned last night it will be hit by an exceptional charge of 80 mln stg, dealers said.

The group said the charge comes as two of its secondary insurers refused to cover their share of the liability costs arising from its macrotextured femoral knee component implant product.

In response, Merrill Lynch, and UBS reiterated their 'neutral' stance on the stock.

Separately, JP Morgan initiated the group with a 'neutral' rating, with a price target of 561 pence.

Meanwhile, Morgan Stanley said the estimate of 80 mln stg of further liability is 'reasonable'.

The broker said the figure includes 12 mln stg which has already been agreed with patients, but which is being disputed by the insurance companies.

Boutique broker CODE said if the charge is confirmed, this would reduce its

pretax forecast for 2004 from 244 mln stg to 164 mln and its EPS forecast from

20.6p to 12.1p.

UK and European brokers' recommendations issued today, as collated by AFX News from a range of market sources.


CITIGROUP SMITH BARNEY
Downgrade hold from buy Travis Perkins, ups target to 1,800 pence from 1,575 -- Logistics review: Downgrade Sell from hold Wincanton, ups target to 240 pence from 220; Reiterate Sell TDG, ups target to 190 pence from 180; Hold Christian Salvesen, cuts target to 60 pence from 62; Buy Exel, target 829 pence -- Reiterate Hold AstraZeneca, cuts target to 37.34 usd from 43.25

UBS
Upgrade Buy from neutral Mediobanca -- Upgrade Neutral from reduce Cambridge Antibody -- Downgrade Neutral from buy PHS -- Reiterate Neutral Slough Estates, ups target to 550 pence from 530 -- Neutral Misys, cuts target to 230 pence from 235 -- Neutral Lonmin, cuts target to 875 pence from 1,125

DEUTSCHE BANK
Downgrade Hold from buy EDP

MERRILL LYNCH
Downgrade Sell from Neutral Travis Perkins -- Upgrade Buy from hold Cambridge Antibody

MORGAN STANLEY
Downgrade Equal-weight from overweight Alliance & Leicester, favour Northern Rock and RBoS -- Reiterate Overweight Misys, cuts target to 213 pence from 226

LEHMAN
Upgrade Overweight from equal-weight KPN, ups target to 8.0 eur from 7.7

CSFB
Downgrade Underperform from neutral CNP -- Reiterate Outperform AGF, ups target to 60 eur from 57 -- Underperform Heineken, cuts target to 22.5 eur from 23.5

JP MORGAN
Downgrade Neutral from Overweight Woolworths, removes from Analyst Focus List, cuts target to 47 pence from 57, reduces estimates -- Initiate Neutral Smith & Nephew, target 561 pence -- Initiate Underweight Linde, price target 44 eur -- Reiterate Overweight Liberty International, ups target to 980 pence from 960, raises estimates --- Neutral Brixton, ups target to 340 pence from 315 -- Underweight Shaftesbury, ups target to 315 pence from 245, raises estimates

SG SECURITIES
Downgrade Hold from buy BMW

ING
Downgrade Hold from buy Acciona -- Downgrade Hold from buy ACS -- Downgrade Hold from buy Dolmen -- Downgrade Hold from buy AstraZeneca -- Reiterate Buy mm02, ups target to 135 pence from 120 -- Hold Statoil, ups target to 101.3 nkr from 99.5

SEYMOUR PIERCE
Downgrade Underperform from hold JJB Sports, cuts estimates

NUMIS SECURITIES
Downgrade Reduce from buy Whittard of Chelsea, cuts target to 170 pence from 230 -- Downgrade Sell from hold Clinton Cards, cuts target to 80 pence from 90

EVOLUTION SECURITIES
Downgrade Reduce from add Brown & Jackson, target 59 pence

Off for a few days hols. Have a great Christmas everybody.

One of my elves will be starting the Traders Thread for me until I get back. :-)