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| | London Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Please click on the images to view our interactive charts | | | London close: Stocks rally on ARM Holdings takeover UK equities closed in the green on Monday as a takeover deal for ARM Holdings lifted investor sentiment.
ARM, a major supplier of components for smartphones made by the likes of Apple and Samsung, agreed to a £23.4bn takeover offer from Japan's Softbank on Monday. The 1,700p-per-share cash offer marked a 43% premium to the 1,188.73p price at which trading closed on Friday.
"On an otherwise unremarkable day, the incredible 43% premium being paid for Arm means that the stock has single handedly managed to drag the index into the green," said IG market analyst Joshua Mahony.
"While Theresa May and Phillip Hammond publicly praised today's deal as a vote of confidence for the UK, this deal also highlights the risk that there may not be much left by the time the pound resurfaces. For all the talk of a spike in exports driven by sterling devaluation, it could in fact turn out that we will simply see shoppers buy the store."
Meanwhile, investors also digested news that the Turkish government has taken back control following an attempted military coup. Six thousand people have been arrested following Friday's attempted military coup and President Recep Tayyip Erdogan has said parliament will consider introducing the death penalty for those thought to have committed traitorous acts against the state.
As market participants shrugged off the news in Turkey, oil prices fell with Brent crude down 2.1% to $46.59 per barrel and West Texas Intermediate down 2.2% to $44.96 per barrel at 1636 BST.
Closer to home, Bank of England policymaker Martin Weale said on Monday the central bank needs more information on the impact of the UK's vote to leave the European Union before cutting interest rates.
Speaking in London on the impact of Brexit on monetary policy, Weale said there was a high level of uncertainty surrounding the vote.
"Uncertainty points to the argument that we should wait for firmer evidence before making any policy change," Weale said.
The BoE voted 8-1 last week to keep interest rates unchanged to the surprise of many economists who had expected a 25 basis point cut. The Monetary Policy Committee said it was waiting on economic data covering the period following the 23 June EU referendum to become available before taking action. However, the BoE indicated that it was likely to loosen monetary policy at the August meeting.
In the US, the National Association of Homebuilders/Wells Fargo Housing Market Index declined to 59 for July from 60 the prior month, compared with market expectations of an unchanged reading.
Company-wise, housebuilders rallied, including Travis Perkins, Persimmon and Taylor Wimpey, even as Rightmove data showed UK house prices fell 0.9% between 12 June and 9 July to just under £308,000. Rightmove said worries around the Brexit vote took the wind out of the property market.
Travel stocks, such as TUI and Thomas Cook, fell on concerns about the unrest in Turkey.
Ultra Electronics shares were up as it said its Ocean Systems business, based in the USA, has been awarded a firm one year contract valued at just over $4m from the US Navy for the continuing production of the ADC MK2 Countermeasure. |
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| Market Movers
FTSE 100 (UKX) 6,695.42 0.39%
FTSE 250 (MCX) 16,867.66 0.84%
techMARK (TASX) 3,374.04 2.20%
FTSE 100 - Risers
ARM Holdings (ARM) 1,675.00p 40.87%
Royal Bank of Scotland Group (RBS) 189.80p 3.15%
Marks & Spencer Group (MKS) 334.70p 2.89%
RSA Insurance Group (RSA) 491.10p 2.68%
Taylor Wimpey (TW.) 147.70p 2.57%
Sage Group (SGE) 668.00p 2.38%
Persimmon (PSN) 1,605.00p 2.16%
Berkeley Group Holdings (The) (BKG) 2,680.00p 2.13%
Travis Perkins (TPK) 1,551.00p 2.04%
Barratt Developments (BDEV) 417.60p 2.00%
FTSE 100 - Fallers
TUI AG Reg Shs (DI) (TUI) 942.50p -1.98%
BHP Billiton (BLT) 977.00p -1.96%
BP (BP.) 449.30p -1.72%
British American Tobacco (BATS) 4,776.50p -1.21%
BT Group (BT.A) 395.55p -1.11%
Antofagasta (ANTO) 503.00p -0.98%
Ashtead Group (AHT) 1,119.00p -0.97%
Intu Properties (INTU) 279.30p -0.92%
Vodafone Group (VOD) 225.90p -0.88%
Rolls-Royce Holdings (RR.) 738.00p -0.87%
FTSE 250 - Risers
Sophos Group (SOPH) 231.00p 7.29%
Supergroup (SGP) 1,606.00p 5.87%
Polypipe Group (PLP) 240.30p 5.86%
Allied Minds (ALM) 370.00p 5.71%
Synthomer (SYNT) 358.00p 4.50%
Victrex plc (VCT) 1,599.00p 4.31%
International Personal Finance (IPF) 335.30p 4.29%
Restaurant Group (RTN) 297.00p 4.28%
Shawbrook Group (SHAW) 173.00p 3.90%
Galliford Try (GFRD) 976.00p 3.83%
FTSE 250 - Fallers
Ascential (ASCL) 245.80p -4.62%
Brown (N.) Group (BWNG) 177.50p -3.95%
Wizz Air Holdings (WIZZ) 1,576.00p -2.48%
IP Group (IPO) 149.00p -2.17%
Hochschild Mining (HOC) 224.20p -2.14%
Polymetal International (POLY) 1,096.00p -1.79%
TalkTalk Telecom Group (TALK) 216.50p -1.72%
Sports Direct International (SPD) 256.10p -1.69%
Evraz (EVR) 162.00p -1.64%
Tullow Oil (TLW) 224.30p -1.58% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks end session little changed European stocks pared earlier gains to trade flat to slightly lower on Monday as investors weighed up a failed military coup in Turkey against some encouraging company deal news.
The benchmark Stoxx Europe 600 index edged higher by 0.23% or 0.78 points to 338.70, Germany's DAX was 0.04% weaker and France's CAC 40 was down 0.34%.
At the same time, oil prices were lower, with West Texas Intermediate off by 1.569% to $45.24 per barrel and Brent crude down 1.5% at $46.90.
Six thousand people were arrested following Friday night's attempted military coup in Turkey and President Recep Tayyip Erdogan said parliament would consider re-introducing the death penalty for those thought to have committed traitorous acts against the state.
Chris Beauchamp, senior market analyst at IG, said: "The weekend was dominated by news of the coup in Turkey, but so far the impact seems to be limited outside of emerging market assets."
Stocks were initially buoyed by news that chip designer ARM Holdings had agreed a £23.4bn takeover offer by Japan's Softbank, in what could be the first major move sparked by the post-Brexit collapse in the value of the pound. ARM surged, with peers such as Dialog Semiconductor and Imagination Technologies also sharply higher.
Beauchamp said: "It would not be surprising to see other bids for UK firms that have now become cheaper thanks to the fall in sterling, so the ARM deal could simply be the first in a procession of deals. It won't be an ugly rush, since ongoing political uncertainty will make it even more important for acquisitive firms to pick their targets carefully, and questions will linger over just how protectionist the UK may become with regards to some of its prized assets. Nonetheless, as a sign of confidence, the deal is very welcome indeed."
Travel and leisure stocks were under pressure, with Thomas Cook and TUI both in the red amid worries about the impact of the coup in Turkey.
Elsewhere, AstraZeneca nudged higher after announcing that its Phase III AURA3 trial has met its primary endpoint, demonstrating superior progression-free survival (PFS) compared to standard platinum-based doublet chemotherapy.
SBM Offshore rallied after the Dutch offshore engineer reached a deal with Brazilian authorities in a corruption probe.
Glencore was under the cosh after Credit Suisse cut its rating on the stock to 'neutral' from 'outperform'.
Investors were also mulling over comments by Bank of England policymaker Martin Weale, who said the central bank needs more information on the impact of the UK's vote to leave the European Union before cutting interest rates.
Speaking in London on the implications of Brexit for monetary policy, Weale said there was a high level of uncertainty surrounding the vote.
"Uncertainty points to the argument that we should wait for firmer evidence before making any policy change," Weale said.
"The argument in the other direction is that, while I am very uncertain about the magnitude of the effect, it does seem to me quite likely that demand will weaken more than supply in the near term. So is there a case for a stitch in time?" |
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| | US Market Report | | US open: Stocks rise as corporate earnings beat forecasts US stocks rose on Monday, lifted by stronger-than-expected corporate earnings.
At 1521 BST, the Dow Jones Industrial Average increased 0.09%, the S&P 500 edged up 0.14% and the Nasdaq grew 0.42%.
In contrast oil prices fell with the West Texas Intermediate crude down 2.02% to $45.04 per barrel and Brent down 2.1% to $46.60 per barrel at 1522 BST.
On the company earnings front, Bank of America shares gained after reporting a fall in second quarter profit that was better than analysts' had forecast.
Charles Schwab shares reversed an earlier rise after posting an increase in second quarter revenue that exceeded estimates.
Hasbro Inc. shares fell even as the toy maker reported revenue and profit that beat forecasts, boosted by brand toys such as Star Wars and Frozen.
After the closing bell, International Business Machines, Yahoo and Netflix are slated to report.
Meanwhile, investors mulled over a failed military coup in Turkey. Six thousand people have been arrested following Friday's attempted military coup in Turkey and President Recep Tayyip Erdogan has said parliament will consider introducing the death penalty for those thought to have committed traitorous acts against the state.
In currency markets, the dollar was trading down 0.57% against the pound and 0.28% versus the euro, but 0.83% stronger against the yen. |
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| | Broker Tips | | Broker tips: Rentokil Initial, Glencore, UK real estate stocks HSBC raised its rating on Rentokil Initial to 'hold' from 'reduce' and lifted its target to 190p from 145p on Monday.
The bank said the pest control company's international businesses are likely to benefit from a weaker pound.
"Our target implies 7% downside from the current price; we upgrade the stock to Hold from Reduce, because in an uncertain world, an overseas currency earner with potential to transform has some attraction."
HSBC said currency moves are likely to make the sterling level of pre-tax profit growth expected materially easier to achieve.
The systems at Rentokil have improved, and discounting is better controlled than in the past, the bank added.
However, HSBC said its core concern about Rentokil continues to be the remuneration of staff which could lead to "bids won on cost assumptions that could not be met and could result in contracts either lost or with margin problems and pricing pressure in re-negotiations".
"On top of this was a habit of remunerating senior staff, on performance excluding restructuring, coincided with 48 consecutive quarters of restructuring and 'one off' charges.
"In short, selling a turnaround to the market seemed to take precedence over the rather duller, more laborious, task of fixing the business."
Credit Suisse downgraded Glencore to 'neutral' from 'outperform' and lifted the price target to 200p from 160p.
The price target lift reflects a 10% reduction in the bank's GBP/USD assumption and a 4% increase to 2017 earnings before interest, tax, depreciation and amortisation largely on higher coal price realisation.
CS noted Glencore has rallied strongly year-to-date and while "it isn't quite mission accomplished on deleveraging, credit concerns have reduced materially and an ongoing commitment from the company to reduce net debt to around $15bn should secure the group's investment grade credit rating".
However, the bank said it was still negative on copper, which is Glencore's largest exposure at around 40% of industrial EBITDA.
CS said the stock's valuation has now re-rated back to its target multiples and is more aligned with peers.
It argued that successful delivery of the company's main earnings and debt reduction targets together with latent capacity growth in copper and zinc still provides upside potential on a medium term view, but weak copper prices lead to a slower-than-planned return of copper volumes.
UK commercial real estate values were set to fall further, analysts at Citi said, but they believed the falls would only be a 'correction' - mostly cyclical in nature - and should be looked upon as a trading opportunity.
Nonetheless, they admitted the risk of a more severe property crisis existed.
"We are of the view that the UK and London will find a way to grow outside the EU and believe the current stock volatility is likely to continue providing investors with a trading opportunity," analyst Aaron Guy said in a research note sent to clients and dated 18 July.
In Guy's opinion, their was admittedly little "visibility" but so too many of the 'amplifiers' of the property crashes of the 1970s, early 1990s and 2007/2009, such as interest rates on the rise, high leverage and no immediate policy or liquidity tools were present this time around.
He also believed there was sufficient capital that held a positive view on the future of the UK to support a correction of between 15% to 20%, instead of a crisis.
"We currently estimate the risk of rescue rights issues and broader commercial real estate loan book distress to be low in what has been a risk off market."
Guy said Citi's view of a 15% to 20% correction was largely priced into stocks, so there was value in the broker's London-focused coverage, referencing as examples shares of Capital&Counties, Great Portland Estates, Derwent London, Land Securities and British Land - all of which he kept at 'buy' - albeit while at the same time lowering his targets on many of them.
His target on Capital&Counties was cut from 577p to 396p, that for Great Portland Estates from 1042p to 804p, for Derwent London from 4710p to 3257, on Land Securities from 1497p to 1268p and on British Land from 974p to 741p. | | |
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