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LONDON BRIEFING: No Apollo offer for THG; GSK trims Haleon stake

12th May 2023 07:50

(Alliance News) - Stocks in London were called to open higher on Friday, after data showed the UK economy expanded 0.1% over the first three months of the year.

The reading came a day after the Bank of England wiped away its recession forecast for the UK. The central bank now expects gross domestic product to flat-line over the first two quarters of the year, having previously predicted a decline.

The BoE raised rates by 25 basis points as expected on Thursday, taking the bank rate to 4.50%.

"[Governor Andrew] Bailey said that the lagging effects of the past rate hikes will weigh more on the economy in the coming quarters, that the BoE expects inflation to fall quickly this year, but reckoned that 'inflation remains too high' and that 'repeated surprises' pointed to the resilience of the economy and added to price pressures. As a result, the BoE will 'stay the course' to bring it down with further rate increases, he said," Swissquote analyst Ipek Ozkardeskaya.

In early UK corporate news, insurer Beazley backed guidance, pharmaceutical firm GSK noted a favourable zantac legal ruling, and e-commerce platform THG said takeover talks with a private equity firm have ended.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: called up 0.4% at 7,758.28

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Hang Seng: down 0.5% at 19,651.37

Nikkei 225: up 0.9% at 29,388.30

S&P/ASX 200: up 0.1% at 7,256.70

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DJIA: closed down 221.82 points, 0.7%, at 33,309.51

S&P 500: closed down 0.2% at 4,130.62

Nasdaq Composite: closed up 0.2% at 12,328.51

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EUR: firm at USD1.0927 (USD1.0917)

GBP: flat at USD1.2518 (USD1.2514)

USD: up at JPY134.73 (JPY134.33)

GOLD: down at USD2,008.91 per ounce (USD2,019.26)

OIL (Brent): down at USD74.47 a barrel (USD75.61)

(changes since previous London equities close)

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ECONOMICS

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Friday's key economic events still to come:

1330 SAT US import and export prices

1500 SAT US University of Michigan consumer survey

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The UK economy grew 0.1% in the first three months of 2023, compared to the final quarter of last year, the Office for National Statistics said. Growth was in line with FXStreet-cited market consensus. GDP also had grown 0.1% in the fourth quarter of 2022 from the third. "In output terms, the services sector grew by 0.1% on the quarter driven by increases in information and communication, and administrative and support service activities; elsewhere, the construction sector grew by 0.7% while the production sector grew by 0.1%, with a 0.5% growth in manufacturing," the ONS said. However, UK GDP shrank by 0.3% monthly in March alone. It had been expected to remain flat, like it had in February. In January, UK GDP expanded by 0.5%, upwardly revised from 0.4% growth. Year-on-year, first-quarter gross domestic product grew 0.2%, as expected. It had expanded 0.6% year-on-year in the fourth quarter of 2022.

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Rail passengers in the UK face fresh travel disruption over the next few days because of strikes by train drivers and other workers in long-running disputes over pay. Members of the drivers' union Aslef will walk out on Friday at more than a dozen train operators, crippling services across the country. Further strikes will be held on May 31 and June 3 – the day of the football FA Cup final at Wembley. Members of the Rail, Maritime & Transport union will strike on Saturday – the day of the Eurovision Song Contest final in Liverpool. Aslef General Secretary Mick Whelan said: "We do not want to go on strike – we do not want to inconvenience passengers, we have families and friends who use the railway too, and we believe in investing in rail for the future of this country. But the blame for this action lies, fairly and squarely, at the feet of the employers who have forced our hand over this by their intransigence."

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There is evidence some companies are profiteering during the cost-of-living crisis, Ireland Taoiseach Leo Varadkar has said, but added that windfall taxes would give money back to the public. Varadkar said there is evidence that some retailers are securing "significantly" bigger margins on their profits in Ireland than they would in other markets. He said that the competition regulator has "enormous powers" to intervene and carry out investigations into unfair trading, price fixing, or price signalling. Although Varadkar agreed that people's bills and prices had gone up faster than they were decreasing, he said prices would not return to where they were before the inflationary crisis began. "We've seen the price of everything rise dramatically over the past year and a half, we haven't had a period of inflation like this for a very long time, probably going back to the 1980s, and as a result of that a lot of families are struggling to make ends meet," Varadkar told Virgin Media's The Tonight Show.

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BROKER RATING CHANGES

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RBC raises Barclays to 'outperform' (sector perform) - price target 230 (215) pence

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Goldman Sachs cuts Derwent London to 'neutral' - price target 2,380 pence

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Barclays cuts S4 Capital price target to 270 (300) pence - 'overweight'

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COMPANIES - FTSE 100

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GSK welcomed a legal ruling in Canada that saw a proposed class action made on behalf of users of a heartburn drug thrown out. It also said it raised over GBP800 million from the sale of shares in former unit Haleon. The court said there was little evidence that ranitidine, or zantac, leads to an increased risk of developing any type of cancer. "Given the uncontroverted evidence that neither ranitidine nor NDMA are reliably associated with increased cancer risk, and the absence of evidence that ranitidine or NDMA cause cancer in humans, the plaintiff has failed to raise a bona fide triable issue regarding injury due to the ingestion and/or purchase of ranitidine," the court said. N-Nitrosodimethylamine, or NDMAs, are a type of chemical compound. GSK commented: "GSK will continue to vigorously defend proposed class actions by ranitidine users that have been filed in Ontario and Quebec as well as individual actions filed by ranitidine users in Canada." The case was brought against Sandoz Canada, part of Sandoz, which is itself a unit of Novartis. GSK also said it successfully sold part of its stake in consumer healthcare business Haleon, which it demerged last year. It now holds just over a 10% stake in Haleon, trimmed from 13%. Haleon sells Sensodyne toothpaste, Panadol and Advil painkillers and Centrum vitamins. GSK sold 240 million shares in Haleon at 335 pence each, netting GBP804 million in total. GSK said it and Pfizer, which owns 32% of Haleon, will not sell any more shares in the consumer healthcare firm for another 60 days.

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Beazley reported growth in gross premiums written as the insurer hailed "excellent and continuing market conditions". Gross written premiums were 12% higher at USD1.37 billion in the first quarter of 2023, from USD1.23 billion a year earlier. "The first quarter saw us deliver good headline growth in line with our expectations, underpinned by growth in property, where we are taking advantage of the excellent and continuing market conditions," Chief Executive Officer Adrian Cox said. Beazley still expects to achieve a combined ratio in the "high 80s" this year. For 2022, its combined ratio came in at 89%, better than the 93% achieved in 2021. A ratio below 100% indicates an insurer is making underwriting profit, so the lower, the better. "We remain confident in our growth guidance of mid teens gross premium written and mid 20s net premium written for 2023 full year," Beazley added.

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COMPANIES - FTSE 250

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NextEnergy Solar Fund upped its dividend target for the current financial year, which the investment company said is its tenth consecutive payout target increase. It now plans to pay dividends totalling 8.35p per share for the year ending March 31, 2024, up 11% from financial 2023's dividend of 7.52p. "This announcement represents NESF's tenth consecutive dividend target increase, in line with the company's progressive annual dividend policy. The company has achieved all of its dividend targets whilst maintaining a covered dividend throughout the nine years since IPO and continues to target a covered dividend beyond the current financial year," the solar assets-focused investor said.

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OTHER COMPANIES

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THG said takeover talks with Apollo Global Management have terminated. The e-commerce firm said it became clear "there is no longer any merit in continuing to engage with Apollo". In April THG said it received buyout interest from the US private equity firm. THG at the time noted that it is "a highly preliminary and non-binding indicative proposal", but did not disclose the terms of the proposal. "The board remains fully confident in THG's strategic direction and long-term prospects as an independent company," Chair Charles Allen said.

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By Eric Cunha, Alliance News news editor

Comments and questions to [email protected]

Copyright 2023 Alliance News Ltd. All Rights Reserved.

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