27th Jan 2017 12:03
LONDON (Alliance News) - London stock indices were slightly lower at midday on Friday ahead of the first reading of US fourth quarter gross domestic product and the meeting between UK Prime Minister Theresa May and US President Donald Trump.
Before that, the focus was on Tesco's surprise GBP3.70 billion cash and shares takeover of mid-cap food wholesaler Booker Group, a deal which will combine the UK's largest supermarket with its biggest cash-and-carry company.
Under the terms of the deal, Booker shareholders will get 0.861 of a Tesco share and 42.60 pence in cash for each of their shares. The deal values Booker at 205.30p per share, a premium of around 12% to its closing price of 183.10p on Thursday.
On Friday, Tesco led the blue-chip gainers, up 8.3% at 204.718p, while Booker was the best FTSE 250 performer, up 16% at 212.80p.
Shore Capital called the merger "one of the corporate surprises of the retail century so far". However, the broker was not as positive as the rest of the market, saying the strategic rationale of this combination "is neither wholly straightforward nor compelling to our minds".
Tesco said consumers will benefit from an improved selection of fresh food available at more outlets in the UK and from an expanded network of convenience outlets to pick up click-and-collect orders.
Catering, retail and small business customers of Booker will benefit from a bigger range of products, better value thanks to improved sourcing, and an enhanced delivery service through combining the respective Tesco and Booker fleets.
The FTSE 100 was down 0.1%, or 4.27 points, at 7,157.22. The FTSE 250 was a touch lower at 18,139.56 and the AIM All-Share was up 0.4% at 879.08.
The BATS UK 100 was up 0.1% at 12,098.29, the BATS 250 index was flat at 16,482.72 and the BATS Small Companies was up 0.1% at 10,864.23.
In Europe, the CAC 40 in Paris was down 0.5% and the DAX 30 in Frankfurt was down 0.2%.
Ahead of the open on Wall Street, futures indicated the Dow 30 and S&P 500 both flat and the Nasdaq Composite up 0.1%.
UK and US leaders May and Trump will meet in Washington, in what will be Trump's first official engagement with a foreign leader since his inauguration on Friday last week. Talks on a bilateral trade deal post-Brexit are expected to be on the agenda, while May will call for a "renewed" special relationship between the UK and the US.
"This should be an easy win for both countries. The UK is not legally allowed to start making deals until Brexit is complete in 2019. So all they need to do is shake hands, smile, and announce their intention to put together an amazing deal," said Mati Greenspan, senior market analyst at eToro.
"However, if Trump decides to employ his unpredictability tactic and start trying to add pre-conditions, plays hard to get, or tries something else entirely inappropriate it could have disastrous consequences for global stocks. It's one thing to say you're going to play hardball, but it's an entirely different thing to try to bully a friend in need," Greenspan added.
The other focus in the US will be on fourth quarter GDP, which is out at 1330 GMT. Economists expect the world's largest economy to show 2.2% annualised growth, marking a slowdown from the 3.5% seen in the third quarter.
Elsewhere in the economic calendar, US preliminary personal consumption expenditure and durable goods data are both at 1330 GMT, the Michigan consumer sentiment index is at 1500 GMT and the Baker Hughes US oil rig count is at 1800 GMT.
On the London Stock Exchange, budget airline easyJet was one of the worst FTSE 100 performers, down 2.2% after it was downgraded to Neutral from Buy by Goldman Sachs, and to Underperform from Neutral by Davy Research. Irish broker Davy said easyJet's pricing weakness is due to "increasing competitive overlap", particularly from Ryanair Holdings.
International Consolidated Airlines Group was up 1.7% after Goldman Sachs upgraded the company to Buy from Neutral, while Davy lifted it to Outperform from Neutral. Davy believes IAG will benefit from the positive inflection point for prices of long-haul carriers.
Ubisense Group was up 31% after the location intelligence services company said it made good progress in 2016 and is confident on its prospects for the coming year.
Ubisense said it made progress in terms of revenue growth, margins, cost management and its order book in 2016, with all "significantly better" year-on-year. An increased focus on its RTLS software platform is paying off, it said, with a major deal with an automotive manufacturer signed over the course of the year.
Injection-moulded plastic products maker Coral Products said its profit for the year to the end of April is set to miss expectations and said its chief executive and finance director have both left the business.
Coral said a weak November and December for its Coral Products Mouldings unit will mean group profit for the year to April 30 will be "materially" lower than both its internal and market expectations. No further detail on the problems faced by the Mouldings unit were provided, but Coral said its other businesses have traded profitably and it remains confident on its medium and long term outlook.
The group added that CEO Roberto Zandona has resigned from his role for "personal reasons". In addition, Finance Director Stephen Fletcher has retired after 14 years with the company. The stock was down 36%.
By Neil Thakrar; [email protected]; @NeilThakrar1
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