15th Sep 2014 15:45
LONDON (Alliance News) - UK stock indices closed a little lower Monday as equities never fully recovered from a lower open after some disappointing Chinese economic data was released over the weekend.
With little in the way of overall market drivers Monday, and as investors remain cautions ahead of the major risk events scheduled for later in the week, some merger and acquisition activity within the Beverages and Software sectors accounted for the biggest gainers on the London market.
The FTSE 100 closed just fractionally lower at 6,804.21, the FTSE 250 closed down 0.4% at 15,649.23, and the AIM All-Share closed down 0.6% at 771.99.
Major European markets were mixed, with the French CAC 40 closing down 0.3%, but the German DAX closing just fractionally higher.
Following the European close, stocks in the US continue mixed, with the DJIA up 0.1%, but the S&P 500 down 0.2%.
Chinese data released at the weekend showed that industrial production rose 6.9% year-on-year in August, missing the estimate for growth of 8.8% and hitting its slowest pace in more than five years. Meanwhile Chinese retail sales expanded 11.9% year-on-year in August, also missing the expected growth rate of 12.1%.
There was no domestic data released Monday, and US industrial production data released later in the afternoon was also disappointing, recording a 0.1% fall in production month-on-month in August, reversing half of the 0.2% growth in July and missing expectations for an acceleration in growth to 0.3%.
SABMiller was by far the biggest blue chip gainer Monday, closing almost 10% higher following reports that it approached the owners of Dutch brewer Heineken with a possible bid for the company in an attempt to fend off a potential approach from Anheuser-Busch InBev.
SABMiller has long been the subject of speculation about a possible bid from AB InBev, the Belgium-based beer group which has spent nearly USD100 billion on acquisitions in the past decade. The Heineken family, which owns 50% of the Heineken company, rejected the SABMiller offer, saying they want to "preserve the heritage and identity of Heineken as company," according to Bloomberg.
Analyst now see SABMiller as an "in play" takeover target, with AB InBev the most likely bidder. The heightened activity in the sector also boosted sector peer Diageo, which closed up 2.3% Monday.
"SABMiller think offence is the best defence against a possible move from Anheuser Busch, so with both of these companies on the lookout for a deal other potential targets will get a bid," said market analyst at CMC Markets Jasper Lawler. "In Europe especially there is always concern over monopoly so SABMiller may shed a few assets to make the deal more palpable to regulators which could then be picked up by Diageo," the analyst says.
FTSE 250-listed Micro Focus International saw its shares jump more than 15% following the announcement that is has agreed a USD2.35 billion reverse takeover deal to acquire US-based The Attachmate Group. Analysts have called the deal "transformational" for Micro Focus; it would become one of the biggest software companies in the UK. Early analyst estimates indicate that the deal would be at least 20% accretive to the groups earnings.
Under the agreement, Micro Focus plans to acquire the whole of Attachmate by issuing 86.60 million shares to Attachmate's parent company Wizard Parent LLC, equivalent to 40% of the new company's enlarged share capital. Additionally, Micro Focus will return GBP83.9 million to shareholders at 60 pence a share, and simultaneously undertake a proportionate share consolidation, giving shareholders 0.9285 new shares for each existing share held.
TUI Travel shares rose 1.6% Monday after the travel operator and its German parent TUI AG revealed the details of their proposed merger, which will see TUI Travel shareholders own a 46% stake in the combined group that will have a fully-diluted equity value of around GBP5.2 billion. TUI Travel, which owns Thomson and First Choice, has been in the process of merging with its German parent TUI AG, after TUI AG said in June that it planned to buy the minority of UK-based holiday operator TUI Travel that it didn't already own.
The UK bookmakers had a less positive start to the week, with William Hill closing down 1.5%, and Ladbrokes closing down 3.2%. Investors were unconvinced by the self-imposed restrictions announced Monday in an attempt to address the issue of problem gambling.
The voluntary changes announced by a group of UK bookmakers include restrictions on advertising free bets and promoting increased awareness of responsible gambling. While these measure may help to reduce the levels of problem gambling, they will be negative for the bookmakers profits, and analysts have said that the voluntary measures will not be enough to deflect further regulation in the sector, given increasing pressure from lobbyists on the government.
Foreign exchange majors were relatively subdues Monday, with the dollar just a little firmer across the board. At the time of the European equity market close, the pound trades at USD1.6233, and the euro trades at USD1.2945.
While it was a relatively quiet start to the week, volatility across the equity and currency markets will undoubted pick up as the week goes on, given the amount of major events scheduled. These include the release of the latest Bank of England policy meeting minutes on Wednesday, which will be followed on Wednesday evening by the latest policy decision from the US Federal Reserve, all before the referendum in Scotland on Thursday - which remains too-close-to-call according to the latest polls.
Looking at Tuesday's calendars, the domestic economic focus will be the latest UK inflation data at 0930 BST. Highlights from the UK corporate calendar include full year results from FTSE 250-listed construction company Galliford Try, as well as a fourth quarter trading update from AIM-listed online retail giant ASOS.
By Jon Darby; [email protected]; @jondarby100
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