27th May 2014 16:02
LONDON (Alliance News) - UK stocks closed firmly higher Tuesday, with the FTSE 100 recording its biggest daily rise in over two weeks, as investors returned from a three-day weekend in buying mood following a strong performance by European equities on Monday.
"The weekend vote in the Ukraine appears to have been one major catalyst for yesterday’s strong European session, with the new Ukrainian President Petro Poroshenko making conciliatory noises towards Russia, as well as the European Union in an attempt to bring together the various factions in an attempt to de-escalate recent tensions," says Michael Hewson, chief market analyst at CMC Markets.
The DAX 30 in Frankfurt had closed up 1.3% on Monday, while the CAC 40 in Paris gained 0.8%.
"A bounce in the DAX yesterday provided the spring board to fresh gains for London, with a bit of M&A spice thrown in for good measure just to keep things bubbling over," says David Madden, a market analyst at IG.
FTSE 100-listed InterContinental Hotels Group ended the day amongst the biggest risers in the blue-chip index Tuesday, closing up 3.4%. Shares in the hotel chain rose sharply after it was reported over the weekend that it had rejected a GBP6 billion takeover from an unnamed US company. Sky News reported on Saturday that InterContinental's board met a few weeks ago to consider an offer but rejected it on the grounds that it was too low.
At the other end of the spectrum, AstraZeneca was a big loser, closing down 1.8%. The pharmaceutical company's shares fell after US drug maker Pfizer Inc confirmed on Monday that it no plans to make another offer for its UK rival, with the deadline under UK takeover rules for it to make a final offer having passed.
Pfizer will not be able to launch a takeover bid for AstraZeneca until November at the earliest.
Overall, the FTSE 100 closed up 0.4% at 6,844.94, to record its biggest daily gain since May 12, while the FTSE 250 closed up 0.9% at 15,843.93, and the AIM All-Share index up 0.6% at 806.54.
In Europe, having closed materially higher on Monday, the CAC 40 and DAX 30 spent much of Tuesday trading within relatively tight ranges. Eventually, the CAC 40 closed up 0.1%, while the DAX 30 closed up 0.5%.
On Wall Street, at the close of the UK equity market, US stocks are higher. The DJIA is up 0.4%, the NASDAQ Composite is up 0.9%, and the S&P 500 is up 0.5%, having hit a record high of 1,911.61 in early trading.
"It's becoming hard to imagine what the catalyst would be for a sharp downward move in equity markets given how markets continue to go from strength to strength on a day to day basis," says Hewson. "While sentiment continues to remain broadly positive it’s impossible to ignore the little voice on your shoulder, urging caution given that below the blue-chip benchmarks, equities remain well below their previous peaks," he adds.
Away from M&A chatter, ARM Holdings was a big FTSE 100 riser Tuesday, closing up 4%.
Shares in the chip maker jumped after Numis Securities increased its price target on the company to 920.00 pence from 880.00p, following the company's investor day. "Our main take-away from the ARM investor day was increased visibility of significant [market] share gains in network infrastructure which can be a material growth driver over the next five years," Numis analyst Nick James said.
Smiths Group, on the other hand, was a big blue-chip loser, ending the day down 1.1%. The engineering company's shares fell heavily on the back of some negative price target revisions. JPMorgan cut its target to 1,300.00 pence from 1,350.00p, while Morgan Stanley lowered its target to 1,481.00p from 1,536.00p.
On Monday, Exane BNP Paribas cut its price target to 1,300.00p from 1,330.00p, while Societe Generale lowered its target to 1,200.00p from 1,220.00p.
In the FTSE 250, AVEVA Group closed up 8.8% as the index's biggest riser. The engineering software and services provider's shares moved sharply higher after it said its pretax profit rose in the year to end-March, prompting it increase its dividend by 13%.
AVEVA posted a pretax profit of GBP69.0 million, up from GBP63.5 million, as revenue rose to GBP237.3 million from GBP220.2 million, boosted by growth in its three-dimensional design platform AVEVA Everything 3D, and a strong performance in its Engineering and Design Systems division. It proposed a total dividend of 27.0 pence, up from 24.0 pence the previous year.
Ophir Energy was the mid-cap index's heaviest faller, closing down 3.9%. The oil and gas exploration company said that drilling at its Affanga Deep-1 well in the Gnodo block offshore Gabon had found no "significant" oil indications in its target rock formations as it encountered thinner-than-expected sandstone sections with poor reservoir characteristics.
Genus, closing down 1.9%, was another big loser after it said it had agreed to cancel its joint venture plans with Yunnan Shennong Agricultural Group Co Ltd. The animal genetics company said that the establishment of a joint venture will not proceed, following its February deal with Shennong to build and operate a 1,000 sow nucleus farm to support Shennong's expansion, due to the current adverse market conditions for pig production in China
In the forex market, the pound ticked lower against its major rivals Tuesday.
The currency fell after data from the British Bankers Association showed fewer UK mortgages were approved in April than expected. The BBA said 42,173 mortgages were approved in the month, down from 45,045 in March and missing economists forecasts of 45,200. The latest figure was the lowest since last August, when approvals totalled 39,597.
At the close of the UK equity market, sterling trades at USD1.6803, EUR1.2330, CHF1.5073, and JPY171.45.
Meanwhile, the price of gold has fallen sharply Tuesday.
"Trading in gold has been so tight in recent weeks whilst the market has been looking for direction," says Richard Perry, a market analyst at Hantec Markets. "The perception has been that a 'war premium' has supported the price as uncertainty over geopolitics in Ukraine and how Russia would react to the presidential elections," he adds.
At the close of the UK equity market, the precious metal trades at USD1,268.69, having hit its lowest level since February earlier in the day at USD1,265.60.
Still to come Tuesday, Bank of England Governor Mark Carney gives a speech at 2000 BST.
In the data calendar Wednesday, French consumer spending and producer price information is released at 0745 BST, with German unemployment figures at 0855 BST. The latest reading of Italian business confidence is published at 0900 BST, with eurozone consumer confidence, industrial confidence, and services sentiment data due at 1000 BST. The Confederation of British Industry's distributive trades survey is released at 1100 BST.
In the US, the Mortgage Bankers Association releases its MBA mortgage applications data at 1200 BST.
In the corporate calendar, FTSE 250-listed Caledonia Investments and De La Rue release full-year results Wednesday, while Brewin Dolphin releases half-year results.
By James Kemp; [email protected]; @jamespkemp
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AstrazenecaInterContinental HotelsGenusDe La RueCaledoniaAVV.LBRW.LOPHR.LSmiths GroupARM.L