15th Oct 2014 09:47
LONDON (Alliance News) - UK shares have fallen heavily Wednesday with the focus on individual stocks, as Irish drug company Shire lost a quarter of its share value after AbbVie appears to have got cold feet over a potential acquisition for the company.
At mid-morning, the FTSE 100 is down 1.1% at 6,321.26, while the FTSE 250 has recovered to trade down 0.1% at 14,663.06, and the AIM All-Share is down 0.6% at 693.83.
European stocks also trade lower, with the CAC 40 down 0.6% and the DAX down 0.6%.
"Any hope of today seeing a continuation of [Tuesday?s] small gains was wiped out by the news that Shire?s deal with AbbVie was under threat of being undone. The news took around 30 points off the index, representing the majority of early losses, but the selling gathered pace as the morning continued," says Chris Beauchamp, a market analyst at IG.
Shire said it thinks AbbVie Inc should proceed with its recommended GBP32 billion takeover offer for the company, and noted that Shire would be due a break fee of about USD1.64 billion if the deal is called off, but its shares lost 24% of their value on fears the deal will be called off.
US drug maker AbbVie said late Tuesday that it intends to reconsider the recommendation made to its shareholders to adopt the takeover agreement to acquire Shire amid proposed tax rule changes in the US. It has sent Shire a notice about its intention to withdraw or modify its recommendation.
The price of Brent oil fell to a fresh near-four-year low Wednesday to USD83.25 a barrel. The fall has kept oil producers amongst the worst performing stocks in the FTSE 100, with Tullow Oil down 2.4% and Royal Dutch Shell 'A' shares down 1.4%.
BG Group has avoided the adverse effects of the low oil price, gaining 1.2% after the company poached Helge Lund from rival Statoil to be its new chief executive from next March, and separately said it had started production early at a block in Brazil.
"Helge's track record speaks for itself. He has built a world-class exploration and production portfolio at Statoil, and the company is now widely admired for its technical expertise, financial performance and strong, values-based culture. Helge is ideally suited to lead BG Group in the next phase of its growth," said BG Chairman Andrew Gould, who led the search for a new CEO.
Separately, BG Group said it had started production early on the Iracema area in block BM-S-11 in the Santos Basin, offshore Brazil.
In the FTSE 250, CSR's shares have gained 30%, making it the best performing stock in the mid-cap index. The company said it has reached an agreement to be acquired by Qualcomm Inc for GBP1.6 billion in cash. The 900 pence a share bid from the US semiconductor group comes after CSR rebuffed an approach from Microchip Technology for being too low in August. The British company remained in talks with Microchip, but the US company only had until Wednesday to make a firm offer under UK takeover rules.
Balfour Beatty shares have risen by 8.3% after it confirmed it has poached the chief executive of defence products company QinetiQ Group to be its own CEO from January 1, 2015, a job that will involve turning the struggling company around after a string of profit warnings, a failed merger attempt from a rival, and the disputed sale of its US project management business. In a statement, Balfour Beatty said Leo Quinn, who started his career at Balfour, has "an excellent track record in improving the performance of major international businesses".
Jefferies is positive over Balfour's appointment, saying Quinn has a good track record as a turnaround specialist, but feels he should have a say over the selling of the construction company's US arm Parsons Brinckerhoff.
QinetiQ's shares have fallen 9.4% on the back of the news, making it the worst performing stock in the FTSE 250.
UK unemployment rate fell to the lowest since late 2008, data from the Office for National Statistics showed Wednesday. The jobless rate fell to 6.0% during June to August, the lowest since late 2008 and down from 6.5% seen in March to May period. Economists had forecast a rate of 6.1%. During June to August, there were 1.97 million unemployed, 538,000 fewer than a year earlier, representing the largest annual fall in unemployment since record began in 1972. Pay including bonuses was 0.7% higher than a year earlier, in line with expectations. Excluding bonus, earnings climbed 0.9% from last year.
"If the unemployment rate keeps falling rapidly, rate setters may need to hike rates even with inflation below target because of the chances that price gains would pick up in the future. We expect inflation to change little from its current level over the next year or so, before the effects of oil price falls drop out of the index and the tightening labour market begins to show up in better wage gains, pushing inflation back up to target," says Berenberg's chief UK economist Rob Wood. "Right now, policy makers will probably be more concerned by stalling eurozone growth than a headline inflation figure dragged down by commodity prices."
Still ahead on Wednesday is US MBA mortgage applications for the week ending October 10 at 1200 BST and producer price index and retail sales for September both at 1330 BST.
Futures indicate Wall Street to open lower, with the DJIA shown to open down 0.1%, S&P 500 down 0.2% and the Nasdaq Composite just fractionally lower.
European Central Bank President Mario Draghi will give a speech at the grand opening event of the European Cultural Days 2014 in Frankfurt after the London close at 1900 BST.
By Neil Thakrar; [email protected]
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