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LONDON (Alliance News) - Shares are firm in London at the open Monday, following some mixed economic data from China, Japan and Germany.
Attention is on the G7 meeting taking place in southern Germany, at which Greece and Ukraine are topics of conversation.
In the FTSE 100, both Shire and GKN are being sold on two articles in The Sunday Times. The stocks are down 1.9% and 1.1%, respectively. Pharmaceutical firm Shire is understood to be preparing a GBP12 billion offer for Swiss peer Actelion, newspaper reported, while Airbus is considering throwing open GKN’s multimillion pound contract to supply parts for the A320 aircraft in a row over cost-cuts.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.2% at 6,820.21
FTSE 250: up 0.1% at 17,941.08
AIM ALL-SHARE: flat at 775.82
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Hang Seng: up 0.5% at 27,404.11
Nikkei 225: closed flat at 20,457.19
DJIA: closed down 0.3% at 17,849.46
S&P 500: closed down 0.1% at 2,092.83
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GBP: up at USD1.5292
EUR: up at USD1.1157
GOLD: up at USD1,173.07 per ounce
OIL (Brent): up at USD63.21 a barrel
(changes since end of previous GMT day)
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ECONOMICS AND GENERAL
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Monday's Key Economic Events still to come
(all times in BST)
09:30 EU Sentix Investor Confidence
13:15 Canada Housing Starts s.a (YoY)
13:30 Canada Building Permits (MoM)
15:00 US Labor Market Conditions Index
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European Commission President Jean-Claude Juncker rejected a phone call Saturday from Greek Prime Minister Alexis Tsipras asking for a new round of talks on Athens' deepening debt crisis, but that does not mean the matter won't weigh on an upcoming summit of the world's major economies in Bavaria. Juncker turned down Tsipras' request, saying that there had been no new developments in the crisis, which threatens to result in cash-strapped Greece defaulting, according to dpa information. The commission president is attending the summit of Group of Seven leading industrial states at luxury Alpine retreat Schloss Elmau, where Greece's faltering talks with its creditors - the European Central Bank, the International Monetary Fund and Athens' eurozone partners - are now set to form part of the G7 leaders' talks.
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Western sanctions against Russia should remain in place until the Ukraine ceasefire agreement is fully implemented, US President Barack Obama and German Chancellor Angela Merkel agreed Sunday. The two leaders met privately before the start of the two-day G7 summit in southern Germany, the White House said. The Group of Eight became the Group of Seven after Russia was expelled last year by the other powers over its actions in Ukraine. Merkel and Obama agreed that the "duration of sanctions should be clearly linked to Russia's full implementation of the Minsk agreements and respect for Ukraine's sovereignty," a White House statement said.
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The Confederation of British Industry downgraded its UK growth projections citing weaker-than-expected growth in the first quarter. In a report released Monday, the business group said the economy will grow 2.4% this year compared to a 2.7% rise expected in February. For 2016, growth is expected to be at 2.5% instead of 2.6%.
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The growth in the Irish construction sector expanded for the third straight month in May, reaching the highest level since November last year, as activity, new orders and employment rose at sharper rates, the results of a survey by Markit Economics and Ulster Bank showed Monday. The Ulster Bank Construction Purchasing Managers' Index rose to 63.3 in May from 57.2 in the previous month. Any reading above 50 indicates expansion in the sector.
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Germany's industrial production grew more than expected in April, data from Destatis revealed. Industrial production expanded 0.9% month-on-month in April, reversing a revised 0.4% fall in March. It was larger than an expected 0.5% increase and also the biggest growth seen so far this year. Excluding energy and construction, industrial output advanced 0.7% in April.
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Germany's exports climbed for the third straight month in April, defying economists' expectations for a decline, preliminary figures from Destatis showed. Exports rose a seasonally and calender-adjusted 1.9% month-on-month in April, faster than previous month's 1.3% increase. Economists had forecast a 0.4% drop for the month. Meanwhile, imports fell 1.3% in April from the prior month, in contrast to economists' expectations for a 0.5% rise. It was the first decrease in three months.
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China's foreign trade surplus increased by more than expected in May, as imports fell faster than exports, figures from the Customs Office showed. The trade surplus of the country came in at USD59.49 billion in May, more than the USD44.8 billion expected by economists. Exports fell 2.5% year-over-year in May, while they were expected to decline by 4.4%. Imports plunged 17.6%, much more than a 10.0% fall expected by economists.
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Japan's gross domestic product expanded 3.9% on year in the first quarter of 2015, the Cabinet Office said in the revised report released on Monday. This was well above of forecasts for 2.8% growth and up from the February 15 preliminary reading of a 2.4% rise. GDP growth for the fourth quarter of 2014 was 1.2%.
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Japan's current account surplus declined in April compared to the previous month and came below economists expectations, data from the Ministry of Finance showed Monday. A reversal in the balance of trade to a deficit from a surplus impacted the current account balance. Current account surplus fell to JPY1.326 trillion in April from JPY2.795 trillion in the previous month. Economists had expected a surplus of JPY1.687 tillion. In April 2014, the current account surplus was JPY220.8 billion.
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Turkey's Justice and Development Party was facing the challenge of forming a new government, after failing to secure an outright majority in parliamentary elections for the first time in its history. The AKP has ruled the country alone since 2002, and Sunday's elections are seen as a blow to the efforts of its founder, President Recep Tayyip Erdogan, to change the presidential system to give more powers to his office. With nearly all the votes counted, the AKP had just over 40% of the vote, giving it 258 seats in the 550-member parliament.
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At least 44 soldiers were killed on Sunday in a series of airstrikes by a Saudi-led coalition on the headquarters of the Yemeni army in the rebel-held capital Sana'a, a health official said. At least 180 people, mostly civilians living nearby, were injured in the bombardment of the building located in the Tahrir district in central Sana'a, the official at the rebel-controlled Health Ministry told dpa.
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BROKER RATING CHANGES
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JPMORGAN RAISES DIAGEO TO 'NEUTRAL' ('UNDERWEIGHT') - PRICE TARGET 1900 (1700) PENCE
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EXANE BNP CUTS RIO TINTO TO 'NEUTRAL' ('OUTPERFORM') - PRICE TARGET 3000 (3250) PENCE
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CITIGROUP CUTS BELLWAY TO 'NEUTRAL' ('BUY') - TARGET 2,540 (2,160) PENCE
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CREDIT SUISSE RAISES KAZ MINERALS TO 'OUTPERFORM' ('NEUTRAL'), PRICE TARGET TO 320 (255) PENCE
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COMPANIES - FTSE 100
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BT Group is set to become a takeover target for Germany's Deutsche Telekom according to senior industry executives and city analysts, the Telegraph reported Sunday. Deutsche Telekom is reportedly in talks to merge its American arm, T-Mobile US, with satellite pay TV operator Dish Networks. It a deal is struck, the sources claim, the likelihood of a potential takeover of BT will rise as this could be a route for Deutsche Telekom to exit the American market. It could then look to redeploy funds in Europe.
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Airbus is considering throwing open GKN’s multimillion pound contract to supply parts for the A320 aircraft in a row over cost-cuts, The Sunday Times reported without saying where it got the information. The European aerospace giant is believed to be considering inviting other suppliers to pitch for GKN’s work on the short-haul workhorse as it attempts to transform the meagre profit margins it makes on planes by demanding cost-cuts from suppliers, The Times said. Last year Airbus earned margins of about 6% on commercial aircraft, compared with more than 12% in GKN’s aerospace division.
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Shire is understood to be preparing a GBP12 billion offer for Swiss peer Actelion, The Sunday Times reported citing market sources who said Actelion was an "obvious target" for the British drugs specialist. However, Shire could have a battle on its hands, The Times said, as Actelion is understood to have rebuffed an informal approach a few weeks ago. Shire may have to offer a sizeable premium.
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COMPANIES - FTSE 250
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Drax Group said trading conditions have "remained challenging" in 2015 as weak gas markets continue to cause lower power prices, but said its expectations for the full year remain unchanged. The FTSE 250-listed UK power generator said although conditions remain difficult, it continues to benefit from a strong contracted position and good operational performance of its generating units. As at June 1, Drax has 23.8 terawatt hours of power sales secured for 2015, which is up from 20.4 terawatt hours at the end of February.
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COMPANIES - LONDON MAIN MARKET AND AIM
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Asia Coal Ventures said it has made an improved offer to takeover Asia Resource Minerals which has secured the backing of significant shareholder Nathaniel Rothschild, who had claimed the previous offer undervalued the company. Financier Rothschild's NR Holdings Ltd vehicle, which holds a 17.2% stake in Asia Resource Minerals, had said Asia Coal Venture's 41 pence per share offer undervalued the Indonesian coal mining company. On Monday, Asia Coal Ventures said it had increased the offer to 56.0 pence per share, up 37% from the original offer and valuing the company at over USD200 million. In a separate statement, Rothschild's NR Holdings confirmed the offer and said it intended to accept it.
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Construction services company ISG said it has acquired a further 49% stake in its Brazilian fit-out partner ACE, for GBP335,000 in cash, and said it plans to buy the remainder of the company over the next three years. ISG first bought 20% of ACE in 2013 and now owns 69% of the company. ACE provides office fit-out and refurbishment services in Sao Paulo and Rio de Janeiro.
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Armadale Capital said it has signed a heads of terms agreement with the African Mining Contracting Services group to fund, develop, construct and operate the Mpokoto gold project in the Democratic Republic of Congo, the "final big hurdle" in moving the project toward production, Executive Director Justin Lewis told Alliance News. The agreement, which is subject to a final definitive deal between the two companies, will lead to Africa Mining introducing investors to provide at minimum of USD20 million of debt financing to develop the project into production in the first-half of 2016 as a pre-condition.
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Sound Oil said it has entered into a farm-in agreement with the Moroccan Oil and Gas Investment Fund on the onshore Tendrara license to operate and acquire up to a 55% stake by funding exploration costs. The company has also completed further work on the second appraisal well at the Nervesa discovery in Italy, which has shown it is gas bearing but has low permeability and Sound is now deciding whether to initiate a well test directly or to utilize stimulation techniques.
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Pendragon said the agreement it announced in March to buy a motor dealership in Glendale, California has fallen through after Toyota Motor Corp's Lexus brand exercised its right to buy the dealership.
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COMPANIES - INTERNATIONAL
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Deutsche Bank confirmed the resignation of its co-chief executives, Anshu Jain and Juergen Fitschen, who will leave the bank during the course of the next year and be replaced by banking veteran and former UBS chief financial officer John Cryan. Jain, who has come under fire in recent months in relation to a series of financial missteps and Deutsche's flagging profitability, will officially resign on June 30, but remain with the bank as a consultant until January.
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General Electric is nearing a sale of its private-equity lending unit to Canadian pension fund Canada Pension Plan Investment Board, according to a Wall Street Journal report. The terms of the deal, which is expected to be inked as early as Monday, are still being negotiated. The deal would include assets of more than USD10 billion and propel CPPIB into being one of the largest lenders to private equity firms in North America.
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Sony Music CEO Doug Morris said Apple will announce its new music streaming service on Monday at its World Wide Developers Conference, VentureBeat reported on Sunday. Rumored details about the new Apple Music service have been floating around for months now. The service is expected to be priced around the industry standard of USD9.99 per month.
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Seed maker Monsanto reaffirmed its commitment to negotiate a mutually beneficial combination as part of the company's proposal to combine with Swiss rival Syngenta in a cash and stock transaction valued at CHF449 per share. Monsanto said its proposal would provide Syngenta shareholders with a substantial premium of more than 43% over the CHF314 share price on April 30.
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Online-video streaming service Netflix plans to expand into Italy and Portugal in October 2015. They will join Netflix's list of about 50 countries that already receive service, 13 of which are fellow European nations. The company plans to expand to 200 countries by the end of next year.
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Monday's Scheduled AGMs/EGMs
Hansteen Holdings
Eleco
Manx Telecom
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By Tom Waite; thomaslwaite@alliancenews.com; @thomaslwaite
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