(Alliance News) - Stock prices in London are seen opening slightly higher on Monday as Brexit negotiations face a ticking clock and tensions between the US and China flare up.
More positively for the market, China posted strong trade data overnight, while M&A activity heated up for UK listings.
In early company news, DIY retailer Kingfisher joined major UK supermarket chain in returning coronavirus business rates relief. In merger and acquisition news, speciality chemicals firm Elementis rebuffed an "opportunistic" offer from Minerals Technologies, and estate agent Connells made an improved offer for peer Countrywide.
IG futures indicate the FTSE 100 index is to open 9.97 points higher at 6,560.20. The blue-chip index closed up 59.96 points, or 0.9%, at 6,550.23 Friday.
Kingfisher said it is to return in full the UK and Republic of Ireland business rates relief that the B&Q store chain owner received as a result of the Covid-19 crisis. Earlier this year, Kingfisher repaid in full the GBP23 million received under the UK government's Job Retention Scheme.
Kingfisher, which had to close its stores earlier in the year due to the coronavirus pandemic, said it benefited from financial support measures it received from the UK and Irish governments which, helped protect jobs and cushion the blow from Covid-19, in the face of "significant uncertainty".
Since reopening its stores in late April and early May, Kingfisher said its sales performance has been strong, supported by higher demand for home improvement across its markets.
As such, Kingfisher has decided to return the UK and Republic of Ireland business rates relief. Kingfisher's total annual business rates bill eligible for this relief is around GBP130 million, of which GBP110 million falls in financial 2021 and the remainder in financial 2022.
It now anticipates that financial adjusted profit before tax will include GBP85 million of non-recurring cost savings, compared to previous guidance of GBP175 million.
Land Securities Group said it has acquired a 10 storey, office-led building located at 55 Old Broad Street in the City of London from PGIM Real Estate for a headline price of GBP87 million and a net initial yield of 4.1%.
LansSec said the deal has exchanged on an unconditional basis and is expected to complete in January.
Nick de Mestre, head of investment at Landsec, said: "55 Old Broad Street is a well-located asset in the heart of London. The development potential of this asset, combined with the potential for Dashwood, offers Landsec the opportunity to deliver a compelling, best-in-class destination over the medium term. This acquisition demonstrates our commitment to optimising our central London portfolio through the reinvestment of capital, as set out in our strategy."
Frasers Group confirmed that it is in negotiations with the administrators of department store chain Debenhams' UK business regarding a potential rescue transaction for Debenhams' UK operations.
Frasers Group said that while it hopes that a rescue package can be put in place, "time is short" and the situation is "further complicated" by the recent administration of the TopShop owner Arcadia Group, which is Debenhams' biggest concession holder. Frasers added that there is no certainty that any transaction will take place, particularly if discussions cannot be concluded swiftly.
Elementis said that it received a revised conditional proposal from Minerals Technologies late Friday for a possible cash offer for Elementis at 130 pence per share. The stock closed at 126.80p on Friday.
The board of Elementis rejected the offer, saying it was significantly short of a value that would merit engagement and access to the company's non-public information, despite the "continued opportunistic bidding tactics of Minerals Technologies".
"We have a clear strategy to capture this growth and profitability and we are confident that this will deliver significant value for our shareholders. It is the quality of these businesses that has attracted Minerals Technologies. As a board, we are fully aware of our responsibility to create and capture value for our shareholders, but this 'best offer' falls well short of that threshold for us to engage," said Chair Andrew Duff.
In other M&A activity, Connells made a 325p cash offer for Countrywide, saying it raised its offer by 30% following discussions with Countrywide's major shareholders. The stock closed at 255.00p on Friday.
Countrywide had rejected a 250 pence per share takeover offer from Connells last week.
Connells believes that its offer is significantly more attractive to Countrywide shareholders than the alternative proposal by Alchemy Partners, which it said would "Countrywide with high levels of debt and significantly less capital".
Further, Connells said the offer is not conditional on clearance from the UK Competition & Markets Authority, saying it believes the combination will not give rise to any competition concerns on any markets in which Connells and Countrywide operate.
The UK and EU post-Brexit trade talks reach a crisis point on Monday with the outcome highly uncertain and the risk of a damaging "no-deal" still alive.
EU chief negotiator Michel Barnier and his UK counterpart David Frost worked late into Sunday in Brussels, scrambling to close out a deal after eight months of fraught talks.
Barnier and Frost are expected to keep talking through Monday, and report back to their respective bosses, EU Chief Ursula von der Leyen and UK Prime Minister Boris Johnson. The two leaders will speak by phone later in the day.
All eyes are on an EU summit on Thursday, with the prospect that any deal – or the failure to find one – will be put to the bloc's 27 leaders at that time. A source close to the talks said the situation was "very difficult" and that negotiations were in their "last useful days".
Without a deal, tariffs would be levied on the huge volumes of trade passing between the UK and the European continent, through the Channel tunnel and by ship, starting on January 1.
"European markets look set for an uncertain start as the latest EU/UK trade talks move into their final phase, in what is set to be a make-or-break week, with a possible ratification summit, later this week," said CMC Markets analyst Michael Hewson.
The pound was quoted at USD1.3376 early Monday, well down from USD1.3470 at the London equities close Friday.
The euro was priced at USD1.2120, down from USD1.2140. Against the Japanese yen, the dollar was trading at JPY104.12, down from JPY104.20.
Brent oil was quoted at USD49.05 a barrel on Monday morning, flat from USD49.08 late Friday. Gold was trading at USD1,838.02 an ounce, up from USD1,832.24.
The Japanese Nikkei 225 index ended down 0.8%. In China, the Shanghai Composite closed down 0.8%, while the Hang Seng index in Hong Kong is down 1.3%.
Investor sentiment in Asia was hurt by reports that the US is considering fresh sanctions on several Chinese officials over their roles in the disqualification of lawmakers in Hong Kong, as Donald Trump presses ahead with his fight against Beijing before leaving office.
"After an initial rise on US stimulus hopes, early rallies quickly faded on news that the Trump administration is preparing new sanctions on Hong Kong and Mainland China officials. This time, the culprit is Beijing's disqualification of elected legislators in Hong Kong, proving that geopolitics will not go away as the Trump administrations end draws closer," said Oanda markets analyst Jeffery Halley.
Separately, customs data showed that China's exports grew 21% year-on-year in November while imports rose 4.5%, as the Asian economy has largely recovered after the coronavirus crisis.
Altogether, China's foreign trade rose 17% in November, with the trade surplus jumping 103 to USD75.4 billion. In the first 11 months of the year, China's exports rose 2.5%, while imports dropped 1.6%.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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