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(Alliance News) - Stocks in London are called for a higher open on Monday following the agreement of some early terms in what the US called a possible "substantial" trade deal with China.
In UK company news early Monday, Sophos Group has agreed to be bought for over GBP3 billion, while Ferrexpo has moved to defend its chief executive over allegations of misconduct in Ukraine.
IG futures indicate the FTSE 100 index is to open 16.5 points higher at 7,263.58. The blue-chip index closed up 60.72 points, or 0.8%, at 7,247.08 on Friday, ending the week up 1.2%.
US and Chinese trade negotiators on Friday reached agreement on some of the key US demands, including intellectual property and financial services, producing what US President Donald Trump called phase one of a "substantial deal".
In exchange, the US agreed to postpone a tariffs increase, from 25% to 30%, set to take effect on Tuesday on billions of dollars of imported Chinese goods.
Trump said the deal had been reached "in principle" and which still must be put onto paper and signed. But he stressed that it "fully covered" some of the US demands, including trade in agricultural goods, with China agreeing to increase purchases to as much as USD50 billion annually within two years from about USD8 billion currently.
"While this week's tariff increases have been postponed, this was always going to be the low hanging fruit when it came to a potential de-escalation, while Trump announced any further trade progress was likely to come in phases, with the December tariff increases remaining very much on the table," said Michael Hewson at CMC Markets UK.
"So while things aren't likely to get any worse in terms of an escalation in the short term, they also haven't got any better, as all the existing tariffs remain in place."
China's imports and exports fell by more than expected in September, official data showed Monday, as cooling demand at home and abroad hit trade in the world's second-largest economy.
Globally, China's exports dropped 3.2% in September from the same period last year, while imports dived 8.5%, according to data from the customs administration.
The figures were worse than a Bloomberg forecast, which estimated exports to drop 2.8% and imports by 6.0%.
The EU has replaced the US as China's top trading partner amid a bruising tariffs spat, with imports from the US down 26% on-year in September.
"The latest China trade numbers would appear to underline the urgency of a need to avoid an escalation with the latest data showing the global economy continues to struggle," added Hewson.
Financial markets in Japan were closed on Monday for the Health & Sports Day public Holiday. In China, the Shanghai Composite is up 1.3%, while the Hang Seng index in Hong Kong is 1.0% higher.
In the US on Friday, Wall Street ended higher. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite finished up 1.2%, 1.1% and 1.3% respectively.
In early UK corporate news, FTSE 250 cybersecurity firm Sophos Group has agreed to a takeover by Surf Buyer, a newly-formed vehicle owned by funds managed by private equity firm Thoma Bravo.
Surf Buyer will pay USD7.40 per Sophos share, or 583 pence. This is a 37% premium to Sophos's closing price in London of 425.5p on Friday in London.
The deal values Sophos at GBP3.01 billion, with an enterprise value of GBP3.11 billion when including its debt.
On the trading front, Sophos said momentum has been "encouraging" in the first half of its financial year ending March 2020, with billings growth at constant currency 9%.
Emerging markets-focused asset manager Ashmore Group reported a 0.1% rise in assets under management for the quarter ended September, to USD91.8 billion.
There was a 0.4% fall in blended debt, its biggest investment theme, while external debt grew 2.6% and local currency remained flat. Ashmore's corporate debt assets under management declined by 3.2%.
The slight rise in overall assets under management reflected net inflows of USD2.4 billion, offset by a negative investment performance of USD2.3 billion.
Iron ore pellet firm Ferrexpo said it is aware of media reports surrounding Chief Executive Kostyantin Zhevago, but said no legal action has been taken against him and he "strongly denies" any wrongdoing.
Last week, Bloomberg reported Ukraine has added Zhevago to an international wanted list after he failed to report for questioning about former business commitments.
He has been named as a suspect in absentia, Bloomberg continued, and investigators have begun court proceedings to find him.
Bloomberg said Ukrainian investigators believe he has committed "large-scale" money laundering and embezzlement.
Energean Oil & Gas has sold assets in the UK and Norway to Neptune Energy for USD250 million in cash.
The assets were only recently purchased as part of Energean's takeover of Edison Exploration & Production, but they have been swiftly moved on with Energean looking to focus on the Mediterranean.
Elsewhere, fashion firm Superdry has extended Interim Chief Executive Julian Dunkerton's contract to April 2021, as he looks to return the company to "sustainable growth".
Company founder Dunkerton returned in April this year, having left in 2018, after the company issued a series of profit warnings.
On the political front, UK Prime Minister Boris Johnson is coming under pressure to concede more ground to Brussels as hopes for an early breakthrough in the Brexit talks appeared to falter.
UK and EU officials will resume talks in the Belgian capital on Monday with the prospects of an agreement in time for Britain to leave with a deal on October 31 in the balance.
Time is rapidly running out if there is to be an agreement to put to EU leaders to sign off on at their two-day summit starting on Thursday.
The EU's chief negotiator Michel Barnier said "technical-level" talks between officials over the weekend had proved "constructive".
But in a briefing to ambassadors of the remaining EU27 on Sunday in Brussels, he said that "a lot of work remains to be done".
Johnson is putting a crackdown on violent and foreign criminals at the centre of the first Queen's Speech of his premiership in a bid to "restore confidence" in the justice system.
The package of 22 bills to be set out on Monday will include legislation to keep serious criminals in prison for longer, impose tougher sentences on foreign offenders who return to the UK and provide better protection for victims of domestic abuse.
They will sit alongside measures intended to invest in the NHS, strengthen environmental protections and raise living standards through increasing the national living wage to GBP10.50 an hour.
At the same time ministers are preparing to rush through a bill to ratify any Brexit deal Johnson is able to agree this week in Brussels in time for Britain to leave on the EU on October 31.
The economic calendar Monday has industrial production data from the eurozone at 1000 BST.
By George Collard; georgecollard@alliancenews.com
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