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(Alliance News) - London share prices are set to fall further on Tuesday with the new coronavirus strain and countries banning travel and freight from the UK continuing to damp spirits.
In a glimmer of good news, the UK economy is estimated to have grown a record 16% in the third quarter of 2020 from the second.
The reading has been revised from quarter-on-quarter growth of 15.5% reported initially. While a record figure, UK gross domestic product is still 8.6% below where it was at the end of 2019, revised from an initial estimate of 9.7% - and follows a 19% slump in the second quarter of the year and 3.0% fall in the first quarter.
In early UK company news, M&A again was the dominant theme. Applegreen has agreed to be bought in a deal that values it EUR718 million. Grafton is to acquire Proline Architectural Hardware. Weir said its Oil & Gas sale will now complete in the first quarter of 2021.
IG says futures indicate the FTSE 100 index of large-caps to open 26.42 points lower, or 0.4%, at 6,389.90 on Tuesday. The FTSE 100 closed down 112.86 points, or 1.7%, at 6,416.32 on Monday.
"As countries queued up to close borders with Britain over its mutated strain of Covid-19, investors hit the panic button. Equity markets were slammed, along with energy and precious metals as investors flocked to the safety of the US dollar and US treasuries," said Jeffrey Halley, senior market analyst at Oanda.
He added: "The beleaguered UK and European stock markets may receive a boost this afternoon as Britain offered a fishing fig leaf in Brexit trade negotiations. It is unlikely to be enough to materially impact yesterday's ugly session, with Brexit fears, border closures and Covid-19 concerns sure to continue weighing on sentiment."
Talks with France on reopening full trade and transport across the Channel are ongoing as the UK government's chief scientific adviser said more restrictions may be needed at home because cases of a mutant strain of Covid were now appearing "everywhere".
Patrick Vallance gave the grim warning after more than 40 countries banned UK flights because of fears regarding the spread of the coronavirus variant. Vallance indicated a lockdown may be needed in wider areas of England, particularly as Christmas mixing may result in an increased spread of cases.
After the government moved to impose Tier 4 restrictions on London and parts of southern and eastern England over the weekend, France shut its border with the UK for 48 hours, prompting delays for freight lorries heading across the Channel.
Government sources told the PA news agency that discussions with the French government were "ongoing" after the PM said on Monday evening the two countries were working "to unblock the flow of trade as fast as possible".
Sterling was quoted at USD1.3411 early Tuesday, higher than USD1.3321 at the London equities close on Monday, though still well down from late last week. The euro traded at USD1.2226 early Tuesday, firming on USD1.2217 late Monday.
In early UK company news, Applegreen said it has agreed to be taken over by BidCo, a newly-formed company owned by B&J Holdings and Blackstone Infrastructure Partners, in a EUR718.1 million deal.
Applegreen operates a number of petrol stations in Ireland, the UK and the US. B&J Holdings is a 41% shareholder in Applegreen and represents the holdings of Applegreen's founders, Robert Etchingham and Joseph Barrett.
Applegreen shareholders will receive EUR5.75 in cash under the deal - the same price touted earlier in December - being a 48% premium to the stock's closing price of EUR3.88 on December 9, the last business day before the publication of the possible offer announcement.
The stock closed at 500 pence in London on Monday.
"The business has significant scope to further expand its footprint, which we believe will be best achieved in the private arena where the Group can benefit from the experience and capital of Blackstone as its partner, whilst maintaining the management and wider team which have driven the business forward to date," said Applegreen Chair Daniel Kitchen.
He continued: "The independent board is unanimously recommending the offer from BidCo, as it represents a compelling opportunity for independent shareholders to realise their investment in cash in the near term, and is at a significant premium to the prevailing share price."
Grafton Group said it has agreed to buy Proline Architectural Hardware, a leading of architectural ironmongery products for doors from a single location in Dublin.
Proline reported revenue of EUR10.8 million in 2019. No financial details of the deal were disclosed.
"Proline will bring specialist expertise to Grafton in the architectural ironmongery distribution segment in Ireland. It will also enable us to offer a broader range of products and services and to extend our customer base in this segment of the market," said Chief Executive Gavin Slark.
Weir said its Oil & Gas division sale to Caterpillar is now expected to close in the first quarter of 2021. The mining technology business said completion by the end of this year was dependent on the receipt of all regulatory clearances, and a "small number" remain outstanding, with the timing of some standard processes being delayed by Covid-19.
easyJet has agreed with Airbus to defer aircraft from the 2022 to 2024 financial years. A total of 22 aircraft will be moved from the 2022 to 2024 financial years to 2027 to 2028.
The budget airline said it will take no deliveries in the 2021 financial year, 8 in the 2022 year, 7 in 2023 and 18 in 2024. easyJet's financial year ends in September.
"This latest amendment to our longstanding agreement with Airbus reflects easyJet's significant fleet flexibility as well as the benefit of highly attractive aircraft pricing. In this period of uncertainty, this flexibility is even more valuable, as it will enable us to quickly flex our fleet size in response to customer demand," said easyJet Chief Executive Johan Lundgren.
In Asia on Tuesday, the Japanese Nikkei 225 index closed down 1.0%. Against the yen, the dollar was quoted at JPY103.41 versus JPY103.50.
In China, the Shanghai Composite ended down 1.9%, while the Hang Seng index in Hong Kong is down 0.8%. The S&P/ASX 200 in Sydney closed down 1.1%.
In the US on Monday, Wall Street ended mixed, with the Dow Jones Industrial Average ending up 0.1%, the S&P 500 down 0.4% and Nasdaq Composite down 0.4%.
Stocks in New York avoided the falls seen in Europe after US lawmakers on Monday approved a USD900 billion relief package for the world's biggest economy that will provide a long-sought boost for millions of Americans and businesses battered by the coronavirus pandemic.
Overwhelming approval in the Senate and House of Representatives clears the way for the legislation to be sent to President Donald Trump to be signed into law.
"The American people can rest assured that more help is on the way, immediately," Republican Senate Leader Mitch McConnell said on Twitter.
As the Covid-19 death count rises amid a massive resurgence of the virus that further threatens the economy, Republican and Democratic legislators finally hammered out a bill after months of wrangling and partisan finger-pointing.
Gold was quoted at USD1,868.40 an ounce early Tuesday, easing from USD1,875.05 on Monday. Brent oil was trading at USD49.96 a barrel, lower than USD50.32 late Monday.
The economic events calendar on Tuesday has US GDP figures at 1330 GMT.
By Lucy Heming; lucyheming@alliancenews.com
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