Last checked at LONDON (Alliance News) - UK stocks ended lower Monday as a lack of progress in the Greek debt negotiations continued to dent investor sentiment, with Diageo and Shire top and tailing the FTSE 100 amid a burst of merger and acquisition speculation.
The FTSE 100 ended down 0.2% at 6,790.04, having traded flat for most of the session, while the FTSE 250 ended down 0.3% at 17,878.43 and the AIM All-Share closed down 0.2% at 774.12.
In Europe, stock indices were hit harder by the lack of any progress between Greece and its international creditors. The CAC 40 in Paris ended down 1.3% and the DAX 30 in Frankfurt closed down 1.2%.
When the European equity markets closed, Wall Street was lower, with the DJIA down 0.2%, the S&P 500 down 0.3% and the Nasdaq Composite down 0.4%.
"There has been no real progress on (the Greek issue) from Friday," said Forex.com analyst Fawad Razaqzada. "In fact, comments at the weekend from the Greek Prime Minister Tsipras in a speech to the parliament where he criticized Greece's creditors, calling their reforms-for-aid proposals 'absurd' and 'irrational, blackmailing demands' seems to have upset its international creditors."
Greek Finance Minister Yanis Varoufakis described a one-to-one meeting on Monday in Berlin with his German counterpart Wolfgang Schaeuble as "productive."
"Our purpose was trying to achieve a commonly designed, planned, agreed solution to the impasse in which we have found ourselves unfortunately over the past few years with this ongoing crisis," Varoufakis told reporters after the meeting at Schaeuble's office. "I believe that today's conversation is going to be very helpful in solidifying the process of the last few days and weeks before we have a final solution to the ongoing conversations."
The focus in London was on merger and acquisition speculation in the UK media over the weekend.
Drinks company Diageo was the best-performing stock in the FTSE 100, finished up 6.9% at 1,881.90 pence, amid reports in the press late Friday that suggested Brazil's richest man, Jorge Paulo Lemann, is weighing a takeover bid for the drinks company. The Times, The Telegraph and Bloomberg all cited a report from columnist Lauro Jardim of Brazilian publication Veja that Lemann, who founded private equity firm 3G Capital, is in the early stages of preparing a potential offer for Diageo.
Analysts are skeptical about an approach, pointing out that 3G Capital would have to raise tens of billions of pounds, more than any equity component of a leveraged buyout in history.
Shore Capital does not expect 3G to make a bid for Diageo. "As to how likely a bid might be for Diageo, it is difficult say," said Phil Carroll, an analyst at the brokerage. "We would have thought that through its ownership of AB InBev, a bid for SABMiller is more likely especially given the greater level of potential synergies on offer."
Also Monday, Diageo was upgraded by JPMorgan to Neutral from Underweight with its price target lifted to 1,900p from 1,700p.
Drug maker Shire was the worst-performing stock in the blue-chip index, closing down 2.8%, after The Sunday Times said it is understood to be preparing a GBP12 billion offer for Swiss peer Actelion. The newspaper cited market sources as saying 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. Shire and Actelion told The Sunday Times that they didn't comment on market rumours.
Aerospace engineer GKN closed down 1.7% as the The Sunday Times reported that Airbus is considering throwing open GKN’s multimillion pound contract to supply parts for the A320 aircraft in a row over cost cuts.
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 reported, without saying where it got the information.
Investors were also still digesting the improvement in US nonfarm payrolls reported on Friday which some analysts say could drive the Federal Reserve to raise US interest rates in September or October.
The pound hasn't recovered from its drop against the dollar in the wake of the jobs report, even though US President Barack Obama reportedly expressed discomfort about the strong dollar. The strength of the dollar poses challenges to the economy, making the country's exports more competitive, a French source quoted Obama as saying at the sidelines of G-7 summit in southern Germany, although a US official immediately denied that statement, saying the President was making a point that global demand is very weak and G7 nations should avail all means to promote growth.
The pound was trading at USD1.5273 when the London equity markets closed.
"Whatever Mr. Obama said, he is merely catching up with the main worry of equity investors over the past year, namely when will the Fed raise rates?," said IG Markets senior market analyst Craig Beauchamp. "Friday's jobs report caused some to bring their estimates forward, but we will need more good data to confirm that the weakness of the first quarter was just an aberration."
In the economic calendar Tuesday, Consumer Price Indexes are due from China and Japan at 0230 BST and 0600 BST, respectively. The UK goods trade balance is due at 0930 BST, while eurozone gross domestic product is due at 1000 BST. In the US, the Redbook index is due at 1355 BST while JOLTS job openings is due at 1500 BST.
In the corporate calendar, WPP issues a trading statement. RPC Group, Carclo, OMG, Energy Assets Group, Oxford Instruments, Picton Property Income and Park Group publish full year results. Gooch & Housego releases half year results.
By Daniel Ruiz; danielruiz@alliancenews.com
Copyright 2015 Alliance News Limited. All Rights Reserved.
22 Nov 2019 16:06
