LONDON (Alliance News) - London stocks opened lower Friday, tracking declines in Asia driven by business sentiment in Japan coming in beneath expectations.
In Asia, the Bank of Japan's Tankan survey showed Japanese companies losing confidence amid slumping domestic spending and slow growth in emerging economies.
The large manufacturers' index came in with a score of 6 for the first three months of the year, down sharply from the reading of 12 recorded for the fourth quarter. Economists had expected a decline to a score of 8, but the drop was steeper than predicted. It is also the first time the index in the quarterly survey has fallen to below 10 since June 2013.
In London, grocer J Sainsbury ended its long-running pursuit of mid-cap Home Retail Group, coming to terms on a cash-and-shares takeover valuing the Argos owner at GBP1.2 billion.
Sainsbury's first entered talks to buy Home Retail in November, disclosing its interest in January, before then facing competition from South Africa's Steinhoff International. Steinhoff, however, dropped out of the race earlier this month, leaving the path open for Sainsbury's to complete a deal.
Sainsbury's shares opened down 1.5%, while Home Retail was down 0.6%.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 1.1% at 6,103.69
FTSE 250: down 0.8% at 16,791.85
AIM ALL-SHARE: down 0.1% at 709.83
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Hang Seng: down 1.3% at 20,507.69
Nikkei 225: down 3.6% at 16,164.16
DJIA: closed down 0.2% at 17,685.09
S&P 500: closed down 0.2% at 2,059.74
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GBP: down 0.1% at USD1.4352 (USD1.4399)
EUR: flat at USD1.1384 (USD1.1388)
GOLD: up 0.1% at USD1,232.47 per ounce (USD1,236.00)
OIL (Brent): down 0.2% at USD40.03 a barrel (USD40.73)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Friday's Key Economic Events still to come
(all times in BST)
08:45 Italy Markit manufacturing PMI
08:50 France Markit manufacturing PMI
08:55 Germany Markit manufacturing PMI
09:00 Italy unemployment
09:00 EU Markit manufacturing PMI
09:30 UK Markit manufacturing PMI
10:00 EU unemployment rate
13:30 US nonfarm payrolls, unemployment rate, average earnings
14:30 Canada RBC manufacturing PMI
14:45 US Markit manufacturing PMI
15:00 US Reuters/Michigan consumer sentiment index
15:00 US ISM manufacturing PMI and prices paid
15:00 US construction spending
18:00 US Baker Hughes US oil rig count
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Millions of workers will receive a pay rise on Friday when the new national living wage comes into force in the UK. Unions welcomed the GBP7.20 hourly rate for adults - increasing by 50 pence from GBP6.70 - but said it was not fair that younger workers were missing out, while business groups warned that firms' paybills will "ratchet up". The government's aim is to increase the rate to GBP9.00 an hour by 2020, which would affect an estimated nine million workers. The government said the new rate will mean a GBP 900 cash increase for a full-time worker on the current national minimum wage. Chancellor George Osborne said: "The national living wage will play a central role in moving Britain to a higher wage, lower tax, lower welfare economy. It will also mark the end of the gender pay gap for some of our lowest paid and hardest working people."
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UK Business Secretary Sajid Javid will meet steelworkers in Port Talbot to insist the government is "on their side" following intense criticism of his response to the crisis in the industry. The Cabinet minister cut short an official visit to Sydney to return to the UK following the shock decision by Indian conglomerate Tata to sell its UK assets, including the giant plant in South Wales. Javid, who faced calls to consider his position after it emerged he had taken his daughter on the Australian trip, insisted the government was "working hard" to find a long-term solution for Port Talbot and the wider steel industry. The government promised that all possible ministerial, official and diplomatic influence will be exerted to secure the industry's future, but Prime Minister David Cameron has insisted nationalisation is not the right answer.
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China's manufacturing sector continued to contract in March, but at the slowest pace in thirteen months, survey results published by Caixin and Markit Economics showed. The manufacturing Purchasing Managers' Index rose to 49.7 in March from 48.0 in February. Economists had expected the index to climb to 48.3. However, any reading below 50 suggests contraction in the sector. Nonetheless, it was the highest index reading in 13 months and signaled only a fractional deterioration in the health of the sector. Both manufacturing output and new business expanded slightly In March. At the same, firms lowered their staffing levels further.
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Japanese companies were losing confidence amid slumping domestic spending and slow growth in emerging economies, the Bank of Japan's Tankan survey showed. The closely watched index fell by 6 points since December to plus 6, but remained in positive territory indicating that optimists outnumber pessimists. It is the first time the index in the quarterly survey has fallen to below 10 since June 2013. Large manufacturers expect the index to fall to plus 3 in the next quarter, the survey showed. The index for large non-manufacturers also declined to plus 22 from plus 25, according to the survey.
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UK house price growth accelerated more than expected in March, data from the Nationwide Building Society showed. House prices climbed 5.7% year-on-year in March, faster than February's 4.8% growth and the expected rise of 5.1%. This was the fastest growth since January 2015, when prices climbed 6.8%. On a monthly basis, house price growth doubled to 0.8% from 0.4% in February. Economists had forecast the increase to remain unchanged at 0.4%.
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Rescue teams worked overnight and into Friday to find survivors trapped beneath a collapsed flyover in the eastern Indian city of Kolkata as the death toll in the accident rose to 24, officials said. Police launched an investigation into the construction firm building the flyover, the local government said, and had reportedly sealed its offices. Hundreds of personnel from National Disaster Response Force (NDRF) used drilling machines, concrete-cutters and sniffer dogs to reach people stuck under the rubble, assisted by army soldiers and policemen. Construction of the 2 kilometre-long flyover had started in 2008 but missed several deadlines for completion because the firm carrying out the work, IVRCL, was in financial trouble, media reports said.
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The Belgian judiciary late on Thursday approved the extradition to France of Salah Abdeslam, who was arrested in Brussels for his suspected role in the November terrorist attacks in Paris, in which 130 people died. Abdeslam was arrested in Brussels on March 18, four days before a triple suicide bombing in the Belgian capital claimed the lives of 32 victims. On March 19, France had issued a European arrest warrant for Abdeslam. Earlier Thursday, Abdeslam's lawyer Cedric Moisse said his client wants to "collaborate with the French authorities" and hoped to be sent to France. "The transfer is possible," the Belgian federal prosecution said in a statement following a meeting of judicial authorities. Since Abdeslam had agreed to be extradited, the matter did not have to be considered by the pre-trial chamber, it added.
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BROKER RATING CHANGES
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SOCGEN INITIATES WOLSELEY WITH 'BUY' - TARGET 4600 PENCE
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GOLDMAN CUTS PZ CUSSONS TO 'NEUTRAL' ('BUY') - CUTS PRICE TARGET TO 310 (315) PENCE
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UBS RAISES SHELL PRICE TARGET TO 1950 (1800) PENCE - 'BUY'
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COMPANIES - FTSE 100
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J Sainsbury said it has agreed a deal to acquire Home Retail Group, ending its long-running pursuit of the Argos owner. Sainsbury's will pay 55.00 pence per share in cash, plus 0.321 Sainsbury's shares to acquire Home Retail, valuing the company at GBP1.2 billion. Including the GBP200.0 million capital return Home Retail shareholders already stood to get from the sale of the Homebase DIY and garden centre business, the deal values Home Retail at GBP1.4 billion. The agreement ends Sainsbury's pursuit of Home Retail. The FTSE 100-listed grocer disclosed in January it had approached Home Retail in November about a possible cash and shares acquisition. The pair have been in talks since then and, in the interim, Home Retail sold its Homebase business to Australian group Wesfarmers. Sainsbury's faced competition from Steinhoff International Holdings, the South African group which made a higher, all-cash bid for Home Retail but pulled out ahead of the deadline for making a firm offer.
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Life insurance and investment management group Standard Life aid it has secured regulatory approval to increase its stake in its Indian joint venture. Standard Life has spent GBP179.0 million to increase its stake in HDFC Standard Life Insurance Co to 35% from 26% previously. The company is a joint venture with HDFC, the Indian financial group. "We are delighted that we have obtained the approvals necessary to increase our stake demonstrating our long-term commitment to India and the future success of HDFC Life," said Standard Life Chief Executive Keith Skeoch.
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RSA Insurance Group said it has completed the sale of its Colombian operations to Suramericana, the insurance subsidiary of Colombia's Grupo de Inversiones Suramericana. RSA agreed in September to sell all its Latin America businesses to Suramericana for GBP403 million, part of a wide-ranging restructuring by the FTSE 100 insurer to focus on its core operations. RSA expects to complete the sale of the remaining assets in Latin America, in Chile, Argentina, Mexico and Uruguay, in the next six months.
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Satellite communications provider Inmarsat said Ligado Networks has elected the 30 mega hertz option under the cooperation agreement between the two. Inmarsat said it remains in talks with Ligado around the details of the plan and a consequent change in payments under the agreement between the pair. Inmarsat entered into a cooperated agreement with Ligado, then called LightSquared, in 2007, as part of LightSquared's plans to develop a 4G network integrated with satellite coverage in the US.
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COMPANIES - FTSE 250
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Drax Group said it expects to deliver 2016 earnings at the top end of market expectations as it revealed it has been awarded a new contract from National Grid. The power generator said earnings before interest, tax, depreciation and amortisation are now anticipated to be at the higher end of expectations in 2016 after reviewing its revenue and cost estimates, as well as the recent weakness in commodity markets, it said. Drax said that, based on a range of current market forecasts, Ebitda will be toward the top end of a range between GBP132.0 million to GBP161.0 million. Drax also revealed it has won a 12-month contract from National Grid to supply ancillary services starting this month.
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Vedanta Resources said it has picked JP Morgan Securities to launch a buy-back programme on behalf of the company in order to repurchase some of its outstanding bonds. Vedanta said it will purchase up to USD148.6 million, or 20%, of the USD743.0 million outstanding balance on the 6.75% bonds that are due in 2016. The company will also repurchase up to USD200.0 million, or 34%, of the USD582.0 million outstanding balance on the 5.5% guaranteed convertible bonds that are also due in 2016 which are related to Vedanta Resources Jersey.
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Information and events group Euromoney Institutional Investor said it has agreed to sell its energy publishing businesses for USD18.0 million in cash. Euromoney has sold the businesses, Gulf Publishing Co in Houston and the Petroleum Economist in London, to a consortium led by John Royall, the chief executive of Gulf Publishing, and media investor Russell Denson. Euromoney expects the deal to close by the end of April and said it is actively seeking to sell non-core businesses.
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COMPANIES - LONDON MAIN MARKET AND AIM
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Bank of Cyprus on Thursday said it intends to pursue a premium listing on the London Stock Exchange in the second half of 2016. In a statement, the bank said it does not intend to maintain a listing on the Athens Exchange, as it no longer has banking operations in Greece. It will maintain a listing on the Cyprus Stock Exchange. "The access to a greater pool of international capital, together with greater profile and visibility in the European financial markets, will help position the group to play a key role in supporting the growth of the Cypriot economy," Bank of Cyprus said in a statement on its website. The bank is expected to be large enough to be eligible to join the FTSE 250 index once it lists.
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Arrow Global aid it has agreed terms to acquired consumer debt purchasing and collections business InVesting for around GBP78.5 million. Arrow, the debt buyer and manager, will pay the consideration in cash from existing cash resources and a new GBP50.0 million financing facility. Arrow said the acquisition of InVesting, which operates in the Netherlands and Belgium, will create a leading player in the Benelux debt purchasing market, boosted Arrow's existing operations in the UK and Portugal.
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Irish banana and fresh produce company Fyffes said it has purchased Canadian mushroom producer Highline Produce Ltd for CAD145.0 million. Fyffes said the deal is to be funded through new and existing bank debt, and will result in a 13% increase in its current 2016 target adjusted earnings per share range on an annualised basis. Fyffes said Chief Executive Glenn Martin will continue to run the Leamington, Ontario-headquartered Highline business after integration. "This transaction fits perfectly with Fyffes strategic objective of adding an additional product to its existing three through the acquisition of an established, successful, integrated operator in a category with significant scale," said Fyffes Chairman David McCann.
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COMPANIES - INTERNATIONAL
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China's Angbang Insurance has reportedly walked away from its attempt to acquire Starwood Hotels & Resorts Worldwide, withdrawing its USD14 billion bid. The move clears the way for Marriott International, which has bid USD13.6 billion, to acquire Starwood. Marriott and Starwood encouraged shareholders of both companies to vote in support of the proposed merger. Both companies note that their renewed request for shareholder support follows Starwood's announcement that a consortium of potential investors, led by Anbang, has withdrawn its alternative proposal to acquire Starwood. Marriott had been set to acquire Starwood before Anbang then entered the bidding race, forcing Marriott to increase the value of its offer.
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Electric car maker Tesla unveiled its Model 3 late Thursday, the first model pitched at the mass market, after the success of its first two higher-end designs. The Model 3 was to start shipping by late 2017 for 35,000 dollars. Around 115,000 pre-orders, along with downpayments of USD1,000 each, were made in the first 24 hours of availability, Tesla chief Elon Musk said from the company's design studio in Los Angeles. Since it was started in 2003, the company has marketed the Model S limousine, and the Model X luxury SUV, both sold for more than twice the price of the Model 3.
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General Electric announced it has entered into an agreement to sell GE Capital's majority stake in Bank BPH's Core Bank to Alior Bank. Bank BPH will be transformed into two separate operating units, the core bank and the mortgage bank, followed by the spin-off and demerger of the core bank into Alior Bank. The deal is expected to release approximately USD0.2 billion of capital to GE.
"As we continue to execute on our strategy to sell most of GE Capital's assets, we are now primarily focused on European transactions. We expect to continue to find strong buyers in the coming months for our other European commercial and consumer banking businesses," said GE Capital CEO Keith Sherin.
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Friday's Scheduled AGMs/EGMs
Tribal Group (re rights issue, delisting & AIM admission.)
XP Power
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By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.
