LONDON MARKET CLOSE: Share Prices Firm As Pound Rebounds Twice

LONDON (Alliance News) - London shares closed flat to slightly higher Tuesday, with the pound holding firm against the dollar despite twice facing selling pressure during the day in the wake of a weaker-than-expected UK construction purchasing managers' index score and positive US factory orders data.

On the company news front, aerospace engineering company Meggitt led FTSE 100 gainers after reporting a rise in interim profit and saying it has won two further deals in the US and UK.

Among blue-chip stocks in the red was Shire. The Dublin-based pharmaceutical firm took a USD30 billion proposal for an all-share merger with US-based Baxalta directly to Baxalta shareholders, after the US company's board refused to enter into talks

The FTSE 100 ended flat at 6,686.57, the FTSE 250 closed up 0.4% at 17,734.43, and the AIM All-Share finished up 0.5% at 755.09.

In Europe, the CAC 40 in Paris ended down 0.2%, and the DAX 30 in Frankfurt closed up 0.1%.

UK construction sector growth slowed unexpectedly in July, with business activity and incoming new work expanding at slower rates, survey results from Markit Economics showed. The Markit/Chartered Institute of Procurement & Supply construction PMI slipped to 57.1 in July from June's four-month high of 58.1. It was forecast to rise to 58.5.

"July's growth slowdown is the first for three months and perhaps a sign that the post-election impact on construction confidence has started to diminish. Reflecting this, UK construction firms’ business activity expectations moderated from June's 11-year peak but remain strong overall," says Tim Moore, senior economist at Markit.

Meanwhile, US government data showed that orders in the US factory sector rose a little more than expected in June, rebounding from two consecutive months of declines. The US Commerce Department revealed that factory orders rose 1.8% in June compared to the previous month. Economists were predicting an increase of 1.7%. In May, factory orders were lower by 1.1%.

Sterling fell sharply against the greenback to a low of USD1.5570 after the UK data from USD1.5610 prior to it. However, sterling rebounded even after the positive US economic data, standing at USD1.5619 when the European equities markets closed.

Wall Street was trading mostly unchanged at the European close, with the DJIA and S&P 500 flat and the Nasdaq Composite down 0.1%.

US factory orders were amongst the first in a flurry of significant US economic figures expected for the week. Wednesday's ADP unemployment data, Thursday's initial and continuing jobless claims, and Friday's key nonfarm payroll figures are likely to be the centre of market attention, as investors calculate the odds of a US interest rate hike by the US Federal Reserve in September.

On the London Stock Exchange, Meggitt ended up 7.1% after saying its pretax profit jumped in the first half of 2015 as revenue increased. The company's order intake was slightly weaker in the period, though it said it has won two further deals in the US and UK.

The group said its pretax profit for the half to the end of June was up to GBP115.8 million from GBP98.2 million a year before, driven by a 10% rise in revenue in the half to GBP793.7 million from GBP718.9 million. Order intake slipped 1% in the half to GBP775.3 million from GBP782.7 million.

Smiths Group was the second best performer in the FTSE 100, up 5.6%. US activist hedge fund ValueAct has emerged as a shareholder in the engineering company, just days after it was revealed the fund had become the largest shareholder in Rolls-Royce Holdings, the Financial Times reported.

ValueAct's holding in Smiths, which makes products including airport scanners and medical devices, is below the 5% threshold required for disclosure to the London Stock Exchange, the FT said.

At the other end of the blue-chip spectrum, Shire closed down 3.4%. The pharmaceutical company took a USD30 billion proposal for an all-share merger with US biotechnology company Baxalta directly to Baxalta shareholders, as the board of Baxalta has refused to enter into talks, while Shire urged Baxalta to engage with the proposed deal.

The combined company would be projected to deliver product sales of USD20 billion by 2020, Shire said, which is double the USD10 billion by 2020 that Shire is targeting independently. The deal would be expected to generate double-digit top-line growth, strong returns and attractive value creation, Shire said.

Under the terms of its proposal, Baxalta shareholders would receive 0.1687 Shire American Depositary Receipts with a value of USD45.23, representing a 36% premium to Baxalta's closing share price on Monday. Should the merger go through, Baxalta shareholders would own 37% of the combined company.

Meanwhile, Standard Life shares closed down 3.1%. The Edinburgh-based investments and savings company said it expects a lower contribution to its results for 2015 from annuity new business in the wake of changes to UK pensions rules that mean retirees are no longer required to purchase them. It said it expects annuity new business to fall by about GBP10 million to GBP15 million in 2015. The contribution from asset liability management is to fall by about GBP30 million to GBP40 million, Standard Life said.

In the UK corporate calendar Wednesday, Legal & General Group, London Stock Exchange Group, Unite Group, SOCO International, Statpro Group and Spirax-Sarco Engineering release half-year results at 0700 BST. Standard Chartered and Stanley Gibbons Group publish half-year results at 0915 BST.

In the economic calendar, Japan's Markit Services PMI is due at 0235 BST, while Caixin China Services PMI is due at 0245 BST. Service and composite PMI readings from France, Germany and the eurozone are expected at 0850 BST, 0855 BS and 0900 BST, respectively. In the US, Markit Services and Composite PMI readings are due at 1445 BST. The US Institute for Supply Management Non-manufacturing PMI is due at 1500 BST, while EIA crude oil stocks are expected at 1530 BST.

By Daniel Ruiz; danielruiz@alliancenews.com

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