LONDON MARKET MIDDAY: DWF surges on takeover offer; BT CEO resigns

(Alliance News) - Stock prices in London were mixed at midday on Monday, with concerns around the Chinese economy hurting investor confidence.

The FTSE 100 index was up 11.35 points, 0.2%, at 7,268.29. The FTSE 250 was up 0.49 of a point at 18,004.46, and the AIM All-Share was down 1.88 points, 0.3%, at 739.83.

The Cboe UK 100 was up 0.2% at 724.73, the Cboe UK 250 was flat at 15,766.31, and the Cboe Small Companies was down 0.1% at 13,486.66.

Trading in Asia was mixed on Monday, as weak Chinese inflation data pointed to weak demand and a faltering economic recovery.

The consumer price index for June was flat, which was down from the 0.2% seen in May, according to the National Bureau of Statistics, and was worse than expected as domestic demand slowed.

A 7.2% annual drop in the cost of pork, the staple meat in China, as well as falling oil prices that made transportation cheap, dragged down the cost of the essential goods basket, the NBS said.

Producer prices – which measure the cost of goods at the factory gate – tumbled 5.4% on-year, following a 4.6% slide in May. Economists polled by Bloomberg had expected prices to sink 5%.

"Overall, recent mainland data warn of a deflationary spiral ahead if policymakers do not take aggressive action. For now, we are only seeing very modest measures. Yet policymakers cannot rely on the usual levers of stimulus due to an already high debt overhang. There’s simply no easy way out," said BBH Currency Strategy.

The Nikkei 225 index in Tokyo closed down 0.6%. In China, the Shanghai Composite closed up 0.2%, while the Hang Seng index closed up 0.6%. The S&P/ASX 200 in Sydney closed down 0.5%.

The dollar was mixed against major currencies at midday in Europe.

The pound was quoted at USD1.2802 at midday on Monday in London, down compared to USD1.2832 at the equities close on Friday. The euro stood at USD1.0960, higher against USD1.0949. Against the yen, the dollar was trading at JPY142.57, up compared to JPY142.27.

On the FTSE 100, BT lost 0.2%.

The London-based telecommunications company said its Chief Executive Philip Jansen is resigning.

Jansen said he will step down from his role, at the appropriate moment, over the next twelve months.

"To resign a mere four years into running one of Britain's best-known companies would suggest Jansen has had enough of the challenges that come with BT," AJ Bell's investment manager Russ Mould said.

Since joining BT, Jansen has re-shaped the company by announcing a reduction in the workforce by 55,000 employees by the end of the decade, and investing in high-speed broadband; setting a target of connecting 25 million homes by the end of 2026.

FTSE 100 water utility companies were up, after news of a cash injection in Thames Water. Severn Trent and United Utilities were up 1.6% and 1.1%, respectively.

Thames Water Utilities said its shareholders have agreed to pump in another GBP750 million in funding, but it warned that another GBP2.5 billion will be needed by 2030 as the water supplier struggles under a GBP14 billion debt mountain.

Thames Water said the initial funding agreement to the end of March 2025 is a "major milestone", although it is less than the GBP1 billion expected, and the company admitted that "significantly" greater support will be needed in following years for its turnaround to be delivered.

Thames Water is the UK's biggest water supplier with 15 million customers, serving households across London and the South East.

Among London's main market small-caps, DWF surged 38% to 89.76p. It confirmed a Bloomberg report that it was in talks about a potential takeover with Inflexion Private Equity Partners.

The Manchester-based legal business said the potential offer would be for a total consideration of 100 pence per share. This could comprise 97p in cash, and a 3p special dividend for the six months to April 30.

The total consideration is a 53% premium to Friday's closing price of 65.5p

"Discussions between DWF and Inflexion are ongoing and there can be no certainty that an offer will be made, even if the pre-conditions are satisfied or waived," the company said.

On AIM, Helium One Global jumped 39%.

The Tanzania-focused helium explorer said it has bought an Epiroc Predator 220 drilling rig for use at its Rukwa project in Tanzania.

Ownership of the rig means that Helium One can quickly move to the appraisal phase after drilling Tai-C, enabling accelerated exploration at its Rukwa, Eyasi and Balangida projects, it said.

Chair Ian Stalker said: "This is indeed a milestone event for the company and opens up a range of ancillary options for the company as well as, most importantly, securing the control of our own drilling programme and any future appraisal and further exploration activities."

In European equities on Monday, the CAC 40 in Paris was up 0.4%, while the DAX 40 in Frankfurt was up 0.3%.

Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.1%, the S&P 500 index down 0.2%, and the Nasdaq Composite down 0.4%.

Brent oil was quoted at USD78.04 a barrel at midday in London on Monday, down from USD77.47 late Friday. Gold was quoted at USD1,924.34 an ounce, down against USD1,929.07.

Still to come on Monday's economic calendar, UK Chancellor Jeremy Hunt and Bank of England Governor Andrew Bailey speak at the yearly Mansion House event.

By Sophie Rose, Alliance News reporter

Comments and questions to newsroom@alliancenews.com

Copyright 2023 Alliance News Ltd. All Rights Reserved.