LONDON MARKET MIDDAY: GSK rises, Unilever falls on consumer health bid

(Alliance News) - Stocks in London were on strong footing at the start of the week, with the FTSE 100 climbing despite investor concerns over Unilever's bid for GlaxoSmithKline's consumer healthcare business.

The large-cap index was up 48.48 points, or 0.6%, at 7,591.43 midday Monday. The mid-cap FTSE 250 index was up 132.89 points, or 0.6%, at 22,876.24. The AIM All-Share index was up 5.07 points, or 0.4%, at 1,164.94.

The Cboe UK 100 index was up 0.7% at 753.56. The Cboe 250 was up 0.8% at 20,502.97 and the Cboe Small Companies up 0.3% at 15,773.24.

"The FTSE 100 is in an upbeat mood amid M&A speculation, extending gains after Friday's positive close with the index poised to break above the next major resistance hurdle at 7,600 as it inches towards the January 2020 pre-Covid peak," said Victoria Scholar, head of investment at interactive investor.

GlaxoSmithKline shares rose 3.7% after Unilever confirmed making an approach for GSK Consumer Healthcare, believing that the business would a be a "strong strategic fit" with its own consumer goods.

On Saturday, Glaxo confirmed that it had received three bids for its Consumer health arm from Unilever, the latest being for GBP50 billion in cash and shares. The business was formed in August 2019 as a joint venture with Pfizer, which holds a 32% interest, while GSK holds the remaining 68%.

All three proposals were rejected by the Brentford-based pharmaceutical group, on the grounds that they all undervalued the business and its future prospects.

Unilever said its interest in GSK Consumer Health follows an extensive process reviewing how it can reposition its portfolio into higher growth categories.

Reckitt Benckiser, maker of Nurofen painkillers, was up 2.8% in a positive M&A read-across.

However, Unilever shares tanked 7.5% on a day of broad-based gains in the FTSE 100.

"The negative share price reaction probably reflects investors' fears that Unilever is going to come back with a higher offer and potentially pay too much," said Russ Mould, investment director at AJ Bell.

With US financial markets shut on Monday for Martin Luther King Jr day, Pfizer shares were unable to react to the news.

In mainland Europe, the CAC 40 in Paris was up 0.6%, while the DAX 40 in Frankfurt was up 0.4% on Monday.

Back in London, shares in Taylor Wimpey rose 3.3% after the UK housebuilder said 2021 results will be in line with its prior guidance, following strong demand for houses and improved operating margins.

Total UK home completions were up 47% to 14,087 from 9,609 in 2020, with 18% of completions being affordable homes. Selling prices for UK houses were up overall by 4.2% to GBP300,000 from GBP288,000 in 2020. This includes a 3% year-on-year increase for private completions, which sold on average for GBP332,000.

Antofagasta was up 2.7% after UBS upgraded the Chilean miner to Neutral from Sell. The industrial mining sector on Monday also was lifted by the latest Chinese economic growth figures, with Glencore up 1.7% in midday trade in London and Anglo American up 1.0%.

The world's second-biggest economy, a key buyer of minerals, expanded 8.1% in 2021, National Bureau of Statistics data showed, beating forecasts of 8.0% in an AFP poll, and the 2.3% reading for 2020. But much of that growth came in the first half of the year, with the Chinese economy shaken by a series of shocks towards the end of 2021.

The gross domestic product figures came as China's central bank cut the rate on its one-year policy loans to 2.85%, the first drop since April 2020 at the height of the pandemic and a clear signal from authorities that the outlook this year remains uncertain.

Topping London's mid-cap FTSE 250 index was Cineworld, up 8.3% at midday and continuing to rally after Friday's news that the cinema operator was cash flow positive in its fourth quarter.

Capital & Counties rose 2.9%. The property firm said its London-based flagship asset, Covent Garden, had a strong second half despite the fast-spreading Omicron variant of coronavirus.

As at December 31, the independent property valuation of Covent Garden stood at GBP1.7 billion, representing a like-for-like increase of 4.6% in the second half of 2021. However, the asset depreciated 0.6% for the full year ended December 31.

Elsewhere in London, WAG Payment Solutions rose 13% after the toll and fuel payments processor said trading was strong in fourth quarter. WAG expects to deliver full-year revenue growth of 18%, to stand at at least EUR152 million.

In the currency space, sterling was quoted at USD1.3662 at midday, soft against USD1.3675 at the London equities close on Friday.

UK Prime Minister Boris Johnson has reportedly been interviewed as part of the investigation into 'partygate' allegations, as claims of another lockdown breach in No 10 surfaced.

Johnson is said to have "shared what he knows" with senior civil servant Sue Gray about alleged parties in Downing Street as she prepares to publish her report into claims of coronavirus rule flouting as soon as this week, the Daily Telegraph reported.

In a bid to survive the storm, reports have suggested Johnson could overhaul his top team, with the likes of his principal private secretary, Martin Reynolds, who sent an email inviting staff to enjoy the good weather in the No 10 garden in May 2020, being shown the door as part of a move said to have been dubbed 'Operation: Save Big Dog'.

The euro traded at USD1.1410 on Monday, down versus USD1.1423. Against the yen, the dollar was quoted at JPY114.51, up from JPY113.82 late Friday.

Gold was quoted at USD1,820.43 an ounce on Monday, up from USD1,818.19 on Friday. Brent oil was trading at USD85.85 a barrel, higher than USD85.56.

By Lucy Heming; lucyheming@alliancenews.com

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