LONDON MARKET OPEN: Dechra warns on US; Japan investors get Suga rush

(Alliance News) - Stock prices in Europe opened higher on Monday, recovering somewhat from weakness at the end of last week following Friday's bombshell US jobs report miss.

With the dust having settled, investors have considered that Friday's poor data could mean the US Federal Reserve will opt not to taper stimulus measures so soon, interactive investor analyst Richard Hunter commented.

"A major miss from the US unemployment reading has had the ironic impact of reducing investor jitters," Hunter explained.

"The unemployment rate fell in August and wage inflation was muted, suggesting that the Federal Reserve narrative of no imminent stimulus tapering will remain in place, with December now being seen as the earliest possible time."

The FTSE 100 index was up 33.90 points, 0.5%, at 7,172.25. The mid-cap FTSE 250 index was up 17.54 points, 0.1%, at 24,212.15. The AIM All-Share index was up 2.72 points, 0.2%, at 1,312.87.

The Cboe UK 100 index was up 0.5% at 713.31. The Cboe 250 was flat at 22,006.85, and the Cboe Small Companies was up 0.2% at 15,545.27.

In mainland Europe, the CAC 40 stock index in Paris and the DAX 30 in Frankfurt were up 0.6%.

Financial markets in the US are closed on Monday for the Labor Day holiday.

The pound faded against the dollar early Monday. Sterling fell to USD1.3842 from the USD1.3866 it fetched at the London equities close on Friday. Against the yen, the dollar rose to JPY109.88 early Monday UK time, from JPY109.64 late Friday.

The euro slipped to USD1.1863 from USD1.1883, even as provisional figures from Destatis showed new manufacturing orders in Europe's largest economy surged in July.

New manufacturing orders in Germany climbed 3.4% monthly in July, building on June's 4.6% climb, and topping FXStreet-cited forecasts of a 1% decline.

Annually, new orders surged 24%, following June's upwardly revised 27% hike. July's yearly figure breezed past forecasts of a 14% rise.

Destatis said: "New orders reached the highest level since the beginning of the time series in 1991. The previous record high had been reached in December 2017 before the beginning of the corona crisis. The marked month-on-month increase was caused by major orders. Excluding major orders, there was a decline of 0.2% in July 2021."

Still to come on Monday, the latest UK construction PMI is released at 0930 BST. As the week progresses, central banks will be in focus. The European Central Bank reports its latest interest rate decision on Thursday, after the Bank of Canada on Wednesday and Reserve Bank of Australia on Tuesday.

In London, Dechra Pharmaceuticals plunged 8.2%. The veterinary products firm posted improved annual earnings but warned on a fall in vet visits in the US.

For the year ended June 30, revenue climbed 18% to GBP608.0 million from GBP515.1 million. Pretax profit jumped 81% to GBP74.0 million from GBP40.9 million.

"Dechra has continued to outperform a robust market throughout the Covid-19 pandemic affected financial year. As we start the new financial year trading remains strong with the momentum and market penetration seen in the second half of the prior financial year continuing," Chief Executive Officer Ian Page said.

Dechra lifted its annual payout by 18% to 40.50 pence per share from 34.29p a year earlier.

Looking ahead, Dechra said: "Although Covid-19 related travel restrictions have limited acquisition activity, we have still been able to identify and progress numerous strategic opportunities to strengthen our product portfolio and development pipeline. We therefore remain confident in our ability to successfully execute our strategy and in our future prospects.

"In the UK there have been reports of an increased number of dogs; however, recent information from the United States indicates that veterinary practice visits by pet owners have marginally declined. What is clear is that people have been spending more time with their pets and have therefore been more cognitive of their welfare, and with disposable income being higher than normal due to lockdown, expenditure per pet has increased."

Equities in Asia started the week strongly. In China, the Shanghai Composite closed 1.1% higher, and the Hang Seng in Hong Kong was up 0.9%. In Tokyo, the Nikkei 225 closed up 1.8%, having advanced 2.3% on Friday.

The Nikkei continued to advance after surging on Friday in the wake of Japan's Prime Minister Yoshihide Suga announcing he will not run for his ruling party's leadership, effectively ending his tenure and throwing wide open the race for the next premier.

Suga's departure lifts the prospect of stimulus measures, Oanda analyst Jeffrey Halley noted, with Fumio Kishida, a leading successor to Suga, promising an economic help scheme.

Japan-focused investors were higher early Monday in London. JPMorgan Japanese Investment Trust rose and Baillie Gifford Shin Nippon each rose 1.7%. Baillie Gifford Japan Trust was up 1.5%.

Elsewhere in London, Goldman Sachs's Petershill Partners on Monday said it is "considering" an initial public offering on the London Stock Exchange's Main Market.

Petershill - which will be a standalone company operated by the Goldman Sachs Asset Management team - buys minority stakes in independent alternative asset managers.

It aims to boost its coffers by USD750 million in the IPO to fund new investments.

"Petershill Partners today comprises minority investments in 19 high-quality partner-firms, previously held in private funds managed by Goldman Sachs Asset Management. The partner-firms have USD187 billion of aggregated assets under management," the company explained.

"Petershill Partners has an attractive financial profile underpinned by strong organic AuM growth momentum and a diversified revenue stream comprised substantially of contractually committed, high and stable management fees on long-dated assets."

It expects to be eligible for FTSE UK indices upon listing. It has engaged Merrill Lynch International, Goldman Sachs International and JP Morgan Cazenove to act as joint global co-ordinators and joint bookrunners and BNP PARIBAS and UBS AG London Branch to act as joint bookrunners in the event the IPO proceeds.

Brent oil was quoted at USD71.80 a barrel early Monday in London, down from USD72.96 late Friday. Gold was trading at USD1,826.54 an ounce, down from USD1,831.95.

By Eric Cunha; ericcunha@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.