(Alliance News) - London stocks started Wednesday's session in the green, the FTSE 100 lifted by share price gains for Melrose Industries and United Utilities.
Focus in the day ahead lies on the UK chancellor's spending review, while a raft of US data is released before Thursday's Thanksgiving Day holiday.
The FTSE 100 index was up 25.63 points, or 0.4%, at 6,457.80 early Wednesday. The mid-cap FTSE 250 index was down 48.42 points, or 0.2%, at 19,741.14. The AIM All-Share index was up 0.2% at 1,034.13.
The Cboe UK 100 index was up 0.5% at 642.91. The Cboe 250 was down 0.2% at 17,121.62, and the Cboe Small Companies flat at 11,536.00.
In mainland Europe, the CAC 40 in Paris was up 0.3% while the DAX 30 in Frankfurt was up 0.1% early Wednesday.
"After a record-setting session in the US, EU stocks are heading broadly higher, although the pace of gains suggest that the risk rally is easing slightly," said City Index's Fiona Cincotta.
Cincotta commented: "Vaccine optimism, EU governments starting to ease lockdown restrictions, and more US political clarity have driven stocks firmly higher across the start of the week. However, investors are now looking ahead to a slew of US data due later today for further cues ahead of the Thanksgiving break."
Initial jobless claims data from the US are released at 1330 GMT, a day earlier than usual due to the US holiday on Thursday. At the same time is a GDP reading and personal consumption expenditures.
In the UK, focus is on Chancellor Rishi Sunak's spending review.
In his Commons statement on Wednesday, the Chancellor will announce the launch of a three-year 'restart' programme, worth GBP2.9 billion, which will help more than a million unemployed people get back into work in the wake of the pandemic.
Unusually, because of the economic uncertainty caused by the virus, most UK government departments will receive only a one-year spending allocation rather than the usual multi-year settlement.
Other commitments are expected to include GBP3 billion more to support the NHS, including GBP1 billion to address the treatment backlogs built up while it was dealing with the Covid-19 crisis.
Sunak's review comes a week after figures showed the UK's debt-to-gross domestic product ratio reached 100.8% - levels not seen since the early 1960s. Total public sector net debt, excluding public sector banks, rose by GBP276.3 billion in the first seven months of the financial year to reach GBP2.076 trillion at the end of October, or around 100.8% of UK GDP.
"The chancellor's spending review later today may have an impact on sterling, with concerns on further borrowing potentially being offset by investments aimed at stemming unemployment and kickstarting infrastructure spending," said Richard Hunter, head of markets at Interactive Investor.
Sterling was quoted at USD1.3367 early Wednesday, firm on USD1.3357 at the London equities close on Tuesday.
The euro traded at USD1.1919 early Wednesday, up against USD1.1882 late Tuesday. Against the yen, the dollar eased to JPY104.42 from JPY104.62.
In Tokyo on Wednesday, the Nikkei 225 index closed up 0.5%. In China, the Shanghai Composite ended down 1.2%, while the Hang Seng index in Hong Kong closed up 0.3%.
At the top of London's FTSE 100 in early dealings was Melrose, up 5.6% after the industrial turnaround specialist said it is currently trading at the top end of board expectations for 2020.
"The performance of the group in the period reflected the faster than expected recovery in automotive markets, first seen over the summer, the continued strong performance in Nortek Air Management, and the more challenging, although currently stable, market conditions in Aerospace," said Melrose.
While the firm is "encouraged" by its robust trading, Melrose added that caution is needed on any predictions for next year given global uncertainty.
The Aerospace division is expected to be broadly breakeven for the year, with restructuring and cost savings offsetting a challenging trading backdrop. For Automotive & Powder Metallurgy, both businesses saw an improvement in trading in the four months to October 31.
Nortek Air Management has continued to trade well in the period, with "impressive" revenue growth of 13% year-on-year.
United Utilities rose 2.7% as the FTSE 100 constituent registered profit growth for its half-year and lifted its payout.
Revenue in the six months to September 30 fell 4.4% to GBP894.4 million from GBP935.5 million year-on-year, though pretax profit rose 3.1% to GBP201.1 million from GBP195.1 million. Finance expense fell 47% to GBP132.0 million from GBP193.9 million.
The water and water waste utility declared an interim dividend of 14.41p, up from 14.20p a year before.
"Despite the pandemic, our operational performance in this first year of the new regulatory period is on track. We are accelerating our capital expenditure to bring forward benefits and help support 17,700 jobs in the supply chain. We recognise the role that we can play in a successful society, economy and a thriving natural environment and are confident in our ability to deliver our AMP7 plans to achieve this," said Chief Executive Steve Mogford.
Elsewhere in London, GoCo shares leapt 19% to 131.00 pence after receiving a GBP594 million takeover offer from Future.
Under the agreed combination, GoCo shareholders will be entitled to receive 0.052497 new shares in magazine publisher Future and 33 pence in cash, valuing each GoCo share at 136p each. This represents a premium of 24% to Tuesday's closing price, when GoCo shares closed at 110p.
GoCo shareholders will own around 19% of the combined group.
GoCo directors intend to recommend shareholders vote in favour of the deal, as do Future's directors. Future expects the transition to be "immediately" earnings per share accretive.
"We believe that the combination is a unique strategic opportunity to create a leading global specialist media and intent platform, capitalising on the growing consumer demand for informed and value driven purchasing decisions enabled by intent driven content, which will deliver strong returns for all shareholders," said Future Chair Richard Huntingford.
Separately on Wednesday, Future published its full-year results. Revenue surged 53% to GBP339.6 million in the financial year to September 30, and pretax profit rallied four-fold to GBP52.0 million from GBP12.7 million.
Future said the revenue growth was driven by a combination of organic growth and acquisitions, underpinned by a 56% rise in total online users.
Future recommended a final dividend of 1.6p.
Future shares were down 3.1% in early trade.
AA shares rose 6.1% after receiving a 35p-per-share firm offer from a consortium of TowerBrook funds and Warburg Pincus funds.
On Monday, AA confirmed it had received a non-binding takeover offer from TowerBrook Capital Partners and Warburg Pincus International. The consortium made a 35p cash approach and had until 1700 GMT on Tuesday to either announce a firm intention to make an offer, or walk away. AA then secured an extension, giving the consortium until 1700 GMT on Wednesday to make a firm offer.
The deal values AA at GBP219 million, and the purchase price represents a premium of 40% to AA's closing price on August 3, the last day before the offer period began.
"Having carefully considered the range of options available to the AA including the terms of the proposed acquisition by the consortium, the AA board has concluded that the acquisition, which offers certain cash value to the AA's shareholders as well as a significant equity injection to reduce indebtedness, is in the best interests of the AA, its shareholders and wider stakeholders, and as such is unanimously recommending the acquisition to shareholders," said AA Chair John Leach.
Gold was quoted at USD1,813.39 an ounce early Wednesday, up on USD1,805.23 on Tuesday. Brent oil was trading at USD48.44 a barrel, higher than USD47.68 late Tuesday.
By Lucy Heming; lucyheming@alliancenews.com
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Future (FUTR)
Melrose (MRO)
United Utilities (UU.)
