MARKET COMMENT: London Seen Higher After Shell Deal For BG Group

LONDON (Alliance News) - The announcement by Royal Dutch Shell and BG Group of an agreed takeover of BG by Shell early Wednesday has turned the expected opening direction of UK shares to gains, with the FTSE 100 now seeing reapproaching the 7,000 mark.

IG says futures indicate the FTSE 100 to open 28 points higher at 6,989. The index closed up 1.9% at 6,961.77, led by oil-related stocks, in what had been the first chance for London and other Europe markets to react to a worse-than-expected US non-farm payrolls report released on Friday that appeared to push back the timing for a rate hike by the US Federal Reserve.

Royal Dutch Shell and BG Group on Wednesday said they have reached an agreement on a cash and shares takeover of BG by Shell, valuing BG at around GBP47 billion.

Under the terms of the deal, BG shareholders will get 383 pence in cash plus 0.4454 Shell B shares per BG share. Based on the 90 trading day volume weighted average price of 2,170.3 pence per Shell 'B' Share on April 7, the total value of the deal is 1,350.00 pence per BG share. BG shares closed at 910.4 pence on Tuesday. BG said the price represents a premium of around 50% to its closing price on Tuesday.

French media giant Vivendi has denied media speculation that it might seek to acquire pay-TV provider Sky, Bloomberg reported. According to the report, a representative of the Paris-based company said it was looking at Sky as one of many options to expand its own TV business Canal Plus. A report that appeared in the media earlier had said that Vivendi was considering the deal after reviewing targets in Turkey and other parts of Europe.

Wall Street ended flat to lower Tuesday. The DJIA closed flat, while the S&P 500 and the Nasdaq Composite ended down 0.2%.

The minutes of the Federal Reserve's most recent monetary policy meeting are due at 1900 BST, "which are expected to be instructive in the context of the thinking behind last month?s decision by the Federal Reserve to drop 'patience', from their guidance language, while at the same time revising down their growth and inflation forecasts," says CMC Markets chief market analyst Michael Hewson.

"Since that meeting we?ve heard a lot from Fed officials about their thoughts vis-a-vis the timing of a rate hike, but that was before last Friday?s payrolls number. There is the likelihood...that policymakers are likely to tread slightly more carefully in the coming days and weeks and that in that context, the contents of tonight?s minutes are likely to be stale, and out of date," Hewson says.

The start of the US corporate earnings season also will be in focus, with aluminium producer Alcoa, traditionally the first to report, releasing its 2015 first-quarter results after the market close.

Greek President Alexis Tsipras' visit to Moscow to see Russian President Vladimir Putin also will be on the agenda Wednesday. The Greek repayment deadline to International Monetary Fund is on April 9th, while a deal to secure funding from Eurozone creditors appears weeks away.

The debt-laden country is due to repay an IMF installment of EUR460 million on Thursday followed by its social security bill on April 14. After a meeting in Washington with IMF officials, Yanis Varoufakis, the country's finance minister, said on Sunday that Greece "intends to meet all obligations to all its creditors, ad infinitum."

In Asia on Wednesday, the Japanese Nikkei 225 trades up 0.7%, and the Hang Seng trades up 2.7%. Meanwhile, the Shanghai Composite is trading up 0.8%.

Brent crude is quoted at around USD58.38 a barrel Wednesday, and US benchmark West Texas Intermediate is quoted at USD52.93 a barrel. Gold is quoted early Wednesday at USD1,209.81 an ounce.

Amongst other stocks, FTSE 100-listed budget carrier easyJet on Wednesday said it passenger numbers and load factor both improved in March year-on-year. The airline said its passenger numbers rose 7.5% year-on-year in March to hit 5.5 million, up from 5.1 million a year earlier. On a rolling basis to the end of March, the company's passenger numbers rose 6.7% to 66 million, up from 61.8 million a year before.

International Consolidated Airlines Group is also due to publish its March traffic statistics later in the day.

Shawbrook Group starts trading Wednesday following its Main Market IPO.

Still in the economic calendar Wednesday, eurozone retail sales are at 100 BST. The Bank of England releases its credit conditions survey at 1030 BST. In the US, EIA crude oil stocks are at 1530 BST.

By Daniel Ruiz; danielruiz@alliancenews.com

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