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FTSE 100 Index maintains momentum after ARM Holdings takeover

Published: 13:35 18 Jul 2016 BST

Hounslow shopping centre

A takeover bid for chip-maker ARM Holdings PLC (LON:ARM) kept the momentum in London shares at lunchtime.

Japanese telecoms and IT group SoftBank Group Corp (TYO: 9984) vowed to pay £24.3bn for London-listed ARM, sending the latter's shares up 42.6% to 1695p.

Dan Ridsdale, analyst at Edison Investment Research, said: "An increase in inbound M&A was one of the obvious consequences of Brexit and weakened sterling but few expected it to manifest itself so quickly or at so large a scale.

"ARM has always traded at a significant premium rating because its competitive position in its core market is so secure and because growth is locked in as the company's IP penetrates new domains - such as automotive and the Internet of Things.

"There may be some cost synergies, but In paying this multiple, SoftBank is primarily pricing in much more of the growth from these new applications that the markets have ever been prepared to do."

On the economic front, data showing retail activity dropped sharply in June, with the number of shoppers visiting stores falling 2.8% versus a year ago, worse than the 0.3% rise in May and the sharpest decline since February 2014.

Overnight, UK house price figures showed an anticipated dip in prices may now be happening, with average prices falling 0.9% and buying demand down 16% compared to a year ago.

In small-caps, Transense Technologies PLC (LON:TRT) gained by 42.5% to 1.43p after signing a deal worth more than US$750,000 to supply its surface acoustic wave technology to General Electric Company (NYSE:GEC).

Sovereign Mines of Africa PLC (LON:SMA) lifted 15.4% to 0.38p after the Republic of Guinea-focused gold miner appointed former Investec banker Jeremy Sparrow as a non-executive director. Sparrow was most recently the broker's head of resource investment banking for Asia and Australia.

Sound Energy PLC (LON:SOU) was also up 15% at 38.25p as the oil & gas explorer achieved highly commercial and better-than-expected gas flow rate from its Tendrara licence in Morocco.

But audio-visual interaction specialist Mirada Plc (LON:MIRA) headed 14.3% lower to 4.5p after making an operating loss of £360,000 in the year to March 31 against a £290,000 profit a year ago.

Conroy Gold and Natural Resources plc (LON: CGNR) also fell 6.8% to 41p despite the group, which is focused on Ireland and Finland, finding four new gold zones on its Glenish gold target in Ireland.

The FTSE 100 was up 26.76 points at 6,696.

ARM was leading the risers but among the biggest losers was tour operator TUI AG (LON:TUI), down 2% at 942.5p amid fears about the impact of terrorism and 'Brexit' on holiday demand.

Preview at 6.43am

London’s FTSE 100 is set to start the new week on the front foot helped by ‘mega merger’ talk and an easing of geopolitical fears.

Japan’s SoftBank is reportedly close to sealing a £24bn (US$32bn) takeover of London listed microchip maker ARM Holdings.

A £17 per share cash offer could be announced today, according to reports.

Jasper Lawler, analyst at CMC Markets, in a note, highlighted that global sentiment appears to still be intact.

“The failure of the coup and a reassertion of Turkish government control appear to have allayed concerns of rising geopolitical risk on Europe’s border,” he said.

“As such, European stocks look set to open mostly higher on Monday, adding last week’s advance.”

Stocks in Asia made a mixed start to the week.

Japan’s Nikkei was strongest, rising almost 0.7% to 16,497 while Hong Kong’s Hang Seng added 0.16% to 21,694.

The Shanghai Composite meanwhile was down 0.17% to 3,049.

Australia’s ASX 200 gained 0.5% to 5,458.

In London, spreadbetting group IG sees the FTSE 100 some 26 points higher.

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