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FTSE 100 stocks end soft as tobacco takeover produces mixed results

Last updated: 17:46 21 Oct 2016 BST, First published: 06:47 21 Oct 2016 BST

Cigarettes

FTSE 100 shares ended softer on Friday after a trans-Atlantic tobacco takeover bid failed to lift the mood of the market.

The blue-chip ticker closed down 0.1% at 7020 and was led by British American Tobacco (LON:BATS) the company seeking to snap up the 58% it doesn’t yet own of US cigarettes maker Reynolds American.

Shares in BAT itself closed down 2.85% at 4,666p, while rival Imperial Brands (LON:IMB) were the fourth-biggest riser of 2.7% to 3965.5p.

The top blue-chip riser was trenchcoat fashion house Burberry (LON:BRBY), up 3.1% to 1495p, on a report that US luxury goods company Coach was mulling a merger. Read more.

Shares in Intercontinental Hotels Group (LON:IHG) fell 2% to 3160p after it reported slowing revenue growth.

The key measure of revenue per available room (RevPAR) grew by 1.3% in the three months to 30 September, down from a rate of 2.5% in the previous quarter.

The mid-cap FTSE 250 index also ended softer, down 0.1%, or 10 points, to 17,934. The top laggard was Aggreko plc (LON:AGK) down 4.4% to 820.5p.

Among smaller caps, the FTSE AIM 100 Index closed down 0.04% at 3975 and the FTSE AIM All-Share Index gained by the same proportion, to 827.


 
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  • Crude oil set to finish week above US$51

  • Acacia leads miners higher

  • FTSE 100 rises modestly thanks to BATS ciggie mega-merger

  • Digital Globe Services and IBEX get premium bids from SAME buyer

  • ECB president Mario Draghi clear on low rates and QE

Crude above US$51 as OPEC freeze seen as more credible - 14:30

The prospect of the freeze in OPEC production is gaining more credibility and in early trading on Friday, Brent crude was priced above US$51 with WTI still holding above $US$50 a barrel.

With five weeks to go before the final OPEC meeting of the year, investors and traders are banking on a firm OPEC decision to curtail production.

The market seems content enough with the fact that production figures are high and this OPEC gesture is being seen as adding a sense of stability to the market.

 

FTSE 100 gathers pace, Acacia leads miners higher - 12pm

The FTSE 100 got off to a fast start earlier on before giving up some of those gains in the morning.

As it approaches lunch, the blue chip index found some strength as it edged higher, adding 24 points to its open to trade a touch above 7,055.

Luxury goods firm Burberry Group PLC (LON:BRBY) was the day’s biggest winner so far on the main index, adding 5% to trade at 1,519p.

The biggest loser on the FTSE 100 was Direct Line Insurance Group PLC (LON:DLG), dropping more than 2% to trade at 2%.

Malvern International PLC (LON:MLVN) was one of the biggest gainers in London today with the share price rising by a third after it converted some of its debt into shares at a premium price.

Gold producer Acacia Mining PLC (LON:ACA) also enjoyed a strong start to its Friday, with the share price adding 12% after “strong” third quarter results.

 

Imperial Brands lifted by BATS deal, but will it be looking over its shoulder? – 11:00

Imperial Brands Plc, the smallest of the ‘big four’ tobacco companies, could be looking over its shoulder as merger and acquisition activity is tightening the field.

British American Tobacco today unveiled the buy-out of US partner Reynolds, taking the 58% it didn’t already own for US$47bn.

Laith Khalaf, analyst at Hargreaves Lansdown, in a note said: “M&A has been central to the industry’s success in recent years, as companies look to grow scale in the face of ever increasing competition.

“However, today’s deal also raises questions about where the industry turns next.

“There are just a handful of independent or semi-independent operators left (notably including Swedish Match and ITC) that could be snapped up. That could leave Imperial – the smallest of the big four tobacco companies – watching its back.”

BATS was the standout FTSE 100 stock on Friday, rising 144p or 3% to trade at £49.47.

The FTSE 100 itself marked a modest 17 point, 0.24%, gain at 7,044 by 11:00am.

Takeover moves stir small caps too – 9:30

Digital Globe Services Ltd (LON:DGS) and IBEX Global Solutions (LON:IBEX), up 74% and 25% respectively, were among the small cap risers on Friday as they were both targeted by premium priced takeover bids from The Resource Group.

RTC Group PLC (LON:RTC) was a notable faller after the recruiter issued a profit warning citing project delays.

FTSE 100 starts higher, British American Tobacco gains 2.5% on Reynolds takeover - 8:30

Changing hands around 7,038 the FTSE 100 started 11 points, 0.17%, higher in Friday’s early deals.

British American Tobacco PLC (LON:BATS) was the stand out stock among London’s top 100 shares, rising 119p or 2.47%, to £49.05, following news of its US$47bn merger deal with US partner Reynolds.

It is paying US$20bn in cash and US$27bn in shares to acquire the 58% of Reynolds that it doesn’t already own. The deal brings together brands like Rothmans, Dunhill and Camel cigarettes.

Rival tobacco firm Imperial Brands Plc (LON:IMB), meanwhile, gained 74p or 1.9% to trade at £39.37.

FTSE 100 to drift lower at the outset - 7:00

A subdued and slightly dismal day looks in prospect for London’s leading stocks on Friday.

Spread betting quotes point to the FTSE 100 opening 10 or 11 points below last night’s close of 7,027.

Yesterday, European Central Bank president Mario Draghi made it clear that low rates and quantitative easing will not be stopping any time soon – dashing expectations from some analysts that he might indicate how he would turn off the taps on easy money which was due to expire in March 2017.

Attention now turns to his UK counterpart, Mark Carney, and the Bank of England’s Monetary Policy Committee, which had been expected by some economists to cut rates in November until Prime Minister Theresa May expressed scepticism about the effectiveness of further monetary easing.

On the macro-economic front there is not a lot in store to get the pulses racing, unless UK public sector net borrowing floats your boat.

US markets were soft overnight, so there are no friendly winds from there to lift London. The S&P finished three points lower at 2,141 and the Dow Jones fell 40 points to 18,162.

Asian markets this morning have been a bit more buoyant, with Japan’s Nikkei 225 barely changed and Hong Kong’s Hang Seng 69 points to the good at 23,374, heading into the last hour of trading.

Company statements to look out for this morning include and update from Holiday Inn owner Intercontinental Hotels Group PLC (LON:IHG).

"The market will be interested to see if the upbeat comments about its prospects by IHG executives in August have materialised in the third quarter," suggested Graham Spooner at The Share Centre.

"Investors have benefited this year from a $1.5bn special dividend in May and a good run by the shares, boosted following interim figures, which showed a 5% increase in revenue despite the group being impacted by terrorist attacks in France. The level of new franchise sign-ups for the InterContinental brand will be of interest, as will progress on the growing boutique hotel side of the business," he added.

Around the markets

  • Sterling: US$1,2236, down 0.18 cents
  • Gold: US$1,264.00 an ounce, down US$3.50.
  • Oil: Brent crude US$51.19 a barrel, down 20 cents.

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