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FTSE100 flat; CityFibre to take on BT Openreach

Published: 13:38 14 Dec 2015 GMT

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LUNCHTIME REPORT

London’s blue-chip stocks were very flat on Monday, but the world of superfast broadband looks set for a shake-up.

CityFibre Infrastructure (LON:CFHL) is hoping to take on the big boy of the line-rental broadband space – BT Openreach – after its latest acquisition.

The firm is buying network asserts from KCOM Group for around £90mln, with an underwritten placement of 160mln shares at 50p each to raise £80mln. 

It will add around 21 new cities and major towns to its capabilities and create a “competitive alternative to BT Openreach”.

Shares in CityFibre dropped around 15%, or 9p, to 57p as the placing will more than double the number of shares in issue to 265mln from 105mln.

The move will give CityFibre a presence in 36 cities and towns across the UK helping the firm to hit its growth strategy, chief executive Greg Mensch said.

He said that the deal would “play a very meaningful role in redressing the legacy of underinvestment currently plaguing the UK connectivity landscape.”

BT (LON:BT.A) has come under increasing pressure to spin-off its Openreach business due to competition fears, with regulator Ofcom investigating its dealings in the market.

Investors appeared to shrug off the news, as shares in the telecom giant rose 3p to 464p.

It was a flat day for the large caps, with the FTSE100 three points lower at lunch at 5,949.

South African life insurer Old Mutual (LON:OMI) was the best performer of the day so far, rising 7.5%, or 11p, to as the South African government appointed its third finance minister within a week. 

President Jacob Zuma announced the well-respected Pravin Gordhan as South Africa's would be the next finance minster, after sacking Nhlanhla Nene and replacing him with Douglas Van Rooyen last week.

In the mid cap space, Investec (LON:INVP) was also boosted by the news, gaining 7.4% or 31p, to 450p.

In the US, markets look set to follow the malaise in Europe, which has seen the German Dax fall around 80 points to 10,256 while the French Cac40 eased 19 to 4,531.

The Dow Jones industrial average is tipped to open half a dozen points lower, while the broader-based S&P 500 should open only a point or so below Friday's close of 2,011.

Back in the UK, British American (LON:BATS) added 35p to 3,633p as US broker Jefferies stuck on a ‘buy’ recommendation and said the valuation is "compelling'. 

Meanwhile, pharma giant AstraZeneca (LON:AZN) lifted 5p to 4,335p as it confirmed talks with Acerta, a Dutch biotech developing a cancer compound.

In the small cap space, Learning Technologies (LON:LTG) has won a contract as part of a consortium to provide learning services to the UK civil service. Shares rose almost 10% to 25p.

Converesly, Audioboom (LON:BOOM) dropped more than 20% to 3p as it reported that, while revenue in the final quarter was double the other three quarters combined, the company will still fall short of market expectations, it said in an update.

LONDON MORNING

London blue chips opened higher, despite a tough session in Asia as investors looked ahead to this week’s US interest rate announcement.

After heavy losses Friday, FTSE 100 added 48 to 6,001 with a sizeable majority of the index showing gains.

South Africa-focused firms recovered a lot of ground as President Jacob Zuma announced the well- respected Pravin Gordhan as South Africa's would be the next finance minster.

It is a swift U-turn by Zuma who sacked Nhlanhla Nene and replaced him with Douglas Van Rooyen last week only to spark a wave of financial uncertainty and more criticism for the embattled president.

South African life insurer Old Mutual (LON:OMI) was the best performer this morning, rising 8% to 168.8p.

Paper maker Mondi (LON:MNDI) rose 3% to 1,316p and FTSE250 member Investec (LON:INVP) jumped 9% to 458p.

Miners also enjoyed a good start to the week helped by better than expected industrial production figures over the weekend out of China.

Anglo American (LON:AAL) regrouped after its beating last week. It is also got some benefit from the South African effect. Shares rose 7p to 300p.

British American (LON:BATS) added 15p to 3,651p as the US broker Jefferies stuck on a “buy” recommendation and said  the  valuation is "compelling". 

"Q3 sales beat and firmer pricing duly arrived. BATS chose only to reaffirm FY guidance, but the tone was confident, a mood which persisted into September's Investor Seminar.”

BG (LON:BG.) ticked up a few points to 945p as the Chinese gave their approval for its takeover by Anglo-Dutch giant Shell (LON:RDSB), the last major regulatory hurdle to the £45bn deal.

AstraZeneca (LON:AZN) added 19p to 4,349p as it confirmed talks with Acerta, a Dutch bio developing a cancer compound.

Among the small caps, 88 Energy (LON:88E) rose to 13%to  0.62p as drilling at  its Icewine #1 well has reached a critical juncture.

Trading in its shares in Australia have been suspended until the result is known.

Iofina (LON:IOF) rose  9% to 10p as said it would hit its full-year guidance by producing 570 to 580 metric tonnes of crystalline iodine.

Worries had surfaced that output would fall due to restrictions put in place following seismic activity in Oklahoma.

Tribal Group (LON:TRB) slumped 47% to 29p on plans to raise around £30mln in a rights issue next year to cut its debt and provide working capital. 

LONDON PRE-OPEN

The highlight of the week will be on Wednesday when the Federal Reserve announces its decision on whether or not to raise interest rates.

As at Friday afternoon, the Fed Fund Futures, a tool used to determine the likelihood of a Fed rate rise, suggested there was an 83% chance of a rise next week.

Christopher Vecchio, currency analyst, at DailyFX said: “We believe that a Fed rate hike is a "lock" after the November Non-farm payrolls.”

Away from the actual decision, Investec said: “The bigger question is how the Fed defines a ‘gradual’ pace of tightening, with markets currently pricing in a slower pace of tightening than both the Fed’s last ‘dot plot’ and our own forecasts.”

The broker said Fed chair Janet Yellen’s comments during the press conference will be “as relevant for the markets as the actual decision”.

On the very limited corporate front, Dixons Carphone reports its half year results on Wednesday.

Investors will be keen to see if the company can keep the robust performance from a year ago, which was boosted by the release of the iPhone 6, going this year.

Keith Bowman at Hargreaves Lansdown said investors will also be looking for “a potential positive read-across for Black Friday weekend sales having come from recent John Lewis comments.”

Investec said the Black Friday sales could mean electrical sales were “volatile” over the period, while mobile sales are likely be more stable.

Any signs of store closures in the UK or the partnership with Sprint Corp in the US will also likely catch the eye.

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