FTSE flat, Unilever leads losers
FTSE 250 pips higher
Pound up 0.4% against the US dollar at $1.2461
Sterling 0.33% higher against the euro at 1.1735 euros
The FTSE 100 ended flat on Monday as Unilever (LON:ULVR) shares sank in the wake of Kraft Heinz (NASDAQ:KHC) saying it had abandoned its proposed merger which would have been one of the biggest in corporate history.
The blue-chip index closed at 7,299.86. Even the gains in sterling failed to raise bourse spirits. North American markets were shut on Monday on account of public holidays.
Shares in the Anglo-Dutch food giant Unilever surged by 13% on Friday when the $143bn bid was announced. But on Monday, Unilever was the biggest blue-chip faller, of 6.6% to 3548p as Kraft was no longer interested.
Analysts speculated that possible UK government opposition to the deal may have been one factor that dissuaded Kraft Heinz from increasing its offer. On Friday, it had vowed to come back to the table.
On the flipside, Royal Bank of Scotland (LON:RBS) topped the gainers, and rose 6.8% to 258.9p after saying on Friday that it may no longer seek to sell its specialist business lender, the Williams and Glyn subsidiary.
The European Commission had ordered the bank to sell the division to address competition concerns, but RBS has struggled to find a buyer.
Analysts at Morgan Stanley said the move could add 10% to profits by 2019.
RBS is expected to report a ninth consecutive annual loss on Friday, although Ross McEwan, chief executive, said the bank would return to the black next year.
The second-biggest blue-chip riser was Rolls Royce Holdings (LON:RR.) which gained 6.3% to 708p after broker Goldman Sachs upgraded the stock from neutral to buy recommendation.
The mid-cap FTSE 250 managed to rise 0.2% to 18,746 and was led by Tullow Oil plc (LON:TLW) up 3.7% to 269p after broker Barclays reiterates Overweight with a target price of 360p, while Jefferies upgrades to Buy with a target price of 340p.
On the flipside, housebuilder Bovis (LON:BVS) led the losers, and fell 10.2% to 755p after it said annual profits were hit by setting aside £7mln to compensate customers who had complained about poor workmanship, and to improve customer service.
Among small caps, the FTSE AIM 100 Index ended down 0.06% at 4348 and the FTSE AIM All-Share Index was flat at 907.
London gainers this session were 34% and losers 30%.
1530 GMT - FTSE 100 weaker in directionless trading
FTSE 100 falls 7.5 points; Wall Street closed for President's Day
Unilever drops as Kraft withdraws bid
Housebuilders weak as Bovis results disappoint
Banks in focus ahead of results; RBS jumps as Williams & Glyn sale shelved
3.30pm … Directionless trading …
The Footsie was more solidly in the red in late afternoon trading, having fallen back from earlier gains in thin volumes, lacking any lead from US markets which are closed for the President’s Day holiday and unnerved by European issues
Around 3.30pm, the FTSE 100 index was down about 7.5 points at 7,292, holding off the day’s low of 7,283, but below the session peak of 7,329.
Jasper Lawler, senior market analyst at London Capital Group, said; “Political developments in France and Greece and the absence of US investors, who were busy celebrating Presidents Day, meant European stocks showed no clear direction on Monday.
“Europe is caught between the good news of a likely Greek bailout deal and the bad news of rising anti-EU sentiment in France before its election”.
A number of small cap stocks, however, were insulated from the market's falls by corporate news.
Gold recovery specialist Goldplat PLC (LON:GDP) climbed 8% higher to 6.625p after it saw profits surge in its latest half year.
The group, which has operations in South Africa and Ghana, posted a 238% rise in pre-tax profit to £1.33mln in the six months to December on revenues of £14.4mln (£10.7mln).
Elsewhere, Intelligent Energy Holdings PLC (LON:IEH) jumped 21% higher to 8.25p on news it has signed a contract to supply 600 stationary fuel cells to Luxfer-GTM Technologies.
But Feedback plc (LON:FDBK) dropped over 11% to 1,875p even though it expects to see a substantial increase in revenue from its TexRAD software in the second half of the current financial year.
12.30pm … Drifts lower …
The FTSE 100 was marginally lower in lunchtime trading, drifting back from early modest highs albeit in thin volumes, with no lead to come from Wall Street this afternoon as US markets will be closed for the President’s Day holiday.
Around 12.30pm, the UK blue chip index was 4.5 points lower at 7,295, just above the day’s low of 7,283, and well below the session high of 7,329.
Connor Campbell, financial analyst at Spreadex, said: “After a positive start the FTSE found it difficult to maintain its early gains as the morning went on, slipping back below 7300 in the process.
“It marks yet another morning where it has underperformed its peers, the UK index constantly struggling to take off in quite the same way as its Eurozone or US counterparts.”
He added: “There appears to be 2 main reasons for the FTSE’s sluggishness this Monday. Firstly, the rather substantial 7% loss by Unilever following Kraft Heinz’s abandoned merger attempt – though it must be noted that the Marmite maker has still benefited from the bid, keeping hold of a decent chunk of last Friday’s growth.
“Secondly the pound has clawed back a portion of the losses it incurred following last week’s disappointing retail sales, with sterling climbing 0.4% against the dollar and 0.3% against the euro.
Investors were also gearing up for a busy week on the corporate results front, with a plethora of banks and other FTSE 100 firm’s set to report.
Among them, educational publishing group Pearson PLC (LON:PSON) was a casualty, shedding 3.2% at 647p as German broker Berenberg chopped its target price for the stock back to 400p from 500p ahead of numbers on Friday.
Housebuilders were also weak as FTSE 250-listed Bovis Homes PLC (BVS.L) tumbled almost 10% lower to 758.5p as it reported a fall in 2016 profits and said profit would drop again this year as it builds fewer homes.
Among the small caps, Premier African Minerals PLC (LON:PREM) jumped almost 10% higher to 0.85p as it reported more lithium indications from its Zulu site in Zimbabwe, while tungsten production at RHA is also scheduled for March.
But coloured gemstones miner Gemfields PLC (LON:GEM) shed over 6% to 47.25p as the decision by the Indian government to remove high value notes has prompted it to postpone one of the auctions scheduled for the current year, which will knock the group’s figures.
10.30am … Gains eroded …
The Footsie just clung onto modest gains as the morning session progressed, easing back from opening highs, weighed by a big retreat from Unilever PLC (LON:ULVR) as US bid hopes were dashed.
Around 10.25am, the FTSE 100 index was 3.5 points higher at 7,303, holding off the session low of 7,294, but below the day’s peak of 7,329.
Volumes were thin, with no lead to come from Wall Street this afternoon as US markets will be closed for the President’s Day holiday, so there will be no reaction to confirmation that Kraft Heinz Co. (NASDAQ:KHC) has withdrawn its £115bn bid for Unilever, which excited the Anglo-Dutch consumer products business on Friday.
In London, Unilever remained the biggest FTSE 100 faller, dropping 6.5% to 3,549p, having powered 12% higher on Friday.
Aside from Unilever, banks were the main focus as investors geared up for the sector’s fourth-quarter results season which plays out this week.
Standard Chartered PLC (LON:STAN) was a faller ahead of its numbers due on Friday, losing 1.2% at 763.5p as JPMorgan Cazenove downgraded its rating for the lender to ‘neutral’ from ‘overweight' on a risk/reward basis.
But Royal Bank of Scotland PLC (LON:RBS) topped the blue chip leader board, up 6% to 257p, with its results also scheduled for Friday, after it confirmed it has shelved plans to sell its Williams & Glyn chain, while chief executive Ross McEwan also signalled a return to profitability for the state-owned lender in comments made over the weekend.
A number of brokers upped their price targets for RBS today, while Barclays Capital raised its rating to ‘equal-weight' from ‘underweight’.
But Neil Wilson, senior market analysts at ETX Capital, said: “Ahead of its annual results we should see this development in context. It is good news as the sale of those branches was a prerequisite for the bank to move forward.
“But a looming $13bn fine for mis-selling residential mortgage backed securities in the US remains.”
Broker comment also gave a boost to engines maker Rolls-Royce PLC (LON:RR.), ahead 4.5% at 696p as Goldman Sachs upped the stock to its ‘Conviction Buy’ list after big falls last when the firm posted a record loss.
Further down the pecking order, Romania-focused miner VAST Resources PLC (LON:VAST) jumped 26% higher to 0.555p as it confirmed it is fully-funded through to positive cash flow at the Manaila and Baita Plai mines.
But support and construction services group Interserve (LON:IRV) dropped 23% to 256.75p after it spooked investors by more than doubling an expected charge for getting out of its energy-from-waste business.
On currency markets, after falls last week, sterling rallied higher today, adding 0.5% versus the dollar at US$1.2470, and was up 0.4% against the euro at €1.1740.
8.30am ... Positive start ...
The FTSE 100 made a positive, if slightly hesitant, start to the trading week amid the political uncertainty.
On the Continent we have election campaigns in France and the Netherlands that may throw up surprise results, while closer to home, the House of Lords is preparing to debate the Article 50 Bill.
At 8.30am the index of blue-chip shares was up just under 15 points at 7,314.48.
The leading casualty on the Footsie was of course Unilever PLC (LON:ULVR), which fell 8% after Kraft-Heinz confirmed it was withdrawing its £115bn bid for the Anglo-Dutch consumer products business.
Royal Bank of Scotland PLC (LON:RBS) topped the leader board after it confirmed it had shelved plans to sell its Williams & Glyn chain.
Probably as pertinent were comments over the weekend by chief executive Ross McEwan signalling a return to profitability for the state-owned lender.
Not far behind was Rolls-Royce PLC (LON:RR.) as the value investors emerged after a rather torrid week last week for the engine maker, which posted a record loss.
Dropping down to the FTSE 100, another lukewarm performance by Bovis Homes PLC (LON:BVS) saw 9% wiped from the shares of the housebuilder.
Romania –focused VAST Resources PLC (LON:VAST) rocketed 16% as it confirmed it is fully-funded through to positive cash flow at the Manaila and Baita Plai mines.
“The Board see that there is no current need to issue new equity during 2017,” it added. Shares climbed 17% to 0.52p.
Premier African Minerals PLC (LON:PREM) picked up as it reported more lithium indications from its Zulu site in Zimbabwe, while tungsten production at RHA is also scheduled for March. Shares jumped 9% to 0.845p
Coloured gemstones miner Gemfields PLC (LON:PLC) slipped 6% though to 47.4p as the decision by the Indian government to remove high value notes has prompted it to postpone one of the auctions scheduled for the current year, which will knock its figures.
Proactive news headlines:
Sound Energy PLC (LON:SOU) has begun drilling its latest well on the Tendrara licence in Morocco. TE-8 will be around 12 kilometres from the last successful hole and is what’s called a step out well because it will test the lateral extent of gas that has been discovered in the TAGI reservoir. Shares down 2% to 91.5p
Sareum Holdings Plc (LON:SAR) posted a maiden profit as it received first payments from licensing lead product, a Chk1 inhibitor cancer candidate, to Sierra Oncology. Shares down 8% to 1.1p.
Lekoil Ltd (LON:LEK) has declared that the Otakikpo oil field in Nigeria is now in continuous production. The field is now online at 5,000 barrels of oil per day, ramping up output to 10,000 bopd in the coming months. Shares eased 2% to 25p.
Atlantis Resources Ltd’s (LON:ARL) progress as a leading tidal power developer was underlined on Monday as the company announced that its latest turbine was deployed in record time. Shares were flat at 55p.
Nostra Terra Oil and Gas Company plc(LON:NTOG) has seemingly called off a potential equity fundraising. In a stock market statement told investors that a share placing was ‘in contemplation’ on Friday February 17, but the company said the board has now decided not to proceed with it. Shares fell 1% to 2.5p.
Engineer Hayward Tyler PLC (LON:HAYT) has flagged up a very strong pipeline of new business opportunities, though some orders are taking longer to land. Shares fell 7% to 45p.
Rare Earth Mineral Plc (LON:REM) told investors of a substantial upgrade to the JORC compliant indicated mineral resources at the Cinovec lithium/tin project in the Czech Republic, acknowledging a recent announcement by European Metals Holdings Ltd (LON:EMH). Shares rose a touch to 0.53p.
Following the death of a worker, Pan African Resources plc (LON:PAF) is suspending operations at its Evander gold mine in South Africa for up to 55 days. The suspension comes in the context of a previously announced refurbishment programme and will involve remedial action on two mine shafts. Shares eased 8% to 16.5p.
Condor Gold PLC (LON:CNR) is raising £5.24 mln via placing in which the lead investor will be well-known mining entrepreneur Ross Beaty. Directors will also come in for shares. The plan is to issue just under 8.3 mln units at a price of 62p per unit, with each unit consisting of a share plus half a warrant exercisable at 93p. Shares were 63.9p.
Graphene specialist Directa Plus Plc (LON:DCTA) has been awarded €1mln European grant by the regional government in Lombardy, Italy, to help fund its research into smart fabrics. Directa will be project leader of a team that includes local firms Novaresin and Soliani along with the Politecnico of Milan University. Shares roe 1% to 120p.
Gold recovery specialist Goldplat PLC (LON:GDP) saw profits surge in its latest half year. The group has operations in South Africa and Ghana and posted a 238% rise in pre-tax profit to £1.33mln in the six months to December on revenues of £14.4mln (£10.7mln).
Faron Pharmaceuticals Oy (LON:FARN) has recruited its first patient to a phase II clinical trial of its lead drug, Traumakine, in the treatment of organ failure following a ruptured abdominal aorta aneurysm (RAAA). The condition, which has 70-80% mortality rate, requires immediate surgery. Shares rose 8% to 6.6p.
Feedback plc (LON:FDBK) expects to see a substantial increase in revenue from its TexRAD software in the second half of the current financial year. The medical imaging firm has previously reported a significant number of purchase orders for research versions of TexRAD in the first half of its current financial year. Shares fell 9% to 1.94p.
7.00am ... Reasonably strong start forecast ...
The FTSE is expected to make reasonably strong start to the trading week after another record close on Wall Street Friday and a positive session in Asia overnight.
The spread betting firms are predicting the index of blue-chip shares will open 28 points higher at 7,327,96 when it opens later.
It is noticeable there is now a little more caution around the Trump trade in the US with Dow Jones ending just 4.28 higher at 20,624.05.
In Asia the mood similarly circumspect, although all the major bourses other than the ASX were in positive territory.
In Europe there is unfolding political uncertainty in the Netherlands and France ahead of elections, while in Italy the turmoil continues.
Here in the UK last week’s surprise £115bn bid for Unilever by Kraft-Heinz has been abandoned ‘amicably’ after the Anglo-Dutch firm wouldn’t play ball.
“Ultimately these sorts of talks require a certain amount of good faith on the part of both parties,” said CMC Markets senior analyst Michael Hewson.
“In light of Kraft’s recent history that was always likely to be stretch, notwithstanding the potential political opposition in the Netherlands, as well as here in the UK.”
The pound, currently changing hands for US$1.2422, could come under further pressure as the House of Lords starts to debate the bill that will trigger Article 50 (and the UK’s exit from the EU).
Markets
- Brent crude up 18 cents at US$55.99 a barrel.
- Gold down US$5.40 a barrel at US$1,233.70.
Business Headlines
- The Treasury is set to push ahead with changes to the business rate system despite several last-ditch warnings from UK executives that investment will fall as a result – FT.
- Amazon will hire 5,000 people across the UK this year, boosting its headcount by a quarter when it moves into new offices in London’s Shoreditch, in a clear sign of the ecommerce giant’s long-term commitment to Britain – FT.
- Jaguar Land Rover is to launch a fourth Range Rover model, with expectation building that the vehicle will be assembled at the group’s Solihull plant in the Midlands – Times.
- Mounting anger over energy pricing threatens to overshadow an expected rise in profits at Centrica, as jittery investors fear new restrictions on the company – Telegraph.
- ITV is under pressure from shareholders to more tightly link management pay to profits in its production business, which has been rapidly assembled by takeovers in recent years – Telegraph.
- Britain’s major banks will be in the spotlight this week as they unveil their full year figures, with Royal Bank of Scotland forecast to make losses of more than £6bn and HSBC expected to face questions about a boardroom overhaul – Guardian.