Markets
Europe
The FTSE-100 finished yesterday's session 1.30% higher at 7,074.34, whilst the FTSE AIM All-Share index closed 0.56% better-off at 828.99. In continental Europe, markets ended higher, driven by gains in banking stocks, following rebound in Deutsche Bank's shares. Additionally, a weak euro led to gains in export-driven stocks. France's CAC 40 and Germany's DAX advanced 1.1% and 1.0%, respectively.
Wall Street
Wall Street ended in the red, dragged down by a rise in the value of the US dollar following hawkish comments from Fed officials. The IMF forecast indicated slower growth for the US in 2016, which dented investor sentiment. The S&P 500 fell 0.5%, with the utilities sector losing the most.
Asia
Equities are trading higher. The Nikkei 225 increased 0.5% as export-driven stocks rallied, fuelled by a weaker yen. The Hang Seng was trading 0.4% up at 7:00 am.
Oil
Yesterday, WTI prices inched down 0.2% to US$48.69 per barrel, while Brent oil prices remained broadly unchanged at US$50.87 per barrel.
Headlines
Global growth forecast for 2016 remains unchanged
The IMF maintained its overall global growth forecast at 3.1% for 2016 and 3.4% for 2017 after cutting the outlook for five consecutive quarters. It expects advanced economies to grow at 1.8% and emerging markets at 4.6%. The Fund lowered its growth forecast for 2016 in the US to 1.6% from 2.2% forecast in July 2016.
Company news
AstraZeneca (LON:AZN, 5,025.0p) - Hold
AstraZeneca entered into an agreement with Aralez Pharmaceuticals Trading DAC, a subsidiary of Aralez Pharmaceuticals Inc., for the rights to branded and authorised generic Toprol-XL (metoprolol succinate) in the US. Toprol-XL is a beta-blocker medicine for the control of hypertension (high blood pressure), angina (chest pain) and heart failure. As per the terms of the agreement, Aralez would pay AstraZeneca US$175m to acquire the rights to Toprol-XL tablets in the US, and the authorised generic medicine marketed by Par Pharmaceuticals. In addition, Aralez would pay AstraZeneca up to US$48m in milestone and sales-related payments, as well as mid-teen percentage royalties on sales. AstraZeneca will continue to manufacture and supply Toprol-XL and the authorised generic medicine to Aralez.
Our view: AstraZeneca selling rights for the Toprol-XL beta-blocker medicine is a positive development. The agreement would enable AstraZeneca to focus on new launches and pipeline of innovative medicines. AstraZeneca would continue to have access to Toprol-XL and work along with its partner Aralez. However, AstraZeneca's Brilinta drug failed to meet its primary endpoint in trials treating symptomatic peripheral artery disease. Also, the company's new drug zirconium cyclosilicate (ZS-9) recently failed to get the US FDA's approval due to its high potassium levels. AstraZeneca paid US$2.7bn to ZS Pharma to gain access to the drug. Moreover, many of the company's drugs are in the development phase. AstraZeneca is facing challenges, with some of its key drugs approaching patent expiry. Considering the mixed outlook for the company, we maintain a Hold rating on the stock.
Carillion (LON:CLLN, 255.80p) - Buy
Carillion has been awarded a seven-year contract to provide facilities management services for Nationwide Building Society. This contract is expected to be worth approximately £350 million and has the potential to be extended for a further three years. The award builds on an existing partnership of nearly nine years during which Carillion has been providing facilities management services for Nationwide. Under the new contract, which commences on 1 October 2016, Carillion will provide a wide range of hard and soft facilities management and workplace services for Nationwide's Headquarters in Swindon, its 15 corporate offices, critical data centres and 700 retail branches throughout the UK. These services, which will be specifically aligned to Nationwide's sustainability strategy, will include energy management, risk assurance, asset maintenance, capital works, front-of-house, security, grounds maintenance, mailroom management, porterage and cleaning.
Our view: Carillion is a leading integrated support services company with a substantial portfolio of Public Private Partnership projects; extensive construction capabilities and a sector leading ability to deliver sustainable solutions. The renewal of the contract with Nationwide Building Society demonstrates the success of Carillion's long-term partnership with Nationwide and the Company's focus on differentiating Carillion by working collaboratively with customers to deliver an outstanding customer experience, using Carillion's expertise in whole-life property management and services. We retain our Buy stance.
Ryanair Holdings (LON:RYA, 11.88p) - Buy
Ryanair, a low-cost European short-haul airline company, yesterday provided traffic update for September 2016. During the month, passenger traffic increased by +13% y-o-y to 10.8 million customers, while the load factor improved +1% y-o-y to 95%. The rolling annual traffic to August rose +16% to 113.2 million customers.
Our view: Ryanair reported strong passenger traffic and load factor in September, driven by lower fares and the continuing success of its 'Always Getting Better' customer experience programme. The programme has been introduced 2 years ago and this year, Ryanair is focusing on digital acceleration and innovation, particularly through Ryanair Labs' digital developments. As previously guided, the fares are expected to fall further in the 6 months to March 2017 by between -10% to -12%, but the airline has maintained its guidance for the year. Despite the further fall in fares, the Group has been working to remedy this effect through fall in unit costs, lower fuel bill, lower aircraft cost, cheaper financing, discounted airport expansion deals, lower sales & marketing spend, and weaker sterling. Given continuing growth in customers while cost cuttings, we believe Ryanair remains attractive. Beaufort reiterates Buy rating on the stock.
Venn Life Sciences (LON:VENN, 23.75p) - Speculative Buy
Venn Life Sciences (Venn) informed that its wholly owned subsidiary, Venn Life Sciences Limited, has entered into a conditional agreement under which it and Lynchwood Nominees Limited, as custodian for the Helium Rising Stars Fund, would sell the entire issued share capital of Innovenn UK Limited (Innovenn) for a total consideration of up to £4,740,000. The consideration amount would be settled by the assumption by Integumen of £146,032 of Innovenn's debt, and the balance of £4,593,968 being settled by the allotment of ordinary shares of £1.00 each in the capital of Integumen at par credited as fully paid. Venn founded Innovenn in 2014 as an innovation vehicle dedicated to the development and marketing of healthcare products and technologies. Prior to the sale, the subsidiary converted its loan to Innovenn of £1,294,491 into ordinary shares of £0.001 each of Innovenn, increasing its shareholding to 70% of the issued share capital of Innovenn. The other shareholder of Innovenn is the Helium Rising Stars Fund, a Cayman-domiciled fund that invests in small UK companies.
Our view: The sale of Innovenn is positive news for Venn. Innovenn has made good progress in moving from its development phase into commercialisation. The transaction would allow performance of Venn's core CRO business to be more visible. Venn reported solid performance in H1 2016 and made good progress on both operational and financial fronts. Venn reported a sharp jump in revenue and improved EBITDA for H1 2016. Strong Cash reserves should help the Company deliver on its growth plans. Venn made progress on the integration of Kinesis and achieved initial cross sales. The Company expects to benefit from the acquisition of Kinesis in H2 2016. Venn extended its operating capabilities into the USA with the establishment of Venn Inc and the appointment of a VP of Operations USA. The Company has a solid line of opportunities for H2 2016 and remains fundamentally strong. Therefore, we retain a Speculative Buy rating on the stock.