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FTSE 100 closes in the black as Shire surges; tobacco stocks drift lower

Last updated: 12:30 19 Apr 2018 EDT, First published: 01:47 19 Apr 2018 EDT

scientist in lab
  • FTSE 100 closes up 11 points

  • US stocks slide, led by Apple

  • Shire rejects £44bn bid from Takeda; shares surge

 

FTSE 100 closed higher Thursday, with Irish-based drugs group Shire (LON:SHP) the top gainer, but gains were tempered by the general investor malaise.

The UK blue-chip benchmark closed over 11 points at 7,328, while FTSE 250 finished up 135 points at 20,147.

Brent crude was also higher, up 2.65% to US$73.48 per barrel.

Shire shares ended 5.89% higher at 3,975p as it received and then rejected a takeover approach from Japan's Takeda Pharmaceutical (TYO:4502), but was later confirmed to be in talks with US giant Allergan plc (NYSE: AGN).

David Madden, analyst at CMC Markets, said: "This sort of play is common in the pharmaceutical sector as Takeda are keen to expand, seeing as patent expires are approaching.

"Allergan is relatively light in cash and heavily indebted, so there are no guarantees this will transpire." 

Meanwhile, tobacco stocks were lower on Footsie, with British American Tobacco plc (LON:BATS) the top laggard, down 5.43% to 3,650p, while rival Imperial Brands PLC (LOM:IMB) lost 2.89% to 2,355p after Philip Morris hinted at a slowdown of e-cigarette sales in Asia.

Summing up European market trade today: "Stocks are mixed today as there has been to change to the global outlook.

"There is has been little in the way of macroeconomic news to jolt the markets one way or another, and for now volatility is sliding."

3.35pm: Tobacco stocks put out

The FTSE 100 has been mixed this afternoon, having fallen into negative territory before recovering.

With 30 minutes or so left to go in the trading day, the index of blue-chip shares is up 12.9 points, 0.2%, to 7,330.3.

Shire Plc (LON:SHP), which has reported found itself in the middle of a bidding war between Japan’s Takeda and US-listed Botox maker Allergan PLC (NYSE:AGN), is the top riser on the takeover speculation – up 8.6% to £40.75.

Pest controller Rentokil Initial PLC (LON:RTO) is also being chased by investors, with the stock advancing 3.7% to 283p, after it reported a 16% rise in first-quarter revenue.

The oilers – BP PLC (LON:BP.) (up 1% to 514.4p) and Royal Dutch Shell PLC (LON:RDSB) (up 1.4% up £25.22) – have also flowed higher as oil prices hit three-year highs.

Tobacco stocks were stubbed out by investors this afternoon though. British American Tobacco plc (LON:BATS) slumped 5.9% to £36.36 while rival Imperial Brands PLC (LOM:IMB) fell by 3.8% to £23.33 after Philip Morris hinted at a slowdown of e-cigarette sales in Asia – a key market for so-called ‘novel tobacco products’.

3.15pm: Oil prices near three-year highs

Oil prices have reached their highest levels since May 2015 on reports that Saudi Arabia would be prepared to extend a deal to limit global supply.

News that US inventories have declined also helped to push the price for a barrel of the black stuff up past US$74.

A global supply glut, driven by rising US shale oil production, has depressed prices over the past four years. That forced the Organisation for Oil Exporting Countries (Opec) to act last year when it brought in measures to rein in oversupply.

The higher prices have boosted London oil supermajors including BP PLC (LON:BP.) (up 1% to 514.4p) and Royal Dutch Shell PLC (LON:RDSB) (up 1.4% up £25.22).

3.05pm: Allergan now in for Shire?

Reuters deal editor Greg Roumeliotis has tweeted that Botox-maker Allergan PLC (NYSE:AGN) is now interested in snapping up Shire Plc (LON:SHP).

Shire's share price has popped another couple of percentage points on that report, with shares now up 8.4% for the day to £40.70.

2.45pm: Apple brings down US stocks

Warnings of a slowdown in demand for smartphones have hit the shares of tech giant Apple Inc (NASDAQ:AAPL), which is down 2% to US$174.29, while a host of its suppliers, such as Cirrus Logic Inc (NASDAQ:CRUS) (down 3.5% to US$37.63) are also suffering.

Those stocks are weighing on the wider market, particularly the tech-heavy Nasdaq which is down 0.4%, or 27.1 points, to 7,268.2.

The Dow Jones is also nursing losses, down 0.1%, or 28.6 points, to 24,719.5, while the S&P 500 has sunk 0.5%, or 15.2 points, to 2,693.3.

2.10pm: Shire Holding out for more money from Takeda

A matter of hours after Reuters and the FT got wind that Japanese drugmaker Takeda had made an offer for Shire Plc (LON:SHP), the Irish company came out and confirmed that three bids have indeed been made.

The latest offer was lodged last week and valued Shire at £44bn, or £46.50 per share, to be paid in a mixture of cash and equity.

Shire said it had rejected all three offers, including the last one, but left the door ajar for Takeda to come back with another improved offer.

“The board met again and thoroughly considered the third proposal with its advisers and unanimously rejected it, concluding that it continues to significantly undervalue the Company and Shire's growth prospects and pipeline,” read a statement this afternoon.

“The board and management of Shire remain committed to enhancing shareholder value and are focused on fully evaluating internal and external opportunities to maximise value for shareholders, including any further proposals from Takeda.”

Shire shares are up by 6.5% to £40, which would suggest not all investors are convinced that another bid will be forthcoming.

1.25pm: Billy Bragg is at the Bank of England

No, it’s not a joke. Agitprop-singer-songwriter-turned-left-wing activist Billy Bragg is at the Bank of England today, delivering a sold-out lecture to City bigwigs.

Bragg, who is well-known for his anti-establishment campaigning, will give a presentation called: ‘The Struggle for Accountability in the Digital Age’.

The 60-year-old has been something of a banker-basher in the past, threatening to not pay his taxes in 2010 in protest over the bonuses at Royal Bank of Scotland.

He has also slammed the BoE for pumping £500bn into the economy in the aftermath of the 2008 financial crisis, claiming it did little to help the average man or woman on the street.

"It's going to be quite interesting to go in there today and look them [the bankers] in the eye," Bragg told the BBC's Today programme.

1pm: FTSE 100 brushes off ex-divs, resurgent pound

The FTSE 100 has been in the black from the word ‘go’ this morning, despite a resurgent pound.

Sterling had taken a hit after weak retail sales data earlier on but it has recovered those losses and more to sit slightly up against the dollar at US$1.423.

A stronger pound normally weighs on the blue-chips as it makes their overseas earnings worth less once converted back.

Still, the FTSE 100 has managed to eke out a gain 15.1 points, or 0.2%, to stand at 7,332.7 in lunchtime trading.

Leading the index higher is Shire Plc (LON:SHP) which is up 6.3% to £39.99 amid reports that Japanese drugmaker Takeda has lodged an indicative takeover bid worth around £46.50 a share.

Ad giant WPP PLC (LON:WPP) is also in the black on media reports, this time that the group could be split up after the departure of long-time boss Martin Sorrell. Shares are up 3.5% to £11.55.

A host of companies that have gone ex-dividend today are holding the footsie back. Fund manager Stand Life Aberdeen PLC (LON:SLA) is the worst hit, down 3.8% to 366.3p, while UK Bank Lloyds Banking Group PLC (LON:LLOY) (down 2.8% to 65.7p) and defence giant BAE Systems PLC (LON:BA.) (down 2.1% to 588p) not far behind.

Investors buying into any of those stocks today won’t be eligible for the next dividend payments.

Unilever plc (LON:ULVR) also headed lower despite reporting a 3.4% increase in underlying sales in the first-quarter.

AJ Bell investment director said investors “may instead be focusing on how Unilever is exchanging pricing power for volume growth”. Shares are down 1.9% to £38.73.

12.20pm: Slow start expected on Wall Street

US stocks are expected to get off to a quiet start on Thursday, with none of the three major indices moving much one way or the other.

The Dow Jones is called 10 points higher 24,754 at the opening bell; the tech-heavy Nasdaq is expected to lose 7.1 points to 6,825.4; while the broader S&P 500 is seen 1.5 points in the red at 2,706.3.

“Thursday’s sluggish trading is unlikely to be changed by the Dow Jones, which is set to start the US session flat [at around] 24750,” said Spreadex analyst Connor Campbell.

“In terms of what could move the needle, there’s appearances from FOMC members Lael Brainard and Randal Quarles, the Philly Fed manufacturing index and the usual Thursday jobless claims.”

12pm: Shire 'receives indicative takeover bid'

Shares in Shire PLC (LON:SHP) jumped to the top of the FTSE 100 shortly before midday after reports surfaced that Japanese drugmaker Takeda had lodged an indicative takeover offer worth about £46.50 a share.

That’s according to a brief article by Reuters, which said it got the scoop from two unnamed sources. Other reports around the web have suggested any deal would be cash-plus-shares.

If the offer turns out to be true, it would represent a premium of more than 50% from when Takeda first showed its interest. Investors aren’t taking the reports as gospel though, with shares rising 5.4% to £39.57 – still a little way below the reported price.

11.35am: Mothercare brings in new chair to guide it through challenging period

Beleaguered children’s retailer Mothercare PLC (LON:MTC) has announced the departure of its chairman, Alan Parker.

Clive Whiley – who Mothercare was keen to point has “specific refinancing and restructuring experience” – has been brought in as interim executive chairman and will be the man trying to guide the troubled firm through its next stage.

Like many other high street retailers, Mothercare has struggled to deal with changing consumer habits, while cash-strapped consumers have had to cut back on their spending.

In March, Mothercare said it expects to breach its banking covenants and is looking for additional financing. Shares were down 1.7% to 18.9p this morning.

11.20pm: Debenhams margins ‘shot to pieces’

“It’s hard to believe, but there are bright spots in Debenhams results,” wrote Hargreaves Lansdown analyst Nicholas Hyett.

“Online sales are rising rapidly, the ‘destination’ components of the high street stores are doing well, clothing is holding up and headline sales are actually not far off market expectations – especially once you exclude the impact of the Beast from the East.

“Unfortunately, all of that is essentially irrelevant, because margins are totally shot to pieces. The combination of low sterling increasing the cost of stock, and heavy discounting, means gross margins have tumbled.”

11.10am: Ultra Electronics shares crash after SFO probe

Down on the FTSE 250, Ultra Electronics PLC (LON:ULE) took another blow as it revealed the UK’s Serious Fraud Office has opened a criminal investigation into “suspected corruption” by the defence contractor in Algeria.

In a statement, the company – which makes sonar systems for submarines – said the SFO investigation concerned the business conduct of Ultra, its subsidiaries, employees and associated persons, and came after the group referred itself to the British fraud authorities.

It added: “Given the stage of these matters, it is not possible to estimate reliably what effect the outcome of this matter may have on the group.”

The investigation caps a rough few months for Ultra, which plunged last month after it reported a drop in 2017 profits and confirmed it was pulling out of its planned US$234mln merger with Sparton Corp after the US Department of Justice raised competition concerns.

10.50am: Wage growth could spark turnaround for retailers

“The weather meant a disappointing retail sales reading for March was all but guaranteed, but the figures were even worse than anticipated, with sales falling 1.2% as against an expected drop of 0.5%,” Hargreaves Lansdown economist Ben Brettell.

“But the UK consumer has been surprisingly resilient over the past few years, even in the face of economic uncertainty, and there looks to be some light at the end of the tunnel for those suffering a squeeze in household budgets.

“Inflation fell to 2.5% in March, while the most recent wage growth figures show an acceleration to 2.8%.

“If this marks a sustained period of rising real wages, it could bode well for the retail sector – provided any pay rises aren’t swallowed up by increased mortgage payments as a result of May’s likely interest rate rise.”

10.30am: Pound's fall boosts FTSE

Weak UK retail data – largely a consequence of the ‘Beast from the East’ – sent the pound falling for a second day in a row, helping to nudge the FTSE 100 higher on Thursday morning.

After making strong advances at the start of the week, lower-than-expected inflation data took some of the steam out of its rally on Wednesday, while news that retail sales fell 1.2% in the first quarter saw sterling punished once again.

WPP top riser

The pound is currently down to US$1.418. It had risen past US$1.43 on Tuesday.

A weak pound is generally a good thing for the blue-chips as it makes their overseas earnings – which make up about 75% of total sales – worth more when converted back.

And it has indeed helped this morning, with the index up 16.5 points, or 0.2%, to 7,333.7.

WPP PLC (LON:WPP) investors don’t seem to be pining too much for the ad giant’s now ex-boss. Martin Sorrell stepped down earlier in the week amid an internal investigation, but the group’s shares – up 4.2% to £11.63 – top the footsie this morning amid speculation that it could be broken up.

Pest controller Rentokil Initial PLC (LON:RTO) isn’t far behind, advancing 2.9% to 280.9p, after it reported a 16% rise in first-quarter revenue.

Ex-divs weigh heavy

As for the fallers, that list is dominated by companies going ex-dividend today, meaning that investors buying those stocks today won’t be eligible for the latest dividend payments.

Standard Life Aberdeen PLC (LON:SLA), down 3.8% to 366.2p, is the top loser, closely followed by UK bank Lloyds Banking Group PLC (LON:LLOY) (down 2.6% to 65.9p) and fighter jet maker BAE Systems PLC (LON:BA.) (down 1.8% 589.6p).

10am: ONS data hits retailers

Shares in UK retailers have, perhaps unsurprisingly, not reacted well to the news that retail sales recorded their biggest quarterly fall for a year in the opening three months of 2018.

After being boosted by solid results from Associated British Food PLC’s (LON:ABF) Primark business and JD Sports Fashion PLC (LON:JD.) earlier in the week, the likes of Marks and Spencer Group PLC (LON:MKS) (down 0.3% to 280.5p) and Next PLC (LON:NXT) (down 0.4% to £51.70) are both in the red this morning.

The data did help out Debenhams PLC (LON:DEB) though, which rallied slightly afterwards as investors perhaps realised that its poor first-half performance was part of a wider trend. Its shares are down 4% to 22.4p, but they had been down by more than 12% earlier on.

9.45am: ‘Beast from the East’ hits UK retail sales

UK retail sales fell by 1.2% in the three months to March, according to the Office for National Statistics. That was by volume, by value sales declined by 0.9%.

Petrol sales slumped 7.4%, which the ONS said was “a likely consequence of adverse weather conditions of adverse weather conditions which impacted travel”.

Food sales from supermarkets fell 0.6% in the period, although the snowy weather did boost convenience store sales as people opted not to venture too far from home.

9am: Traders pause for breath

After a strong push on Wednesday, which saw a 91 point gain, the FTSE 100 paused for breath, nudging just 6 points higher to 7,323.40.

Even so, there appeared to be palpable relief among traders that range-bound index had finally broken above 7,300 after a period in a narrow 130-point channel to hit a 10-week high.

“With renewed momentum, and right in the middle of historically the second-best month of the year for stock markets, 7,400 is a realistic possibility,” said Lee Wild, head of equity strategy at Interactive Investor.

“A modest unravelling of sterling’s latest advance against the dollar is a clear boon for UK-listed overseas earners, and a strong start to US results season is steering focus back from politics to market fundamentals.

“That’s positive for stocks while data points to rapid growth both in earnings and the global economy.”

It was a busy morning for corporate news (results mainly) with Debenhams (LON:DEB), Unilever (LON:ULVR) and Rentokil (LON:RTO) reporting.

While bad, the bad news (falling sales, slashed dividend) was more or less already in the share price of Debenhams, whose stock fell ‘just’ 6%.

Braced for bad news, investors in the former royal rat catcher Rentokil were pleasantly surprised by the update with shares up 2.7%. By contrast, Unilever’s latest results were not so well received with the stock off 2.2%.

Dropping down to the tiddlers, shares in ANGLE, which has developed a device that can harvest cancer cells, was buoyed by research which revealed its system potentially has a significant role in assessing treatment options for sufferers of the killer disease. The shares spiked 9%.

Proactive news headlines:

ValiRx PLC (LON:VAL) said its optimised VAL101 compound has been effective in inducing programmed cell death in cancer cell models, a process called apoptosis. The company said the results showed a “superior apoptotic effect in comparison to currently available reagents”.

A second drill programme at its jointly held Pandora prospect in Djibouti hit a bumper gold vein in a previously untested area, said Stratex International PLC (LON:STI). Pandora is being explored by Thani Stratex Resources (TSR), a joint venture with Thani Emirates.

Researchers using ANGLE’s Parsortix (LON:AGL) device for capturing circulating tumour cells may have found another “clear high value application” for the system. For not only have they discovered a method of successfully culturing the cancer cells from blood samples taken using Partsortix, they have also designed a work flow for the process.

Eco Atlantic Oil & Gas Ltd (LON:ECO) has updated investors as work continues on recently acquired data from a 3D seismic exploration programme, which spanned some 2,550 square kilometres in the Orinduik block offshore Guyana.

Highlands Natural Resources PLC (LON:HNR) told investors it has secured a natural gas sales deal for the East Denver project which is expected to see gas monetisation in the second half of this year. It presents a further revenue opportunity and adds further upside potential for the asset, the company said.

Cabot Energy PLC (LON:CAB) has reported a 33% increase in revenue for the financial year ended December 31 as the group’s growth initiatives in Canada paid off. The AIM-quoted junior oiler generated US$4.8mln in the year as gross average production rose 43% to 411 barrels of oil per day for the 12 months – such was the pace of growth, the gross rate for December alone measured 653 bopd.

Customised electronics supplier discoverIE Group PLC (LON:DSCV) has continued the strong momentum of last year into 2018.

Challenger Acquisitions Limited (LON:CHAL) has said it will begin legal proceedings to recoup loan costs following the cancellation of the Star Sanctum event.

Cell-based therapeutics specialist ReNeuron Group PLC (LON:RENE) has won a £1.5mln grant to further develop its human retinal progenitor cell (hRPC) therapy which is used to treat blindness-causing, degenerative eye diseases.

Drug developer Motif Bio PLC (LON:MTFB) is to present new safety and efficacy data for its next-generation antibiotic iclaprim at a top European conference this weekend (21-24 April).

Shanta Gold PLC (LON:SHG) reduced production from the New Luika gold mine in Tanzania in its latest quarter as its focus remained on cost-cutting. Output in the three months to March was 17,663 gold ounces against 21,288 in the previous quarter, though this was in line with the annual target of between 82-88.000oz said the company.

Sunrise Resources PLC (LON:SRES) said recent exploration work at its Baker's Gold Project in Western Australia had enhanced the marketability of the asset. The company paid for mapping and sampling within the Dicky Lee open pit at the up-for-sale Baker's Gold Project and to conduct infill soil sampling within the nearby DRL4 gold-in-soil anomaly.

US Oil & Gas PLC (USOIL) has confirmed the start of drilling at the Hot Creek Valley project in Nevada, where the new Eblana well aims to follow up a previously encountered oil discovery. The Eblana-3 well is described as an appraisal well. It is positioned ‘updip’ and around 1.2 kilometres from the Eblana-1 discovery well.

Bloomsbury Publishing PLC (LON:BMY) has announced the appointment of Penny Scott-Bayfield as its group finance director with effect from 16 July 2018.

OptiBiotix Health PLC (LON:OPTI) has announced the appointment of Steven Riley as head of online sales and marketing from 2 May, to develop the company’s web presence.

Bushveld Minerals Limited (LON:BMN), the AIM-listed integrated vanadium producer, will host a Vanadium 101 interactive webinar on Thursday, May 3, 2018 at 13:00 (GMT+1), 14:00 (SAST).

6.45am: Forget the excitement 

The FTSE 100 is expected to make a positive, though not necessarily exciting start to Thursday’s dealing.

Against steady global equities trading, nobody’s expecting fireworks at the open.

The Dow Jones dipped 38 points or 0.16% on Wednesday, meanwhile, the S&P 500 and Nasdaq closed out the session in slightly positive territory up 0.08% and 0.19% at 2,708 and 7,295 respectively.

In Asia, Japan’s Nikkei was up 77 points or 0.35%, changing hands at 22,234 while Hong Kong’s Hang Seng added 411 points or 1.35% to 30,693. The Shanghai Composite, meanwhile, climbed 32 point or 1.05% to 3,122.

Australia’s ASX 200 advanced 20 points or 0.35% to 5,882.

In London, spreadbetting and CFD firm IG Markets sees London’s FTSE 100 starting around 11 points higher, calling the benchmark at 7,321 to 7,325 with just over an hour to go until the open.

Attentions are expected to stay on the British consumer and retail sectors through Thursday, as the market awaits monthly retail sales data later today - investors may also glean insights from the financial results due from Debenhams and Unilever.

“For the most part of this year it’s been difficult to escape the steady drip, drip, drip of bad news from UK retail with profit warnings from across the retail sector at a seven-year high,” said Michael Hewson, analyst at CMC Markets.

“High profile names including Toys ‘R Us, Debenhams, Maplins, Mothercare, Moss Bros, Carpetright, Kingfisher, New Look, either going into administration or reporting difficulties, the list goes on with even high street mainstay John Lewis warning about falling sales, amidst reports of job losses in the thousands, across the entire sector in the first three months of this year alone.”

“There have been notable success stories, with this week’s news from JD Sports and Primark, owned by Associated British Foods posting some fairly decent updates, but they tend to have been the exception.”

Significant events expected on Thursday April 19:

Trading update: Unilever PLC (Q1) (LON:ULVR), Rentokil Initial PLC (LON:RTO), Sky PLC (Q3) (LON:SKY)

Finals: Camelia PLC (LON:CAM), Hvivo PLC (LON:HVO), Xeros Technology Group PLC (LON:XSG)

Interims: Debenhams PLC (LON:DEB), Acacia Mining PLC (Q1) (LON:ACAA), Gattaca PLC (LON:GATC)

Ex-dividends: To knock 9.8 points off FTSE 100 – BAE Systems PLC (LON:BA.), Barratt Developments PLC (LON:BDEV), Croda International PLC (LON:CRDA), Informa PLC (LON:INF), Lloyds Banking Group PLC (LON:LLOY) Standard Life Aberdeen PLC (LON:SLA)

Economic data: UK retail sales; US weekly jobless claims; US Philly Fed index

Around the markets:

Pound: US$1.4202, down 0.01%

Gold: US$1,352 an ounce, up 0.06%

Brent crude: US$73.94 a barrel, up 3%

Bitcoin: US$8,178, up 0.18%.

Headlines

Senior WPP boss says staff 'liberated' after Sorrell exit - BBC News

FAA orders fan blade inspections after jet engine explosion - Daily Mail

Gross betrayal if £1bn Royal Navy contract sent abroad, unions warn - The Scotsman

Apprenticeship levy 'unfit for purpose' in current form - BBC News

Wynn Resorts Adds Three Women to Board - Wall Street Journal

Southwest Airlines steps up engine inspections after fatal flight – NBCNews

Amazon's Bezos Says Company Topped 100 Million Prime Members – Bloomberg

Data experts on Facebook's GDPR changes: Expect lawsuits – TechCrunch

P&G to acquire Merck unit in $4.2 billion deal – MarketWatch

California opens investigation into Tesla factory's safety conditions - Los Angeles Times

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