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London stocks nudged up in early trade on Monday, failing to really build on the gains seen on Wall Street at the end of last week as investors mulled over news that London house prices have slumped over the last year, while M&A was in focus as Melrose sweetened its hostile bid for GKN.
At 0840 GMT, the FTSE 100 was up 0.1% to 7,230.61, while the pound was up 0.1% against the dollar to 1.3970 and flat versus the euro at 1.1250.
On Friday, the Nasdaq hit a record high as US stocks rallied on the back of solid jobs data, which revealed the perfect combination of a much stronger-than-expected non-farm payrolls number and a worse-than-expected wage growth reading.
Rebecca O’Keeffe, head of investment at Interactive Investor, said: “Recent market wobbles have all been connected to the possibility of stronger US inflation which could cause the Federal Reserve to raise rates faster than the market anticipates and end the nine-year equity party. Confirmation that there is a resurgence in the number of Americans joining the labour force, increasing the participation rate, is a huge boost to US production prospects and growth without the downside risk of wage inflation. Not too hot, not too cold; Goldilocks appears to be alive and well.”
But investors were also digesting uninspiring news that house prices in some parts of London have fallen as much as 15% in the last year. Figures from estate agency YourMove revealed that house prices in Wandsworth dropped by more than £100,000 in the last 12 months.
On the corporate front, turnaround specialist Melrose Industries was on the back foot as it upped its offer for engineer GKN to 467p per share, or £8.1bn from £7.4bn. The sweetened ‘final’ offer comes after GKN announced on Friday that it had agreed to combine its automotive business, Driveline, with US-based Dana in a deal valued at around $6.1bn.
Polymetal International was in the red as it said net profit declined 10% in 2017.
Generic drug-maker Hikma Pharmaceuticals also retreated after saying it will carry out a clinical trial of its generic version of GlaxoSmithKline’s Advair Diskus asthma drug after consultation with the US drug regulator.
AstraZeneca was little changed as it said it has pushed back the expected completion of the Phase III ‘Mystic’ clinical trial of its Imfinzi immunotherapy treatment of non-small cell lung cancer.
Petrofac gushed higher as it was awarded a lump-sum 27-month engineering, procurement and construction (EPC) contract by Bharat Petroleum Corporation (BCPL) valued at around $135m.
Clarksons edged up as it posted a 12% jump in full-year underlying pre-tax profit amid early signs of a recovery across shipping markets.
In broker note action, Just Eat was downgraded to ‘sell’ at Deutsche Bank, while Smurfit Kappa was cut to ‘neutral’ at UBS. Aveva was downgraded to ‘neutral’ at Citi and Virgin Money was reduced to ‘hold’ at Jefferies.
Cairn Energy was lifted to ‘overweight’ by Morgan Stanley, while CYBG was upped to ‘buy’ at Jefferies.
