ADVFN Morning London Market Report: Monday 17 January 2022

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London open: FTSE heads higher; Glaxo paces advance on deal news

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London stocks rose in early trade on Monday, with pharmaceuticals giant GlaxoSmithKline pacing the advance after confirming it had rejected an offer from Unilever for its consumer healthcare arm.

At 0840 GMT, the FTSE 100 was up 0.6% at 7,591.46.

Investors were mulling a survey out earlier showing that UK house prices continued to rise in January, marking the busiest start to the year on record.

According to the latest Rightmove House Price Index, the average price of property coming to market rose by 0.3% in January from December, to £341,019. That is 7.6% higher than January 2021, and the highest annual rate of price growth recorded by Rightmove since May 2016.

Rightmove said it was the busiest ever start to a new year, driven by ongoing strong demand and weak supply. Buyer enquiries surged by 15% year-on-year, while the number of available homes for sale per estate agency branch dropped to just 12.

First-time buyer asking prices hit £214,174, a month-on-month jump of 1.4% and a fresh record. Prices are now 6.8% up on January 2021.

Tim Bannister, director of property data at Rightmove, said: “New Year sellers and buyers have been quick off the mark this year, with Rightmove recording the highest ever number of Boxing Day sellers coming to market.

“These early-bird sellers who got themselves ready to come to market are now benefiting from the busiest start to the year that we’ve recorded.

“All the signs suggest that prices are likely to continue to rise until more choice is available.

“It is clear that the trends which defined the market in 2021 have carried over into this year.”

However, looking ahead, Bannister said there were “early signs” of a better balanced market in 2022. The number of requests from would-be sellers to agents increased in January, and was at one of the highest points ever on the first working day of the year.

In equity markets, GlaxoSmithKline surged after revealing it had rebuffed a £50bn offer from Unilever for its consumer healthcare business – a joint venture with Pfizer. Unilever shares slid. Glaxo said it had rejected three proposals from Unilever, all of which “fundamentally undervalued” the business and its future prospects.

CMC Markets analyst Michael Hewson said Glaxo was no doubt hoping that Unilever will come back with a higher offer, “with the sum of £60bn being bandied about according to some estimates”.

“A deal between GlaxoSmithKline for its consumer healthcare business would undoubtedly be a good fit for Unilever, and it’s a little surprising that they haven’t ripped Unilever’s arm off at £50bn, as it’s a decent price, with the only question being as to whether it’s the right one,” he said. “It might be for GlaxoSmithkline and Pfizer, however there is a feeling that for Unilever it could well prove to be too high a price.

“Perhaps GSK think they can get Unilever to come in with a higher bid, or perhaps get a higher valuation by way of a spin-off? This is by no means certain and with the Unilever share price sliding sharply this morning it would appear that the markets have made up their mind, with GlaxoSmithKline shares going higher.”

Elsewhere, Taylor Wimpey gained after the housebuilder said it was is set to meet its annual targets following an “excellent” year, and pledged to return excess cash to shareholders.

Hikma Pharmaceuticals was up after agreeing to buy the Canadian assets of Teligent for $45.75m after the US firm filed for Chapter 11 bankruptcy last year.

Antofagasta was also in the black after UBS upgraded shares of the Chilean copper miner to ‘neutral’ from ‘sell’ and lifted the price target to 1,400p from 1,300p as it said the risk/reward was more balanced after recent underperformance.

Asset manager Ashmore fell after it posted a drop in second-quarter assets under management, citing weaker emerging markets.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Glaxosmithkline Plc +4.63% +76.00 1,717.00
2 Antofagasta Plc +2.61% +36.00 1,415.00
3 Informa Plc +2.34% +13.00 569.00
4 Admiral Group Plc +2.15% +67.00 3,178.00
5 Carnival Plc +2.01% +30.00 1,525.60
6 Standard Chartered Plc +1.99% +10.40 533.60
7 Taylor Wimpey Plc +1.98% +3.05 157.00
8 Wpp Plc +1.98% +23.50 1,212.00
9 Kingfisher Plc +1.91% +6.30 335.50
10 Tesco Plc +1.79% +5.10 290.10

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Unilever Plc -6.31% -248.50 3,688.00
2 Ocado Group Plc -0.83% -12.00 1,433.00
3 Croda International Plc -0.36% -30.00 8,394.00
4 National Grid Plc -0.31% -3.40 1,077.60
5 Berkeley Group Holdings (the) Plc -0.27% -12.00 4,445.00
6 Centrica Plc -0.16% -0.12 74.56
7 Just Eat Plc -0.00% -0.00 861.00
8 Nmc Health Plc -0.00% -0.00 938.40
9 Royal Bank Of Scotland Group Plc +0.00% +0.00 120.90
10 Standard Life Aberdeen Plc +0.00% +0.00 274.10

 

Europe open: Unilever, GSK in spotlight as shares edge ahead

European stocks opened slightly higher on Monday as investors eyed Unilever’s attempts to buy the consumer health division of GSK.

The pan-European Stoxx 600 index rose 0.2% in early deals. Asian markets were unsettled after China’s central bank cut some key lending rates on the back of mixed economic data.

“Today’s focus has been on this morning’s Q4 China GDP numbers which came in at an annualised 4%, which when you consider some of the estimates of 12 months ago is disappointing,” said CMC Markets analyst Michael Hewson.

“As 2021 progressed it became ever more apparent that some of the forecasts may have been too optimistic, as a combination of port disruptions due to covid restrictions, supply chain issues, as well as surging power costs and enforced shutdowns of the Chinese economy, hampered economic activity in the second half of the year. On a quarterly basis the economy rebounded strongly from the 0.2% we saw in Q3, expanding by 1.6%

Trading was expected to subdued with US markets closed for the Martin Luther King Jr holiday.

In equity news, GlaxoSmithKline jumped 5.2% after it confirmed over the weekend that it had rejected Unilever’s £50bn offer for its consumer healthcare business.

Unilever shares were down more than 6% after it said the deal was a “strong strategic fit” and flagged a “major initiative” later in the month, without revealing specifics.

Credit Suisse slipped after chairman Antonio Horta-Osorio quit following an internal probe into his personal conduct, including breaches of Covid-19 rules.

Antofagasta shares rose after UBS upgraded Chilean copper miner to ‘neutral’ from ‘sell’ and lifted the price target to 1,400p from 1,300p as it said the risk/reward was more balanced after recent underperformance.

 

US close: Stocks mixed as Q4 earnings begin to roll in

Wall Street stocks put on a mixed performance on Friday as market participants digested earnings from some of the country’s biggest banks.

At the close, the Dow Jones Industrial Average was down 0.56% at 35,911.81, while the S&P 500 was 0.08% firmer at 4,662.85 and the Nasdaq Composite saw out the session 0.59% stronger at 14,893.75.

The Dow Jones closed 201.81 points in the red on Friday, extending losses recorded in the previous session as big tech names were on the slide as investors digested December’s producer price index and this week’s jobless claims figures.

Friday’s primary focus, however, was the beginning of fourth-quarter earnings season, with banking several giants reporting earnings earlier in the day.

Money manager BlackRock posted a jump in fourth-quarter profit on Friday as assets under management hit fresh highs, while US banking behemoth JPMorgan Chase posted record full-year profits on Friday despite revealing fourth-quarter earnings had come in lower year-on-year as a weaker performance in its trading unit somewhat offset a boom in its investment banking division.

Citigroup posted better-than-expected fourth-quarter earnings and revenues despite meagre top-line growth as its fixed-income operations underperformed, while financial services giant Wells Fargo reported fourth-quarter earnings on Friday that easily topped expectations on the Street.

On the macro front, US retail sales unexpectedly slumped in December amid rising prices, according to figures released on Friday by the Commerce Department. Retail sales fell 1.9% on the month following a 0.2% increase in November. This marked the biggest decline in 10 months and was well short of expectations for a flat reading. Excluding motor vehicles and parts and gasoline stations, retail sales were down 2.5%.

Elsewhere, industrial output underwhelmed at the end of December amid a decline in automobile manufacturing and in the output of gas utilities due to warmer-than-normal temperatures. According to the Department of Commerce, industrial production dipped at a month-on-month pace of 0.1% in December. Economists had pencilled-in a rise of 0.3%.

Still on data, US consumer confidence slipped to its second-lowest reading ever amid increasing worries over inflation, the results of a very closely-followed survey revealed. The University of Michigan‘s consumer confidence index for early January came in at 68.8, which was down slightly from its end of December level of 70.6 and economists’ forecasts for a reading of 70.2.

Lastly, business inventories rose 1.3% in November, bang in line with estimates to put inventories up 8.7% when compared to November 2020. Prior month business inventories were revised to 1.3% from 1.2%.

 

Monday newspaper round-up: Fuel stress, GSK, Boots, Dragui

The number of households suffering from “fuel stress” – those spending at least 10% of their family budgets on energy bills – is set to treble to 6.3m overnight when the new energy price cap comes in on 1 April, according to a leading research group. Fuel stress will no longer be confined to the poorest households, according to a study by the Resolution Foundation. Low- and middle-income families will also find it hard to cope as they spend a far greater share of their family budget on these essentials than higher earners. – Guardian

With typical bravado, GlaxoSmithKline has, we learned on Saturday, dismissed three takeover bids from Unilever for its consumer healthcare venture with Pfizer, including one worth £50bn received just before Christmas. The drugmaker, run by Dame Emma Walmsley, has decided to push on with plan A, namely the demerger and stock market flotation this summer of the consumer health business, known for brands such as Aquafresh and Sensodyne toothpaste, along with Panadol and Voltaren for pain relief. – Guardian

Asda’s owners, the billionaire Issa brothers, are examining a multi-billion pound swoop for pharmacy chain Boots as tightening debt markets may threaten to scupper a potential deal. The Blackburn-based petrol station tycoons have held early-stage discussions over the possibility of adding Boots to their fast-expanding empire, the Mail on Sunday reported. – Telegraph

Bond markets are gearing up for a return to political turmoil in Rome after a key investor risk gauge hit its highest level in 16 months ahead of a crucial vote on Italy’s next president. The difference between yields on Italian and German bonds has widened to its largest since Mario Draghi became prime minister after he became the frontrunner in next week’s presidential race. – Telegraph

 

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