Garry White, chief investment commentator, looks at the market moving events that have shaped the UK equity markets this week (March 12 to March 16, 2018).
This week, Barbadian singing sensation Rihanna managed to wipe $1bn off the valuation of tech group Snap, the Chinese secured a major cobalt deal to help it produce electric vehicles and Unilever said it would move its base to Rotterdam, which may result in it being excluded from the FTSE 100. The FTSE 100 fell 0.9 per cent over the week by mid-session on Friday.
Markets were hit by the highest levels of volatility recorded in nearly a decade last month, fuelled by better than expected inflation data and a subsequent spike in global bond yields in January. Charles Stanley’s bond analyst Jeremy Spain takes a look at what is going on here.
John Redwood, Charles Stanley’s Chief Global Strategist takes a look at China. He examines the issues around its transition to a higher-value-added economy here and looks at the future after the ruling party changes the rules of President Xi Jinping could rule for life here.
Brent crude prices moved 0.5 per cent lower over the week by mid-session on Friday.
The timetable for the floatation of Saudi Aramco, potentially the world’s largest company, may have slipped into next year according to press reports. Reports also suggested that a delegation of Saudi officials to New York were surprised to find investors were not that interested, especially balking at the $2bn mooted valuation. Garry White looks at the options available for crown Prince Mohammed bin Salman here.
The Chinese made a wise move this week after it signing an agreement with the world’s largest producer of cobalt to take one-third of its production over the next three years. Glencoresigned the deal with Chinese battery recycler GEM and cobalt is a critical metal in lithium-ion batteries, used in electric vehicles.
Brussels is getting ready to launch a tax aimed at big tech companies such as Google,Facebook and Apple. The “digital tax” on EU turnover is expected to raise about €5bn.
In the US, pop sensation Rihanna sparked a $1bn sell off in Snap, the company that owns theSnapchat app. The singer was the subject of an advert on the platform which asked users if they would "rather slap Rihanna or punch Chris Brown" and she fiercely criticised the company for using Mr Brown’s domestic violence conviction against her as a cheap marketing ploy.
The hostile takeover battle by Melrose Industries for GKN is approaching its conclusion, as shareholders will vote on the deal on March 29. Melrose sweetened its offer by £700m, taking its cash-and-shares offer to more than £8bn, but this was rejected by GKN management, which said it “fundamentally undervalued” its business. There were also reports that Airbus, the biggest client of GKN’s aerospace business, said it would be “practically impossible” to give new business to the company if it was bought by Melrose.
FTSE 250 listed Spirax-Sarco posted better-than-expected full-year revenue and profits, helped by acquisitions and strength in Europe, Middle East and Africa.
Shares in Anglo-Dutch consumer products giant Unilever may no longer be eligible for inclusion in FTSE indexes after its board voted to move its headquarters to Rotterdam. The maker of Dove soap and Lynx deodorant is the third-largest component of the FTSE 100 by market cap and a decision from the index compilers is awaited. The company is cutting costs following a takeover approach by US group Kraft. Chief executive Paul Polman, was keen to say the decision had “nothing to do with Brexit” and would not result in the loss of any UK jobs. He also said there would be “no change to tax” paid in the UK.
Fevertree Drinks, the maker of upmarket mixers for gin aficionados, posted an excellent set of full-year numbers – but its shares fell. To find out why click here.
Britons flocked to the movies to see films such as Star Wars: The Last Jedi and Dunkirk, boosting revenues at Cineworld by almost 12 per cent. The group also expanded last year into the world’s most lucrative cinema market through the purchase of US cinema chain Regal for $3.6bn.
Alongside chairman Tim Martin’s statements supporting Brexit, JD Wetherspoon also posted some numbers. In the first half of the year, revenues rose 3.6 per cent, but management said it expected lower like-for-like sales growth and higher costs in the second half.
Shares in gambling group Sportech slumped by half after it announced a failure to find a buyer, a profit warning, and a new chief executive in the same day.
Shares in Kier Group have been buffeted by trouble at peers such as Carillion and its shares slipped once again following its full-year numbers. There was a sharp rise in net debt from £147m to £239m. This was despite management saying it was it was on track to deliver double-digit profit growth in 2018.
Estate agents Savills became the latest industry player to warn of a slowdown in the UK property market. “We anticipate a tempering of the strong transaction volumes of recent times in some markets,” chief executive Jeremy Helsby said. The group posted a slightly-better-than-expected 3.5 per cent rise in full-year adjusted profits.
Shares in Mitie hit multi-year lows after management revealed costs associated with its turnaround programme will be higher than its previous estimates.
Shares in Wm Morrison posted a consensus rating set of full-year numbers and announced a 4p a share special dividend, but its shares fell. Much of the profit uplift was down to lower interest payments as the group reduced its debt.
Trading on the UK high street continues to be tough:
Toys R Us will now close or sell all its UK stores in after failing to find a buyer, putting about 3,000 jobs under threat.
Bargain Booze and Wine Rack owner Conviviality may need to raise more cash after management revealed it must pay an “unexpected” £30m tax bill by March 29. This prompted its second profit warning in less than a week and the cancellation of its dividend.
Claire’s Accessories sought to reassure customers that its UK operations will not be affected by its US counterpart’s bankruptcy filing.
However, there was a small positive glimmer. French Connection shares soared after management revealed an unsolicited takeover approach had been made earlier this year. The news came as the group unveiled full-year results, which showed losses narrowed.
Insurer Prudential unveiled plans to spin-off its UK and European division from its international businesses as part of a radical break-up of the 170-year-old company.
CME Group, the US futures exchange, made a preliminary approach for Michael Spencer's Nex Group, a move which some believe will result in a bidding war for the financial technology company.
Operating profits at Just Group, a provider of annuities, jumped 35% last year. The results were ahead of analysts’ expectations.
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