17.05 (close): AstraZeneca shares rocketed to a new record high today after drugs giant Pfizer confirmed its interest in a takeover of the UK company.
Pfizer revealed for the first time that it had been rebuffed by Astra after initial talks in January valuing the company at £59billion, and that further overtures last weekend were also rejected.
However, Pfizer’s continued interest in a possible UK record takeover deal helped the FTSE 100 Index climb 14.5 points to 6700.2, despite further worries over Ukraine as the United States prepares fresh sanctions against Russia.
The pound held on to recent gains against the US dollar and euro as investors awaited Tuesday’s publication of GDP figures for the first quarter of the year.
Economists are pencilling in a figure of 0.9 per cent, which would take UK output within a whisker of its pre-crisis peak.
It would also take the UK a step closer to a rise in interest rates, a factor which has lent weight to the recent climb in the value of the pound. Today, sterling was flat against the US dollar at 1.68 and versus the euro at 1.21.
Astra shares soared by 14 per cent or 586.5p to a new record high of 4666.5p and have now increased in value by around a quarter or £11billion since takeover speculation began last week.
The City is currently betting that Pfizer will succeed with a better offer as Astra’s price is higher than the 4611p proposed in January.
A deal to buy Astra would be the biggest foreign takeover of a UK firm, dwarfing the £17.7 billion paid by Telefonica for O2 in 2005.
The activity helped fellow pharmaceuticals company Shire rise 76p to 3286p but GlaxoSmithKline drifted 2p to 1653p after an earlier strong gain.
Elsewhere, BG Group endured a rollercoaster session after it announced that Chris Finlayson had resigned as chief executive.
BG’s shares have fallen in recent weeks after it slashed production targets due to continued problems in Egypt, where too much of its gas has been diverted into the domestic market instead of being exported.
It warned today that production this year will be towards the lower end of expectations due to the ongoing issues in Egypt but shares recovered from a weak start to finish a penny higher at 1146p.
Mining stocks were under pressure as Rio Tinto fell 93p to 3185.5p, BHP Billiton dropped 21.5p to 1902.5p and Anglo American eased 14p to 1519p.
Other high-profile fallers in the top flight included Royal Bank of Scotland, which fell 7.7p to 295.5p, and Royal Mail after a drop of 8p to 511.5p.
The biggest FTSE 100 risers were AstraZeneca up 586.5p at 4666.5p, Sainsbury’s ahead 8.4p at 330.5p, William Hill up 8.1p at 348.1p and Shire ahead 76p at 3286p.
The biggest fallers were ARM Holdings down 30.5p at 915p, Rio Tinto off 93p at 3185.5p, Royal Bank of Scotland down 7.7p at 295.5p and Travis Perkins off 44p at 1744p.
15.00: The Footie held firm in late afternoon trade but eased back from earlier highs as uncertainty over the situation in Ukraine and a big week of economic data to come sapped some of the enthusiasm from the latest M&A twist in the pharmaceuticals sector.
With an hour and a half of trading to go, the FTSE 100 index was 10.6 points higher at 6,696.3, falling back from a morning peak of 6,719.84 as the United States prepares to levy fresh sanctions against Russia over its Ukraine incursions.
Strength in drug maker AstraZeneca continued to provide the main fuel for the blue chip rise, with the stock up 13 percent, or 523.0p to 4,698.0p easily topping the FTSE 100 leader board after US rival Pfizer confirmed its interest in a takeover of the UK-listed company.
After press speculation last week, Pfizer revealed for the first time today that it was rebuffed by AstraZeneca after initial talks in January which valued the company at 4,611p a share, or £58.7billion in total, and that further overtures this weekend were also rejected by the Anglo-Swedish firm.
Pfizer shares also saw strong demand in early Wall Street trade, jumping over 3 per cent higher to top the Dow Jones Industrial Average leader board, with the US blue chip index up over 0.5 per cent, or 94.5 points to 16,456.0.
But the other US indices were mixed, with the broader S&P 500 index only up 0.1 per cent, and the tech-laden Nasdaq Composite index down 0.1 per cent as investors looked more nervously ahead to a busy week for economic news.
The first reading for US first quarter GDP will be released on Wednesday, together with the Federal Reserve’s latest monetary policy announcement, and Friday will see the release of April’s US jobs report.
Today’s US data was upbeat, with pending home sales up 3.4 per cent in March, the first gain in nine months, according to a National Association of Realtors report. The index of US pending home sales hit 97.4 in March — the highest reading since November — compared with 94.2 in February.
On the domestic data front, UK investors will have the first reading for Britain’s Q1 GDP to digest tomorrow, with forecasts pointing to continued growth of 0.9 per cent.
On currency markets, the pound was higher against the US dollar, reaching 1.6847 on expectations for that GDP number, and also with speculation of a boost from any Pfizer bid.
Kathleen Brooks, research director UK EMEA at FOREX.com said: ‘ The Pfizer/Astra Zeneca offer is the most interesting, in our view.
‘There could be a wave of cash-based deals from US firms due to onerous tax rules in the US that charge US companies extra tax on earnings overseas. Thus, it can be more prudent to spend the cash buying up rivals rather than repatriate earnings and get charged tax on them.
‘Why does this matter for sterling? The UK is considered a less hostile environment for foreign-takeovers compared to some countries, which could make the UK the go-to destination for big US corporates with cash to spend. The results can boost sterling.
‘Now that Pfizer has made public its interest in Astra Zeneca, it has until 25th May (according to UK Takeover Panel rules) to firm up the deal or walk away. Thus, there could be another 4-weeks of speculation that could limit GBPUSD downside during that time,‘ Brooks added.
13.10: A 14 per cent surge by shares in AstraZeneca after US drugs giant Pfizer finally confirmed its interest in a takeover of the UK-listed company provided the main boost for the Footsie today.
By lunchtime, the FTSE 100 index was up 27.1 points at 6,712.8, recouping all of the previous session’s falls despite ongoing investor worries over Ukraine as the United States prepares to levy fresh sanctions against Russia following its recent sabre-rattling.
US stocks are also expected to rally higher today as investors look ahead to a busy week for economic data, include the first reading for US GDP, April jobs data, and the latest Federal Reserve monetary policy decision.
Drugs positive: The Footsie remained buoyed by strength in drug making stocks on sector consolidation hopes
Joao Monteiro, analyst at Valutrades said: ‘Wall Street futures…are taking a ‘glass half full’ approach to the new trading week, at least for now.
‘Again much of this appears to revolve around the expectation of good economic numbers in the days ahead, but simultaneously the prospect of interest rates not going anywhere for some time yet is certainly helping matters.
‘The fact there’s scope for something of a rebound off those heavy losses that rounded off last week is also helping, but all this has the potential to look very short lived in the event that there’s any significant escalation in military activity in Ukraine.’
In London, AstraZeneca shares topped the blue chip leader board, jumping 675.5p to a new record high of 4,756p and have now increased in value by around a quarter or £11billion since before takeover speculation began last week.
The City is currently betting that Pfizer will succeed with a better offer as Astra’s price is higher than the 4,611p it proposed in January.
Analysts at Barclays said: ‘Pfizer could pay up to 56 pounds per share or $ 117 billion for AstraZeneca before transaction costs neutralise any anticipated earnings accretion.’
A deal to buy Astra would be the biggest foreign takeover of a UK firm, dwarfing the £17.7billion paid by Telefonica for O2 in 2005.
The activity fuelled gains elsewhere in the pharmaceuticals sector as Shire rose 54.0p to 3,264.0p and GlaxoSmithKline added 11.5p to 1,666.5p.
On the fallers board, BG Group dropped 2 per cent or 20.0p to 1.125.0p after it announced that Chris Finlayson has resigned as chief executive.
His departure fuelled uncertainty for investors ahead of the company’s first quarter update later this week BG’s shares have fallen in recent weeks after it slashed production targets due to continued problems in Egypt, where too much of its gas has been diverted into the domestic market instead of being exported.
It warned today that production this year will be towards the lower end of expectations due to the ongoing issues in Egypt.
Mining stocks were also under pressure as Rio Tinto fell 72.5p to 3,206p, BHP Billiton dropped 20.5p to 1,903.5p and Anglo American eased 12.0p to 1521.0p.
Other high-profile fallers in the top flight included Royal Mail Group with a drop of 10.0p to 509.5p.
William Hill continued to rally after its trading update on Friday, when it announced solid trading but said that an increase in gaming machine duty will force it to close as many as 109 shops. Shares in blue chip.
William Hill were 10.5p higher at 350.5p, while mid cap rival Ladbrokes was up 5.4p at 144.1p.
10.10: The Footsie pushed higher as the morning session progressed led by a leap from AstraZeneca after US drugs giant Pfizer today confirmed its interest in a takeover of the UK-listed company.
After press speculation last week, Pfizer revealed for the first time today that it had been rebuffed by Astra after initial talks in January which valued the company at £58.7billion, and that further overtures this weekend were also rejected by the Anglo-Swedish firm.
By mid morning, the FTSE 100 index was 31.9 points higher at 6,717.6 as the latest developments in the pharmaceuticals sector provided a lift despite further investor worries over developments in Ukraine.
Thoughtful markets: UK blue chips were higher this morning but underlying Ukraine worries kept the positive mood fragile
Markus Huber, senior sales trader/senior analyst at Peregrine & Black said: ‘European shares are starting out the new trading week on a positive note this morning as the situation in the Ukraine hasn’t further escalated over the weekend and traders unwinding some of their hedges put on last Friday.
‘With US earnings season having peaked last week events in the Ukraine are expected once again to take centre stage this week.
‘Traders will closely watch today how negotiations continue to proceed concerning the release of the captured Western military observers and the new sanctions which will be imposed on Russia today by the EU and the US. The big question here is if these new sanctions will target Russian President Putin directly or will they be of a more general nature,’ Huber added.
AstraZeneca shares soared 14 per cent, or 569.25p higher to 4,649.25p and have now increased in value by nearly a quarter, or around £11billion, since before the takeover speculation began last week.
Other movers among pharmaceutical stocks included Shire, which rose 57p to 3,267p and GlaxoSmithKline with a gain of 18.25p to 1,673.25p.
Among the blue chip fallers, energy explorer BG Group dropped 4 per cent or 46p to 1,099p after it announced that Chris Finlayson has resigned as chief executive.
His departure fuelled uncertainty for investors ahead of the company’s first quarter update later this week.
Other high-profile fallers in the top flight included Royal Bank of Scotland, which fell 4.35p to 298.85p following last Friday’s knock-back on bonus payments from the UK government, and ahead of the lender’s first quarter results due this Friday.
08.35: The Footsie bounced higher in opening deals this morning, recovering after falls in the previous session thanks to strong gains by drugmakers after US firm Pfizer confirmed it had made a rebuffed bid approach to AstraZeneca and was still keen to do a deal.
AstraZeneca shares jumped another 11 per cent higher in early trade, up 450p to 4,625.0p, having been buoyed last week by press reports the US firm had made an approach. Pfizer said today that it had contacted its British rival again this weekend seeking to renew discussions about a takeover.
A Pfizer bid for AstraZeneca would be one of the largest ever pharmaceuticals deals. The renewed approach comes amid a wave of M&A activity in the sector.
Drugs wanted: A surge in AstraZeneca shares led drug makers higher again today as US firm Pfizer confirmed bid approaches
Fellow drug blue chip Shire – also a long mooted bid target – gained 80.0p at 3,290.0p and GlaxoSmithkline added 22.0p at 1.677.0p.
Overall, the FTSE 100 index was up 24.2 points at 6,709.9 having shed 17.31 points on Friday, after hitting a seven-week closing high the day before, knocked by concerns surrounding Ukraine which remained an ongoing factor.
Michael Hewson, chief market analyst at CMC Markets UK said: ‘Having spent the most part of last week at the back of investor’s minds concerns about the situation in Ukraine have once again returned to front of mind after pro-Russian separatist forces raised the stakes by holding hostage a number of European military observers on claims that they were NATO spies.
‘These claims drew an angry reaction from G7 officials who have accused Russia of covertly influencing the increase in tension in contravention of the recent Geneva agreement, with both sides accusing the other of acting in bad faith.
‘Further targeted sanctions look set to be announced today by G7 leaders in response to these recent events, and investors will be hoping that there is no further deterioration in what is increasingly turning into a volatile and fluid situation,’ Hewson added.
Aside from the tensions in Ukraine, investors will have a big batch of key economic data to digest this week, with the first readings for UK and US first quarter GDP growth numbers due for release on Tuesday and Wednesday, respectively, the latest Federal Reserve monetary policy meeting also on Wednesday, and the US April jobs data on Friday.
Domestic data released today showed Britain’s housing market recovery spread further beyond London this month as prices rose in more parts of England and Wales outside the capital than at any time over the last decade.
The figures from property market analysts Hometrack published today found prices rose by 0.6 per cent nationally in April, versus March, taking the annual rise to 6 per cent.
London saw the biggest one month rise of 0.8 per cent, where buyers are typically paying 99 per cent of the asking price, and overall desperate buyers are paying almost 97 per cent of the asking price on average, which is the highest level since September 2002.
Hometrack said the price bubble is spreading to other parts of the south and beyond, with 48 per cent of all post codes outside London seeing an increase in April, while not one registered a fall.
Stock to Watch include:
ENERGY SUPPLIERS – Britain’s biggest energy suppliers could pocket a £2billion windfall over the next three years after the government miscalculated a deal to cut green levies, new research claims, the Daily Telegraph reported.
RECKITT BENCKISER – US firm Merck & Co is in the final stages of selling its consumer healthcare unit for close to $ 14billion, with Reckitt Benckiser and Germany’s Bayer among final contenders to clinch a deal as soon as next week, people familiar with the matter told Reuters.
BG GROUP – The chief executive of UK oil and gas group BG Group, Chris Finlayson, has resigned with immediate effect for personal reasons, the company said today.
BHP BILLITON – Mining veteran and former Xstrata head Mick Davis has offered to buy BHP Billiton’s thermal coal division, which could form the core of his X2 Resources, according to press reports.
PREMIER OIL – London-listed oil and gas explorer Ophir Energy said it was no longer interested in making a takeover offer for rival Premier Oil after a proposal was rejected by the Premier Oil board.
BSKYB – The satellite broadcaster is preparing a major overhaul of its set-top box technology to address the threat to its subscription business from internet-based television services from American giants such as Amazon, Apple and Google , the Daily Telegraph reported.
WILLIAM MORRISON – The under-pressure grocer is facing a £160million hit from its botched takeover of Kiddicare, the babycare retailer, the Sunday Times said. Separately, A former director at Morrisons who served under Ken Morrison has warned the grocery retailer is a ‘supertanker heading towards an iceberg’ and called for management to step aside, the Daily Telegraph reported.
RANDGOLD RESOURCES – Gold production from Randgold’s Tongon mine in northern Ivory Coast will hit 260,000 ounces this year, up from 233,591 ounces in 2013, the company said.
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