17.30 (CLOSE): Resurgent mining stocks and a fresh bout of merger and acquisition activity lifted the FTSE 100 Index to near its highest point of the year today.
London’s top flight index was 37.2 points higher at 6851.7 and within a whisker of following Wall Street’s Dow Jones Industrial Average in setting a new record.
There was also further improvement for the pound, which continued to rally on expectations that interest rates will start to rise early next year. Sterling was slightly stronger against the US dollar and euro at 1.68 and 1.22 respectively.
Miners lead: Strength in heavyweight mining stocks provided the path for the Footsie rally today.
Miners dominated the FTSE 100 risers board after broker JP Morgan upgraded its recommendation on the sector after being ‘underweight’ on the industry for more than two years.
With the City firm encouraged by signs of a rebound in activity in China, Rio Tinto surged 5 per cent or 151.5p to 3340p, Antofagasta lifted 27p to 796p and BHP Billiton cheered 51.5p to 1948p.
BSkyB’s confirmation of a possible £8billion swoop for 21st Century Fox’s Sky Italia and Sky Deutschland stakes provided the wider market with further evidence that merger and acquisition activity is on the way back.
The purchase should give BSkyB the power to sell services and compete for rights across three key European territories, but the potential cost weighed on its share price, with the blue-chip at the top of the FTSE 100 fallers board.
BSkyB was 21.5p lower at 868.5p as Investec Securities warned that Sky Italia and Sky Deutschland were weaker businesses than BSkyB and so initially might dilute the UK firm’s share price in the short-term.
However, the brokerage said the deal would bring welcome scale to BSkyB’s business over the long term.
As well as BSkyB’s decline, BT shares were impacted by the potential threat of increased competition from its pay-TV rival. BT fell 8.2p to 374.3p, while ITV was 2.2p lower at 186.8p in a tough session for the media sector.
Barclays was 3.5p lower at 256.65p after a number of broker downgrades in the wake of last week’s strategy review.
In corporate news, shares in outsourcing firm Capita made headway after it reported a strong start to the year, with £1.1billion of new sales including contracts with Transport for London, John Lewis and the Ministry of Defence.
With its bid pipeline now standing at £5.5 billion, shares lifted 15p to 1117p.
Outside the top flight, Superdry owner SuperGroup continued its slide from last week after it warned its full-year profits will be at the low end of expectations.
The FTSE 250 company has shaken investors due to fears the downgrade may reflect stock management issues, which has blighted the company before.
The stock was the biggest faller in the FTSE 250 Index, slipping 5% or 60p to 1065p and meaning it has lost around 40% of its value since the start of April.
The biggest FTSE 100 risers were Rio Tinto up 151.5p at 3340p, Antofagasta ahead 27p at 796p, Petrofac up 41p at 1218p and BHP Billiton ahead 41p at 1218p.
The biggest fallers were BSkyB down 21.5p at 868.5p, BT off 8.2p at 374.3p, Barclays down 3.5p at 256.65p and Sports Direct off 9p at 759.5p.
15.15: The Footsie pushed up to its best levels for the day in late afternoon deals as US stocks made a strong early showing helped by some M&A activity in the food sector.
With an hour and a quarter of trading to go, the FTSE 100 index was up 34.4 points at 6,849.0, have reached a high at 6,851.06 soon after the New York open.
In early trade on Wall Street, the Dow Jones Industrial Average was up 96.6 points at 16,679.9, building on Friday’s record close and earlier hitting a new intra-day peak with an opening triple-digit jump.
Record levels: The Dow Jones hit an intraday peak in early deals today helping drive fresh gains by the Footsie.
Among the US market features, shares in Pinnacle Foods surged 15 per cent after Hillshire Brands agreed to buy the company for about $ 4.3billion in a stock-and-cash deal.
Stock markets started the week in good fashion, managing to shake off the latest developments in Ukraine, where pro-Russian separatists in the country’s east declared victory on Sunday in a referendum on self-rule.
13.00: The Footsie held firm, close to its highs mid session supported by strength in the mining sector after a broker upgrade and after weekend referendums in favour of breakaways in eastern Ukraine led to no fresh violence in the country.
At lunchtime, the FTSE 100 index was 27.4 points higher at 6,841.1, holding just below the morning peak of 6,846.95.
Chris Beauchamp, market analyst at IG said: ‘The uneventful end to the weekend referendums in Ukraine and an upgrade to the mining sector from JP Morgan, have helped investors start the week in a sunnier frame of mind.
Europe expansion: BSkyB was the biggest Footsie faller the pay-TV confirmed a possible £8billion swoop for 21st Century Fox’s Sky Italia and Sky Deutschland stakes.
‘Tensions in Ukraine have not gone away, but traders will be relieved that there has not been a sudden rush by any of the involved parties to praise or condemn the outcome. That might change over the coming days, but for now the quiet reaction has been gratefully received.
‘The major question now is whether we can sustain these gains – earnings have failed to do it and dovish central bankers aren’t having the impact they once were. The search for a narrative to push us out of the current trading range goes on,’ Beauchamp added.
Miners got a shot in the arm from broker JP Morgan Cazenove, strategists at which upgraded their recommendation on the sector to overweight after having being underweight on the industry for more than two years.
With the sector also buoyed by signs of a rebound in activity in top metals consumer China, Rio Tinto rose 127p to 3,315.5p, Antofagasta added 20.75p to 789.75p and BHP Billiton took on 46.5p to 1,943p.
On the blue chip fallers board, BSkyB remained the biggest casualty, shedding 21.75p at 868.25p after the pay-TV group confirmed a possible £8billion swoop for 21st Century Fox’s Sky Italia and Sky Deutschland stakes.
Investec Securities warned that Sky Italia and Sky Deutschland were weaker businesses than BSkyB and so initially might dilute the UK firm’s share price in the short-term. However, the broker said the deal would bring welcome scale to BSkyB’s business over the long term.
As well as BSkyB’s decline, BT shares were impacted by the potential threat of increased competition from its pay-TV rival. BT fell 7.70p to 374.8p, while ITV was 2.1p lower at 186.9p.
Outside the top flight, Superdry owner SuperGroup continued its slide from last week after it warned its full-year profits will be at the low end of expectations.
The FTSE 250 fashion group has shaken investors due to fears the downgrade may reflect stock management issues, which has blighted the company before.
The stock was the biggest mid cap faller, dropping 8 per cent or 95p to 1,030p and meaning it has lost around 40 per cent of its value since the start of April.
Anite was the market’s biggest gainer, jumping 9 per cent or 7.5p higher to 90.5p after it said it was still investigating the potential sale of its travel reservation software business, which it said it had put up for sale in February.
Traders said talk was that the travel unit, which accounts for about 15 per cent of Anite’s total revenue of £132.5million could be sold to Lloyds Banking Group’s private equity arm for up to £40million.
10.00: Strength in the heavyweight mining sector following a broker upgrade provided the main fuel for a rally by the Footsie as the morning session progressed.
By mid morning, the FTSE 100 index was 17.4 points higher at 6,832.1, also helped by a record finish to last week for Wall Street’s Dow Jones Industrial Average.
Mining stocks provided the main thrust for the UK blue chip advance with Rio Tinto up 3 per cent, or 85p to 3,273.5p and BHP Billiton ahead 36.5p at 1,933p after JPMorgan Cazenove raised its stance on the European mining sector to overweight from underweight.
Miners lead: Strength in heavyweight mining stocks provided the early path for the Footsie rally today.
The bank said it saw signs activity was rebounding and the companies were cutting costs.
But on the downside, BSkyB’s pursuit of a potential £8billion deal for 21st Century Fox’s stakes in Sky Italia and Sky Deutschland spooked investors in the pay-TV company.
The purchase from Rupert Murdoch-owned Fox would provide the BSkyB with the power to sell services and compete for rights across three key European territories, but the potential cost weighed on its share price, which topped the FTSE 100 fallers board with a drop of more than 2 per cent, or 20.75p to 869.25p.
Michael Hewson, chief market analyst at CMC Markets UK said: ‘This move might be part of his (Murdoch’s) longer term strategy to increase his 39 per cent stake in BSkyB which ended in failure a couple of years ago after the phone hacking scandal poisoned the political well against him and his organisation.
‘Since then Mr Murdoch has separated his TV and newspaper assets into separate companies but that is unlikely to cut much ice with regulators who are likely to have the same concerns as they did a few years ago.
‘Against this backdrop it is hard to understand the rationale for the deal given that the companies already enjoy fairly close synergies in any case so closer ties aren’t expected to much that much of a difference when it comes to bidding for future sports packages.
‘Initial investor reaction would appear to indicate similar concerns, but BSkyB’s recent results may have generated some concern that the recent strong growth in subscribers may well be reaching critical mass as competition from BT Sport in the UK, Liberty Global, as well as internet video streaming services like Netflix and Apple have prompted concerns about future growth prospects.
‘There is certainly a case for arguing that the Pay-Tv sector is becoming more and more competitive, but this deal could well be the wrong way in going about dealing with it, unless it’s being done for defensive purposes in order to make BSkyB that much more difficult to swallow up’’ Hewson added.
Other media shares were impacted by the potential threat of increased competition from BSkyB, with BT Group losing 5.35p to 377.1p, while ITV was 2.8p lower at 186.1p.
In corporate news, shares in outsourcing firm Capita said it made a strong start to the year, with £1.1billion of new sales including contracts with Transport for London, John Lewis and the Ministry of Defence.
Its bid pipeline now stands at £5.5billion, but Capita shares still drifted 3p lower to 1,099p after a strong recent run.
The market also got some support today from Britain’s improving economic outlook after the Confederation of British Industry (CBI) upgraded its growth forecasts for this year and next and said it expects to see marked improvements in business investment and productivity.
But the gains were capped by geopolitical concerns as tensions in Ukraine ratcheted up following an overwhelmingly vote of support for independence in a referendum in eastern Ukraine.
08.30: The Footsie pushed higher in early trade, recovering from falls in the previous session although the underlying mood remained cautious as investors braced for a possible escalation in Ukraine’s civil conflicts after anti-Kiev rebels declared victory in a referendum on self-rule.
In opening deals, the FTSE 100 index was up 7.0 points at 6,821.6 having closed 24.68 points lower on Friday after rising to its highest since late February in the previous session.
Pro-Moscow rebels declared a resounding victory in a referendum on self-rule for eastern Ukraine, with organisers of the weekend referendum in saying nearly 90 per cent had voted in favour, with some saying that meant independence and others eventual union with Russia.
Ukraine tensions: A referendum organised by members of the so-called Donetsk People’s Republic in eastern Ukraine saw 90 per cent vote in favour of independence.
The European Union is set to step up pressure on Russia by taking a first cautious step towards extending sanctions.
Markus Huber, senior sales-trader/senior analyst at Peregrine & Black said: ‘Traders will keep a close eye on what the next steps will be and especially if the two Eastern Ukrainian provinces who voted for self-rule yesterday will go ahead and put in an official request to join Russia.
‘Any signs that Russia is indeed planning to annex these two provinces in the near future ahead of the Ukrainian presidential elections scheduled to be held on May 25th could hail new turmoil for stocks and would most certainly lead to aggressive new sanctions being imposed by the West on Russia.
‘Overall markets are expected to remain range-bound today until the picture is getting clearer what the Ukraine is concerned,’ Huber added.
There was little else to provide direction early on, with corporate news scarce and no important economic data scheduled for release today in the UK, US or Europe.
A couple of business reports, however, provided further evidence of the ongoing recovery of the domestic recovery and helped buoy the UK blue chip index.
The Confederation of British Industry (CBI) upgraded its economic growth forecasts for this year and next on and said it expects to see marked improvements in British business investment and productivity.
The CBI believes the economy will grow by 3.0 per cent this year and 2.7 per cent in 2015, having previously forecast rises of 2.6 per cent and 2.5 per cent.
However, the CBI also said that British business is growing increasingly worried about the outcome of the General Election and ‘political uncertainty’ is a major threat to the recovery.
Meanwhile British employers plan to hire staff at the fastest rate since the early days of the financial crisis, a business survey by the Chartered Institute of Personnel and Development showed on Monday in a further sign the economy is picking up speed.
Stocks to watch include:
ASTRAZENECA – Prime Minister David Cameron said on Sunday he had made very good progress in securing guarantees from Pfizer over the US drugmaker’s $ 106 billion bid to buy AstraZeneca.
BARCLAYS – The UK fraud office stepped up its probe into British bank Barclays’ dealings with Qatar, the Financial Times reported on Sunday.
BP – The oil major plans to invest $ 1.5billion this year to increase its production of natural gas in Egypt, hit by an energy crisis following three years of political turmoil, the state news agency MENA said on Sunday.
BRITISH SKY BROADCASTING GROUP – The satellite broadcaster has confirmed is in early talks with Rupert Murdoch’s 21st Century Fox over the possible acquisition of its pay-TV assets in Germany and Italy, Sky Deutschland and Sky Italia.
CAPITA – The outsourcing group has said it is on track to achieve its organic growth target for the year after securing £1.1billion worth of contract wins in the first quarter.
BABCOCK INTERNATIONAL GROUP – The engineering support services company said its rail business has been successful in winning work across three of the seven geographic lots to deliver conventional plain line track works for Network Rail.
BRITISH AMERICAN TOBACCO – Britain’s largest tobacco group has hired bankers to advise on multibillion-pound acquisition opportunities in America, including possible deals with Reynolds American and Lorillard, The Times reported.