FTSE starts the week on a lower note as China tariffs kick in
The FTSE and other major European indices are heading lower at the start of the week despite a flurry of activity in the M&A market. Trade war tensions are still overshadowing company news particularly given that the latest batch of US tariffs on Chinese goods goes into effect Monday. China has already cancelled further trade talks in response. Most big Asian markets are closed for holiday today, but Hong Kong remained open and traded lower.
M&A activity burst into life
The weekend finally brought a resolution to the drawn-out bidding saga for Sky Plc (LON:SKYB) and after months of bids and counter-bids US cable giant Comcast (NASDAQ:CMCSA) beat Rupert Murdoch’s Fox to buy Sky at £17.28 per share. The winning offer was made in a rare open auction in London on Saturday and valued Sky at $38.8 billion. Sky has already advised shareholders to accept the offer and the television firm’s shares jumped 8.74% in early trade Monday to trade at 1723.75.
The mining sector also had a major merger Monday, an unusual move given that low metal prices over the last few years have triggered more sales of assets and closures than acquisitions. London listed gold miner Randgold Resources (LON:RRS) and Canadian miner Barrick Gold have shaken up things by agreeing an all-share merger to create the world’s biggest gold mining company. The deal worth $18.3 billion pushed Rangold shares up 3.72%.
Lastly UK firm Drax is looking to buy parts of Spain’s Iberdrola (MC:IBE) business, particularly UK pumped storage and renewable hydro and gas-fired generation assets. Talks are still at an early stage but if it goes ahead it will be fully debt-funded. Shareholders didn’t seem to like the idea, however, and the FTSE 250-listed Drax started sliding, down 0.22% in early trade.
Gama Aviation hit by poor operating performance and Brexit uncertainty
This is a disappointing result from Gama Aviation, which has been hit by a poor operating performance at its maintenance facility in Oxford.
The European ground division's revenues have consequently fallen by more than a fifth, offsetting what was already expected to be a strong performance from its US business.
A booming US economy and tax cuts are giving companies more cash to shell out on luxuries like charter jets.
Brexit uncertainty, however, is hurting demand in Europe, where Gama still has a relatively heavy weighting to the UK market. Gama's balance sheet is strong enough for it to acquire more assets abroad. But first and foremost, investors will be looking for evidence that it can get its home base in order via the looming consolidation of its facilities at Bournemouth Airport.
"Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.
Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions."