European markets were extending the run of summer gains on Monday. Economic growth is clearly not the driver though. Disappointing GDP data overnight from Japan has confirmed the second quarter slowdown seen in Europe and the US is a global phenomenon.
The German DAX stock index has entered positive territory for 2016 for the first time. The sluggish European growth reported for the second quarter, coupled with a new fight against the Bank of England for competitive currency devaluation increases the odds of another round of easing from the European Central Bank, perhaps this this year. It’s notable however that the DAX is a bit of an outlier compared to other European bourses, which are still down on the year.
The FTSE 100 edged narrowly into positive territory on Monday led by the oil and gas sector as oil prices rose. William Hill (LON:WMH)’s rejection of an improved 352p offer from Rank (LON:RNK) and 888 (LON:888) has weighed somewhat on the FTSE 250, which is trading just in the red.
Data showing Iranian oil production is back to just shy of the pre-sanctions level of 4m barrels a day increases the chance of agreement to freeze output at a meeting of OPEC producing countries next month.
William Hill’s board has said the latest offer of £3.1bn from Rank and 888 “substantially undervalues” the company with its chairman calling it “highly opportunistic and complex.” The indebtedness of the merged company is an issue, but then so is William Hill’s falling profits and inability to establish its online presence, something Rank and 88 have in spades.
Shares of Bovis Homes (LON:BVS) dipped after the homebuilder offered an uncertain outlook for the impact on the company from the EU referendum, despite reporting a profit rise of 15% in the first half of the year. CEO David Ritchie has said the firm is monitoring the effect of Brexit but said the firm was “pleased with the resilient level of interest from home buyers.”
Property stocks more broadly were weighed down by data from Rightmove showing falling house prices in London for the past four weeks. Whether Brexit will add to the cooling property market or not, unless homebuilders can substantially increase construction, the net result of lower house prices will eventually be lower profits.
Sage Group (LON:SGE) is propping up the FTSE 100, with shares down as much as 3% after it reported a possible security breach. The accounting software giant has said there was “unauthorised access to customer information using an internal login”. The TalkTalk data breach, which turned out to be far less damaging than initially feared may have been a lesson to investors not to over-react.
US stocks look set for a higher open amid a rise in oil prices and rising hopes for retailer corporate earnings after a run of good results last week.
USA pre-opening levels
S&P 500: 3 points higher at 2,187
Dow Jones: 36 points higher at 18,612
Nasdaq 100: 10 points higher at 4,817
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