Proactive Investors -
- FTSE 100 falls 13 points to 8,351
- UK retail sales growth improved last month, led by food and clothing
- Ashtead (LON:AHT) impresses with quarterly trading update
M&A down in second quarter
UK mergers and acquisitions fell in the second quarter, according to the latest update from the Office for National Statistics.
The provisional number of domestic and cross-border M&A was 385 in the second quarter, which was down 78 on the first three months of 2024.
April saw an estimated 148 deals involving a change in majority ownership, before falling slightly to 144 in May and declining further to 93 in June.
The value of foreign companies acquiring UK companies was £5.0 billion, the ONS said, down from £5.6 billion in the first quarter, while outward M&A fell to £4.2 billion in the second quarter from £4.6 billion in the first.
Domestic M&A totalled £2.6 billion, down £1 billion from the first quarter.
My first guess is the general election might have slowed things a bit.
Senior civil servant backs Labour's 'black hole' claims
A big story for Chancellor Rachel Reeves has broken in the last couple of hours.
It comes after her claims of a £22 billion "black hole" in Britain’s public finances in July, which has led the new government to cut some spending plans and is expected to lead to some tax hikes in the autumn statement next month.
Jeremy Hunt, the former Chancellor wrote to Cabinet secretary Simon Case, the UK's top civil servant, after the speech to say the claims were "deeply troubling" as they appeared to contradict government spending estimates published by the Tories shortly beforehand.
But a letter in reply from Case to Hunt, leaked to newspapers this morning it seems, says the Conservative's failure to hold a spending review contributed to the uncertainty and denied allegations that the new Labour government’s claims were bringing the civil service into "disrepute".
Oil price drop hits FTSE
Oil titans Shell (LON:SHEL) and BP (LON:BP) are in the red, limiting the gains of FTSE 100 this morning, after a sharp fall in oil prices.
Brent crude futures tumbled 1.2% to $76.58 a barrel in recent minutes, while US WTI is down 1.4% at $73.26.
Falls for mining companies have also been holding the blue-chip index for the second day in a row, as well as declines for housebuilders.
Anglo American PLC (LON:AAL), Persimmon (LON:PSN), Glencore (LON:GLEN), Fresnillo PLC (LON:FRES), Taylor Wimpey (LON:TW) and Rio Tinto (LON:RIO) are the bottom of the blue-chip list, down between 1.4% and 1.2%.
Berkeley Group Holdings PLC (LON:BKGH), Barratt Developments PLC (LON:BDEV) and property developer LondonMetric (LON:LMPL) are also lower.
Rightmove (LON:RMV) is also down 1.1%, after rising over 20% yesterday when Australia's REA Group said it was considering making a bid.
Japan worth watching
The yen "carry trade" and Japanese interest rates are gaining a lot of attention this morning, says market analyst Kathleen Brooks at XTB.
This is after the governor of the Bank of Japan wrote a letter to the Japanese government, explaining the decision to raise rates in July where he said the central bank will continue to raise interest rates "if the economy and prices perform as expected".
In carry trades, investors borrow in a low-interest currency, such as the Japanese yen, to invest in a higher-interest one like the dollar is at the moment, profiting from the interest rate difference while potentially benefiting from currency appreciation.
"The yen is higher on the back of these comments, and USD/JPY is testing the 146.00 level," says Brooks, noting that the yen is the top performing G10 currency today.
"The yen story is worth watching closely," she adds. "Some analysts believe that rising Japanese interest rates could be the canary in the coalmine for the current stock market rally and may trigger unexpected volatility.
"There is some excitement that Japanese investors will trigger a wave of capital flowing out of the West and back into Japanese capital markets, alongside an end to the carry trade."
However, while some 're-shoring' of Japanese investors' capital may be expected, Brooks says "we do not think that this should induce any panic or risk aversion.
"The Japanese respect diversified portfolios, a lot of their foreign investments may be locked in for some time, and Japan’s demographics means that investment flows from Japan to Europe and the US will not dry up."
Mid-cap risers
Top riser on the FTSE 250 is Watches of Switzerland Group PLC (LON:WOSG) after its update this morning, where it marked calendars for next March's grand opening of its twice-delayed new flagship Rolex boutique on Old Bond Street, London.
The luxury watch merchant also maintained full-year guidance set out in July and said it was increasing showroom stock levels in the US in the first half to "enhance displays and client experience".
Shares are up 9%.
Another more turbulent riser is Wizz Air Holdings PLC (LON:WIZZ), though the shares have been up and down in the first hour, currently 0.7% higher.
This is off the back of a monthly update where the Eastern Europe and Middle Eastern flights group said it carried a record number of passengers in August despite the ongoing effect of groundings due to Pratt & Whitney engine issues.
Just over 6.2 million people flew with the airline in August, up 1% on a year earlier, as load factors climbed 1.3% to 95.4%.
Ryanair (LON:0RYA) also reporting a record month for traffic this morning, with load factor still at 96%.
'Some concerns' about Rolls
On Rolls and Cathay, analyst Christophe Menard at Deutsche Bank (ETR:DBKGn) says: "While the news raises some concerns, our preliminary analysis is that the financial liability could be contained."
He says his "positive view of the equity story is unchanged", keeping a 'buy' rating.
Kathleen Brooks, market analyst at XTB, says: "If we see more news flow that suggests RR is not at fault, expect a stronger recovery in the stock price."
She notes that in the year to date, Rolls is still the best-performing stock on the UK market and is higher by more than 60%.