Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Inflation relief helps boost FTSE 100, Fenner surges on Michelin takeover

Published 20/03/2018, 17:32
Updated 20/03/2018, 17:32
© Reuters. People walk past the London Stock Exchange Group offices in the City of London, Britain

© Reuters. People walk past the London Stock Exchange Group offices in the City of London, Britain

By Tom Pfeiffer

LONDON (Reuters) - Britain's FTSE 100 index gained on Tuesday, with banks leading the way after data showed a small slowdown in inflation, while Fenner shares surged after a takeover offer from tyre maker Michelin .

In the second approach for a UK mid-cap firm in as many days, Fenner (L:FENR) jumped 24 percent to the top of the FTSE 250 after France's Michelin (PA:MICP) made a 1.2 billion-pound ($1.7 billion) bid for the engineering company.

"Our first take is that the deal looks good and offers a healthy premium especially in light of Fenner's very strong recent share price performance," said Stifel analysts.

On the large-cap index, housebuilders rose after Bellway said a strong order book would help it achieve record annual output and reported an increase in average selling prices.

The FTSE 100 was up 0.3 percent at the close, with house builders Taylor Wimpey (L:TW), Berkeley Group (L:BKGH) and Persimmon (L:PSN) among the biggest gainers. Bellway (L:BWY) jumped 3.5 percent.

Banks contributed most to keeping the index in positive territory. Lloyds (L:LLOY) was up 1.1 percent and HSBC (L:HSBA) gained 0.7 percent.

British inflation was weaker than expected in February, according to official figures that appeared unlikely to alter the view of the Bank of England, which meets this week, that wages will grow more quickly than prices this year.

Economists expect the central bank to raise interest rates as early as May.

Software company Micro Focus (L:MCRO), which lost 46 percent of its market value in the previous session after its chief executive quit and it cut its revenue outlook, staged a small recovery, gaining 3.6 percent.

Sophos (L:SOPH) tumbled 9.2 percent to the bottom of the FTSE 250 as traders flagged concern over leverage after the blow-up at Micro Focus, and as tech companies came under increased scrutiny globally.

Northern Trust turned negative on the company on Monday for the first time since its IPO in June 2015.

Some market watchers said UK stocks may now be a good longer-term bet after the government sealed a Brexit transition deal with its EU partners.

The transition agreement "will remove a little bit of that economic uncertainty," said Edmund Shing, head of equity derivative strategy at BNP Paribas (PA:BNPP).

"And by the way, let's not forget that even if the UK doesn't have fantastic GDP growth forecasts, they are inching up rather than down, so actually maybe there is less reason for massive pessimism around UK large-cap stocks."

Some investors may be wary of placing big bets before the U.S. Fed's two-day policy meeting this week, with the central bank expected to raise rates for the first time this year.

Mike Bell, global market strategist at JPMorgan (NYSE:JPM) Asset Management, sees a chance of four Fed rate rises this year.

© Reuters. People walk past the London Stock Exchange Group offices in the City of London, Britain

"I think equities can handle it as long as they don't start to signal that they are concerned about inflation and signal more than four rate hikes this year," Bell added.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.