LIVE MARKETS-M&A in the UK: which stocks are targets?

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LIVE MARKETS-M&A in the UK: which stocks are targets?
Credit: © Reuters.

* European shares down

* Euro zone inflation slows down

* Fed leaves interest rates unchanged

* U.S. stocks futures down as Tesla, Spotify results in focus

LONDON, May 3 (Reuters) - Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Danilo Masoni. Reach him on Messenger to share your thoughts on market moves: danilo.masoni.thomsonreuters.com@reuters.net

M&A IN THE UK: WHICH STOCKS ARE TARGETS? (1315 GMT)

M&A has been a key characteristic of the UK market this year, and Liberum gives some tips as to which kinds of stocks are likely to be bid targets.

They share:

- International exposure, possibly undervalued due to the UK market discount

- Growing top line

- Depressed valuations versus history

Among those stocks Liberum finds which fulfil these characteristics, there are several miners, including Glencore (LON: GLEN ), Fresnillo (LON: FRES ), Randgold Resources (LON: RRS ) and Vedanta.

Also potential targets, according to their criteria, are transport company Firstgroup, satellite firm Inmarsat, support services firm Babcock, entertainment company Merlin, oil producers Tullow Oil (LON: TLW ) and Premier Oil.

M&A is typically concentrated on the small and mid-cap area, strategists note. The average M&A as a proportion of index market cap is 1.9 percent for the FTSE 100 , 5.7 percent for the FTSE250 and 6.3 percent for the small caps.

Overall the growing pipeline of deals could lead to the strongest M&A year since the crisis, Liberum finds.

(Helen Reid)

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LUNCHTIME UPDATE: EURO SPOILS STOCKS PARTY (1220 GMT)

It's lunchtime, and European stocks have hit a session low, which coincided with a pop in the euro as the single currency moves higher after being set back by that Euro zone inflation data earlier on.

Over in the U.S., stocks futures are also in negative territory as attention is firmly on the tech sector following disappointing earnings reports from Tesla and Spotify.

It could be a bumpy ride for Tesla's shares after the company reported a record loss for the first quarter and CEO Elon Musk cut off analysts from asking questions during a conference call.

Here's your lunchtime snapshot:

(Kit Rees)

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FRENCH BANKS CALLED EUROPE'S GFC WINNERS AS Q1 KICKS IN (1210 GMT)

"French banks have suffered much less than their European competitors from the 2008 financial crisis and the sovereign debt crisis of 2011," a study published by France's central bank states as the country's listed lenders start publishing Q1 results tomorrow.

You can see in the chart below (from the Banque de France research) how French banks' return on equity (blue line) overtook that of their European peers (green line) between the beginning and the end of the decade (circled in red):

The French regulator also notes that the banks it oversees were able to increase their balance sheet and lower costs more than their competitors throughout the period.

The change of fortunes of pre-financial crisis powerhouses was clearly exposed last week when Deutsche Bank (DE: DBKGn ) vowed to retreat to Europe and end its nightmare on Wall Street after three expensive decades struggling to become a global investment bank. can see below how French banks beat the Euro zone banking index over the last decade:

Overall, betting on European banks as a proxy for the #Euroboom economic recovery has been a disappointment with the sector underperforming the broader STOXXE in 2017 and in 2018.

European lenders are still (desperately?) waiting for monetary normalisation and the higher interest rates necessary to boost their profits.

In the meantime, there's little spark expected from the Q1 vintage which Jefferies said it sees as a "transitional quarter for French banks".

UBS analyst Lorraine Quoirez, who is hoping for an "easier Q2" believes Q1 could be "the toughest quarter of the year" with retail revenues only expected to improve later in 2018 and investment banks profits hit by negative dollar swings.

BNP Paribas (PA: BNPP ) and Société Générale (PA: SOGN ) publish their Q1 results tomorrow while Natixis and Crédit Agricole will report earnings on May 9 and 15 respectively.

Here's a link to Banque de France's research note but it is unfortunately only available in French at the moment: https:// Ponthus)

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FTSE OUT OF THE RED AS WEAK DATA HITS POUND AGAIN (0913 GMT)

The British blue-chip index is the only major European benchmark trading in positive territory but that is yet again thanks to a little help from its sterling friend.

Weak data from Britain's services sector has probably given a final blow to any remaining expectations of a Bank of England interest rate rise next week, and that's definitely bad news for the pound. the blow dealt by last week's GDP figures, markets are unlikely to be mollified by today's Services PMI," said Dean Turner, UBS Wealth Management economist.

It took about half an hour for traders to make up their mind completely but after a few bounces up and down, the pound is reaching the session's low and entering negative territory while the FTSE is doing exactly the opposite, now up 0.1 pct.

Here's how things unfolded:

(Julien Ponthus and Helen Reid)

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OPENING SNAPSHOT: EUROPE IN THE RED, RESULTS DISAPPOINTMENTS BITE (0721 GMT)

European stocks are following in Asian markets' footsteps, falling as trade tensions trigger anxiety once again. The Trump administration was reported to be considering executive action to restrict some Chinese companies' ability to sell telecoms equipment in the United States. STOXX 600 is down 0.2 percent, while the FTSE is holding flat.

Financials and consumer staples are the worst-performing sectors, while results are pulling some stocks sharply down.

Bpost is the standout loser, down 10 percent, alongside Schibsted (-5.9%) and Smith & Nephew (LON: SN ) (-6.6%) which all reported results lagging expectations. on the other hand is rising 7.8 percent after its fourth-quarter results beat expectations.

M&A activity is also a driver. Germany's Vonovia VNAn.DE is down 2.1 percent at the bottom of the DAX after the firm made a $1 billion offer for Swedish real estate company Victoria Park VICPA.ST . The acquisition target is, for its part, rising 8 percent on the news.

(Helen Reid)

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WHAT YOU NEED TO KNOW BEFORE EUROPE OPENS (0651 GMT)

European shares are expected to open slightly lower in another busy day for earnings releases and weighed down by a bounce in the euro from near 4-month lows against the dollar after the Fed delivered no hawkish surprises in yesterday's policy statement.

Futures are trading down 0.2-0.4 percent.

Even though the euro has started to weaken in the last couple of weeks, its strength has weighed on company results during the first quarter.

Today, Bayer (DE: BAYGN ) shares are seen falling 1-2 percent after the group cut its full year guidance, blaming the strong currency. Adverse FX also led to a 2 percent revenue drop at healthcare group Fresenius (down 1 percent premarket) and resulted in a lower-than-expected core profit for Belgian chemicals group Solvay (BR: SOLB ) (down 1-2 percent premarket).

Shares in chipmaker Infineon, utility Veolia and sports goods maker adidas, however, are seen rising at the open following strong updates, while a big sales miss at Fingerprint could lead its shares to decline around 10 percent.

Overall, first quarter earnings for the MSCI EMU index are seen up 2.5 percent in euro terms or 14.6 percent in dollar terms, according to Thomson Reuters data.

In the UK, Rolls-Royce (LON: RR ) confirmed its profit forecast, while miner Glencore predicted trading profit at upper end of forecast range.

(Danilo Masoni)

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UK HEADLINES: GLENCORE, ROLLS-ROYCE AND M&A (0626 GMT)

Results from companies including Rolls-Royce, Glencore, and Smith & Nephew will drive the UK market today.

There's also more inbound M&A with France's Fonciere des Regions buying a portfolio of UK hotels from Starwood Capital for $1.1 billion.

Here are some of the headlines to watch:

Rolls-Royce sticks to profit forecast, working on engine repair solution des Regions buys UK hotels portfolio from Starwood worth $1.1 bln expects trading profit at upper end of forecast range & Nephew downgrades outlook after weak Q1 Reid)

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EUROPEAN STOCK FUTURES DIP AS EURO REBOUNDS (0616 GMT)

Top European stock index futures have opened slightly lower, trading between flat and a fall of 0.3 percent, as the dollar fell back and weakened against the euro after the Federal Reserve delivered no hawkish surprises in yesterday's statement where it left interest rates unchanged.

"Initial market reaction saw the US dollar slip back sharply, on the basis that markets had expected a much more hawkish tilt given recent inflation readings," said Michael Hewson, Chief Market Analyst at CMC (NS: CMC ) Markets UK.

"This was always likely to be optimistic, given the previous reluctance to pre-commit. There was nothing in yesterday's statement to undermine the prospect that rates won't rise next month, as Fed officials remained non-committal as to whether we could get 3 or 4 rate rises this year," he added.

Here's your snapshot:

(Danilo Masoni)

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EARLY MORNING HEADLINE ROUNDUP: EARNINGS DOMINATE (0556 GMT)

Bayer cuts full-year guidance on strong euro Q1 net income slips 2 pct on strong euro Q1 results hit by currency impact, fixed costs nudges up revenue guidance as earnings improve Healthineers posts 4 pct Q2 sales rise Cards sees "some" market stabilization ahead as Q1 lags sees higher raw materials prices in Q2 Veolia's Q1 revenues rise 3.7 pct, boosted by new services biosimilar cancer drug hits U.S. regulatory bump to make $1 bln offer for Sweden's Victoria Park Logistics prices IPO at 27.50 Swiss francs per share seeks regulatory nod for 51 pct controlling stake in China JV outgoing CEO says scepticism over T-Mobile merger is expected U.S. consumers seen hit hard by T-Mobile, Sprint merger alleges 'blatant fraud' at U.S. drugmaker Akorn Generale ready to pay up to $1 bln to end U.S. probes- Bloomberg of En+ says actively working on reducing Deripaska stake utility EDF (PA: EDF ) says received 24-hour strike notice snaps up South Korean cosmetics firm Nanda confident Eurofighter supplier issue can be resolved soon Masoni)

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MORNING CALL: EUROPEAN SHARES SEEN LOWER (0527 GMT)

European shares are seen opening slightly lower this morning in another busy day for earnings releases and following losses in Asia and Wall Street overnight.

Financial spreadbetters expect London's FTSE to open 21 points lower at 7,522, Frankfurt's DAX to open 36 points lower at 12,767 and Paris' CAC to open 24 points lower at 5,505.

While in Asia shares were weighed down by waning hopes for real progress in Sino-U.S. trade talks, U.S. stocks fell after the Federal Reserve left interest rates steady and said inflation had "moved close" to its target. Masoni)

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http://reut.rs/2DQkTqc futures

https://reut.rs/2JQibDt GBP FTSE 2

https://reut.rs/2Iay6j2 Gueux

https://reut.rs/2rfzOpA youpi

https://reut.rs/2rgA5IL Lunchtime snapshot

https://reut.rs/2JOVHmr

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