London close: Stocks rally on ARM Holdings takeover

UK equities closed in the green on Monday as a takeover deal for ARM Holdings lifted investor sentiment.

ARM, a major supplier of components for smartphones made by the likes of Apple and Samsung, agreed to a £23.4bn takeover offer from Japan's Softbank on Monday. The 1,700p-per-share cash offer marked a 43% premium to the 1,188.73p price at which trading closed on Friday.

“On an otherwise unremarkable day, the incredible 43% premium being paid for Arm means that the stock has single handedly managed to drag the index into the green,” said IG market analyst Joshua Mahony.

“While Theresa May and Phillip Hammond publicly praised today’s deal as a vote of confidence for the UK, this deal also highlights the risk that there may not be much left by the time the pound resurfaces. For all the talk of a spike in exports driven by sterling devaluation, it could in fact turn out that we will simply see shoppers buy the store.”

Meanwhile, investors also digested news that the Turkish government has taken back control following an attempted military coup. Six thousand people have been arrested following Friday’s attempted military coup and President Recep Tayyip Erdogan has said parliament will consider introducing the death penalty for those thought to have committed traitorous acts against the state.

As market participants shrugged off the news in Turkey, oil prices fell with Brent crude down 2.1% to $46.59 per barrel and West Texas Intermediate down 2.2% to $44.96 per barrel at 1636 BST.

Closer to home, Bank of England policymaker Martin Weale said on Monday the central bank needs more information on the impact of the UK’s vote to leave the European Union before cutting interest rates.

Speaking in London on the impact of Brexit on monetary policy, Weale said there was a high level of uncertainty surrounding the vote.

“Uncertainty points to the argument that we should wait for firmer evidence before making any policy change,” Weale said.

The BoE voted 8-1 last week to keep interest rates unchanged to the surprise of many economists who had expected a 25 basis point cut. The Monetary Policy Committee said it was waiting on economic data covering the period following the 23 June EU referendum to become available before taking action. However, the BoE indicated that it was likely to loosen monetary policy at the August meeting.

In the US, the National Association of Homebuilders/Wells Fargo Housing Market Index declined to 59 for July from 60 the prior month, compared with market expectations of an unchanged reading.

Company-wise, housebuilders rallied, including Travis Perkins, Persimmon and Taylor Wimpey, even as Rightmove data showed UK house prices fell 0.9% between 12 June and 9 July to just under £308,000. Rightmove said worries around the Brexit vote took the wind out of the property market.

Travel stocks, such as TUI and Thomas Cook, fell on concerns about the unrest in Turkey.

Ultra Electronics shares were up as it said its Ocean Systems business, based in the USA, has been awarded a firm one year contract valued at just over $4m from the US Navy for the continuing production of the ADC MK2 Countermeasure.

Market Movers

FTSE 100 (UKX) 6,695.42 0.39%
FTSE 250 (MCX) 16,867.66 0.84%
techMARK (TASX) 3,374.04 2.20%

FTSE 100 - Risers

ARM Holdings (ARM) 1,675.00p 40.87%
Royal Bank of Scotland Group (RBS) 189.80p 3.15%
Marks & Spencer Group (MKS) 334.70p 2.89%
RSA Insurance Group (RSA) 491.10p 2.68%
Taylor Wimpey (TW.) 147.70p 2.57%
Sage Group (SGE) 668.00p 2.38%
Persimmon (PSN) 1,605.00p 2.16%
Berkeley Group Holdings (The) (BKG) 2,680.00p 2.13%
Travis Perkins (TPK) 1,551.00p 2.04%
Barratt Developments (BDEV) 417.60p 2.00%

FTSE 100 - Fallers

TUI AG Reg Shs (DI) (TUI) 942.50p -1.98%
BHP Billiton (BLT) 977.00p -1.96%
BP (BP.) 449.30p -1.72%
British American Tobacco (BATS) 4,776.50p -1.21%
BT Group (BT.A) 395.55p -1.11%
Antofagasta (ANTO) 503.00p -0.98%
Ashtead Group (AHT) 1,119.00p -0.97%
Intu Properties (INTU) 279.30p -0.92%
Vodafone Group (VOD) 225.90p -0.88%
Rolls-Royce Holdings (RR.) 738.00p -0.87%

FTSE 250 - Risers

Sophos Group (SOPH) 231.00p 7.29%
Supergroup (SGP) 1,606.00p 5.87%
Polypipe Group (PLP) 240.30p 5.86%
Allied Minds (ALM) 370.00p 5.71%
Synthomer (SYNT) 358.00p 4.50%
Victrex plc (VCT) 1,599.00p 4.31%
International Personal Finance (IPF) 335.30p 4.29%
Restaurant Group (RTN) 297.00p 4.28%
Shawbrook Group (SHAW) 173.00p 3.90%
Galliford Try (GFRD) 976.00p 3.83%

FTSE 250 - Fallers

Ascential (ASCL) 245.80p -4.62%
Brown (N.) Group (BWNG) 177.50p -3.95%
Wizz Air Holdings (WIZZ) 1,576.00p -2.48%
IP Group (IPO) 149.00p -2.17%
Hochschild Mining (HOC) 224.20p -2.14%
Polymetal International (POLY) 1,096.00p -1.79%
TalkTalk Telecom Group (TALK) 216.50p -1.72%
Sports Direct International (SPD) 256.10p -1.69%
Evraz (EVR) 162.00p -1.64%
Tullow Oil (TLW) 224.30p -1.58%