London midday: M&A activity boosts equities

London stocks gained on Monday, driven by merger and acquisition activity as ARM Holdings agreed to a £23.4bn takeover offer from Japan's Softbank.

ARM’s board, which is a major supplier of components for smartphones made by the likes of Apple and Samsung, said it unanimously recommended the 1,700p-per-share cash offer, which is a 43% premium to the 1,188.73p price at which trading closed on Friday.

“It would not be surprising to see other bids for UK firms that have now become cheaper thanks to the fall in sterling, so the ARM deal could simply be the first in a procession of deals,” said Chris Beauchamp, senior market analyst at IG.

“It won’t be an ugly rush, since ongoing political uncertainty will make it even more important for acquisitive firms to pick their targets carefully, and questions will linger over just how protectionist the UK may become with regards to some of its prized assets. Nonetheless, as a sign of confidence, the deal is very welcome indeed.”

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.

Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor, said global markets have largely shrugged off the turmoil in Turkey as equity markets start the week higher.

“However, the sustained negative news on Turkey is taking its toll on certain travel companies, including Thomas Cook and TUI, which are down sharply on fears that the political and security risks could prove more traumatic for Turkish tourism as holiday makers rethink their plans.”

As market participants dusted off the news in Turkey, oil prices fell with Brent crude down 0.48% to $47.74 per barrel and West Texas Intermediate down 0.45% to $45.74 per barrel at 1134 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.

On the company front, mining stocks were under the cosh as metal prices dropped. BHP Billiton, Anglo American and Rio Tinto were among the biggest fallers on the FTSE 100.

Glencore was also under pressure as Credit Suisse cut its rating on the stock to ‘neutral’ from ‘outperform’ amid a subdued copper market.

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.

Market Movers

FTSE 100 (UKX) 6,691.99 0.34%
FTSE 250 (MCX) 16,851.80 0.74%
techMARK (TASX) 3,380.99 2.41%

FTSE 100 - Risers

ARM Holdings (ARM) 1,696.00p 42.64%
Sage Group (SGE) 672.50p 3.07%
Royal Bank of Scotland Group (RBS) 189.00p 2.72%
RSA Insurance Group (RSA) 491.10p 2.68%
Marks & Spencer Group (MKS) 330.60p 1.63%
Direct Line Insurance Group (DLG) 344.70p 1.53%
Travis Perkins (TPK) 1,543.00p 1.51%
Taylor Wimpey (TW.) 146.00p 1.39%
Imperial Brands (IMB) 4,043.50p 1.29%
International Consolidated Airlines Group SA (CDI) (IAG) 427.10p 1.18%

FTSE 100 - Fallers

BHP Billiton (BLT) 968.10p -2.85%
TUI AG Reg Shs (DI) (TUI) 936.00p -2.65%
Anglo American (AAL) 821.40p -1.76%
Rio Tinto (RIO) 2,436.00p -1.36%
BP (BP.) 451.75p -1.18%
Antofagasta (ANTO) 502.00p -1.18%
Glencore (GLEN) 183.85p -1.13%
Lloyds Banking Group (LLOY) 55.36p -1.13%
Royal Dutch Shell 'B' (RDSB) 2,095.50p -1.04%
Fresnillo (FRES) 1,840.00p -0.97%

FTSE 250 - Risers

Genus (GNS) 1,780.00p 5.14%
Capital & Counties Properties (CAPC) 303.10p 4.84%
Polypipe Group (PLP) 237.70p 4.71%
Electrocomponents (ECM) 270.20p 4.40%
Vesuvius (VSVS) 346.30p 4.12%
Supergroup (SGP) 1,579.00p 4.09%
Allied Minds (ALM) 363.10p 3.74%
Micro Focus International (MCRO) 1,870.00p 3.54%
Victrex plc (VCT) 1,585.00p 3.39%
Sophos Group (SOPH) 222.60p 3.39%

FTSE 250 - Fallers

Hochschild Mining (HOC) 218.30p -4.71%
Thomas Cook Group (TCG) 62.05p -2.74%
Entertainment One Limited (ETO) 191.80p -1.94%
Polymetal International (POLY) 1,096.00p -1.79%
Zoopla Property Group (WI) (ZPLA) 274.60p -1.54%
Ascential (ASCL) 254.00p -1.44%
Aldermore Group (ALD) 139.10p -1.42%
Wizz Air Holdings (WIZZ) 1,594.00p -1.36%
Brown (N.) Group (BWNG) 182.40p -1.30%
UK Commercial Property Trust (UKCM) 77.00p -1.28%