London pre-open: FTSE looking to rebound, Smurfit and GKN continue to resist
London stocks are predicted to open slightly higher on Monday morning as dealmaking dominated the corporate news again.
The FTSE 100 was called 12 points high by traders in the City, having endured a painful previous week, falling 3.3% to end at 6,921.94.
Aside from central bank speakers, the week ahead is fairly quiet from a macroeconomic perspective, with the only key events being the final iterations of UK and US fourth-quarter GDP and the latest US PCE inflation numbers all later in the week. On Monday, UK property investors may be watching out for mortgage approvals data, while markets are also likely to be watching to see how the nascent 'trade war' unfolds.
"As we come to the end of this first quarter of 2018 all of the optimism that we saw at the end of January now appears to be an almost distant memory," said market analyst Michael Hewson at CMC Markets, "and it will need a significant change of tone to prevent stock markets finishing this quarter lower, despite this year’s record highs."
He said China’s initially measured response to the White House's announcement of tariffs appeared to offer "some hope" in terms of a possible stabilisation this week, but sentiment is likely to remain volatile, particularly if Chinese authorities follow up with further large scale measures which target, larger US corporations like Boeing or Apple.
"The speed of the declines seen in the past two weeks are certainly a far cry from all the recent optimism about global growth that we saw from bodies like the OECD and the IMF at the beginning of the year, and it appears to be a change in sentiment which is likely to be very difficult to turn around, particularity where equity investors are concerned," Hewson said.
In company news, Smurfit Kappa has rejected an increased offer from US-based International Paper Company (IPC) which valued it at €37.54, saying it “fundamentally undervalues the group”. IPC offered €25.25 in cash and 0.3028 new shares of IPC common stock for each Smurfit Kappa ordinary share. Smurfit said the revised offer did not offer Smurfit Kappa shareholders “much more than compensation for the fall in International Paper’s share price since since IPC's first offer”.
As GKN's deadline for shareholders' decision over its potential hostile takeover by Melrose looms, the company was forced to retract statements made by directors in the Sunday Telegraph and Sunday Times.
JD Sports has agreed the "transformational" acquisition of retailer The Finish Line for $558m (£396m) in a deal that would add a 556-store estate across 44 US states. FTSE 250-listed JD has agreed to pay $13.50 per share for 100% of the Indianapolis-headquartered footwear, apparel and accessories retailer, which will be funded by new dollar-denominated bank debt.
Shire announced on Monday that it and biotechnology company NanoMedSyn have entered into a preclinical research collaboration to evaluate a potential enzyme replacement therapy using NanoMedSyn's proprietary synthetic derivatives named AMFA. Under the terms of the agreement, the two firms will perform preclinical evaluations of AMFA conjugated to recombinant enzyme. Shire said it would provide funding to NanoMedsyn, but further terms of the agreement were not disclosed.