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FTSE 100 rises 35 points [hhmc]
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Just Eat surges after counter-bid from Naspers[hhmc]
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"PSNB ex".rose to £9.4bn in September from £8.8bn the year before[hhmc]
Led by Just Eat PLC (LON:JE.), the FTSE 100 has reversed track and hurtled into positive territory.
London's index of leading shares was up 35 points (0.5%) at 7,199, thanks in part to a 25% increase in the share price of Just Eat after the online takeaway giant received a hostile takeover bid from a company owned by South African e-commerce giant Naspers.
The shares are trading at around 735p, 25p above Naspers offer price, which suggests the market is expecting a bidding war to ensue, as Just Eat management had previously agreed to a merger with the Dutch company, Takeaway.com.
“The 710p cash offer from Prosus is a 20% premium to the Takeaway.com offer and about 12% higher than the shares were trading before the latters bid. Always a strong possibility given the increasingly low-ball offer from Takeaway.com, a bidding war is now on. You may need more like 750p to sort this out,” suggested Neil Wilson.
Todays borrowing figures put PSNB at £40.3bn in the first half of 2019-20, up 22% on the same period in 2018-19. But back at the Spring Statement, the OBR projected that full-year borrowing would reach £40.6bn (adjusting for student loans), down v slightly on the 2018-19 total pic.twitter.com/sKN0l3GGlQ
— Matt Whittaker (@MattWhittakerRF) October 22, 2019
On the macro front, the public sector net borrowing excluding public sector banks – “PSNB ex.” in the jargon – rose to £9.4bn in September from £8.8bn the year before but was below the consensus forecast of £9.7bn.
“Septembers relatively small increase in borrowing leaves the public finances looking a little healthier than before, though the government still is on course to exceed next years 2% of GDP [gross domestic product] borrowing limit,” said Samuel Tombs, the chief UK economist at Pantheon Macroeconomics.
“No political appetite exists for further austerity measures to reduce the deficit. Indeed, the Chancellor allocated in last month's Spending Round an extra £12bn to departments to spend in 2020/21, over and above that already planned for in the Spring Statement, while both parties will pledge giveaways to the electorate in the election likely to be held in the coming months. If the next Budget is held as currently planned on November 6, voters can expect pre-election sweeteners from the Conservatives,” Tombs declared.
Also on the home front – literally, in this case – the provisional seasonally adjusted estimate of UK property transactions for September was 101,740 residential and 10,500 non-residential transactions.
The provisional seasonally adjusted count of residential property transactions in September was 2.3% higher than in September 2018 and 5.0% higher than in August 2019, Her Majestys Revenue & Customs revealed.
The provisional seasonally adjusted count of non-residential property transactions in September was 0.2% higher than in September 2018 and 7.7% higher than in August 2019.
“A seasonally inspired spike in transactions will be welcomed across an otherwise weary market landscape and while uncertainty continues to dominate the property sector, this late rally in the number of homes being sold proves there is plenty of life in the old dog yet,” ventured Shepherd Ncube, the chief executive officer of Springbok Properties.
“There remains a huge appetite for home ownership across the UK and while transactions may have plateaued in recent years they have remained consistently stable, with pent up demand from homebuyers occasionally giving way in the form of a monthly spike in sales,” he added.
Property listings website operator Rightmove PLC (LON:RMV) was heartened by the news and added 12p to yesterdays gains to advance to 581.8p.
Yesterday, Rightmove reported that house prices are rising at their lowest rate in October since 2008, climbing 0.6% while property listing numbers are down 13.5% on levels seen a year ago.
10.00am: Stocks chug lower
London's leading shares are lower on balance as traders await the outcome of Boris Johnson's “one more heave” to get Brexit over the line.
The FTSE 100 was down 14 points (0.2%) at 7,150, with travel firm TUI AG (LON:TUI), down 5.1% at 1,012.5p, leading the retreat after Morgan Stanley cut its rating on the stock to “equal weight”.
Also under the cosh is Reckitt Benckiser PLC (LON:RB.) after it slashed full-year sales guidance in its third-quarter trading update.
The Anglo-Dutch fast-moving consumer goods giant's shares were down 5.0% at 5,577p.
Anglo-American PLC (LON:AAL), up 1.3% at 1,965.2p, was the top-performing blue-chip after its third-quarter production update.
Whitbread plc (LON:WTB) was another stock on the rise, hardening 0.8% to 4,238p, after its interims.
“Now without the significant buttress of the Costa business, Whitbread is finding life tough,” declared Richard Hunter, the head of markets at interactive investor.
“Whitbreads reliance on the hotels market makes the company less diversified and therefore more vulnerable to economic swings. The shares have underperformed of late, having declined 13% over the last six months and 7% over the last year, the latter of which compares to a 1.7% increase in the wider FTSE100. With the real potential of economic clouds on the horizon, the market consensus of the shares has now swung to a sell in the absence of any sustained cheer from the company,” Hunter noted.
8.45am: Stuttering start ahead of the Withdrawal Agreement Bill
The FTSE 100 made a stuttering start to proceedings with caution the watchword ahead of Boris Johnsons final bid get the UK out of the EU by the end of the month.
Later Tuesday, MPs will be asked to back the Prime Ministers Withdrawal Agreement Bill. If Johnson is successful, and at this stage, it is still a big if, the Commons will be asked to approve an intensive three-day timetable in which to consider the legislation.
“There are yet plenty of hurdles for the government to clear after winning the vote that will keep traders mindful of downside risks,” said Neil Wilson, an analyst at Markets.com.
The mornings big mover was Reckitt Benckiser (LON:RB.), which cut its sales target after a dour third-quarter update. The shares fell 4.5%.
On the upside, there was a recovery from recent lows for the miners led by Antofagasta (LON:ANTO), which was up 1.5%.
6.43am: Hesitant start predicted
The FTSE 100 will start very hesitantly ahead of a potentially big Brexit day in parliament.
London's blue-chip index is predicted to drop three points to 7,163, according to spread betters, having added 13 the day before.
Boris Johnson is thought to have the House of Commons numbers to win a vote on his withdrawal agreement bill (https://www.gov.uk/government/publications/eu-withdrawal-agreement-bill – WAB), in what is known as the second reading of the bill on Tuesday, but may find it more difficult to get the deal through on the accelerated timeline for approval by 31 October.
This timeline, known as the programme motion, allows only three days of consideration and debate on the WAB, and many MPs who say they are willing to vote for the second or third readings are opposed to the current programme.
But even if the WAB continues its passage, various groups of MPs are planning to try to add amendments, including the push for a customs union and/or a confirmatory referendum.
"The prospect of an extension has continued to support the pound which made another five-month high against the US dollar yesterday above the 1.3000 level," said Michael Hewson at CMC Markets.
"For now, this appears to be acting as a short-term top, with markets reluctant to drive the currency too much higher given that there could be many more political twists and turns before any deal gets across the line."
Economists at Pantheon Macroeconomics noted that the pound has only been tickling the 1.3 mark rather than going much higher, saying “markets are right to view the passing of the WAB as far from a done deal”.
“By our reckoning, the customs union amendment will be only one vote short of passing if the SNP, Lib Dems and others back it, so the vote essentially looks likely to be a toss-up,” Pantheon said.
But the big votes are not scheduled until late on Tuesday evening, so investors can safely mull over some corporate news in the meantime, plus perhaps the second term for Canadas Justin Trudeau confirmed overnight.
Hotel sector squeeze
Premier Inn owner Whitbread plc's (LON:WTB) half-year results come amid some negative news from the hotels sector.
At the end of last week, smaller rival easyHotel gave a grim assessment of UK market, saying its London hotels performed well enough but regional hotels saw a 2.8% decline, with many regions hit by double-digit drops.
Across the UK, sector-wide revenue per available room (revpar) is down by an average of 0.7% this year, according to market data from STR Global.
Recently, however, UBS upgraded the shares to 'buy' from 'neutral' as they said the recent share price valuation implies that the market is predicting Whitbread's revpar will fall 10%, while the analysts reckon the fall will be nearer 3%.
In the first quarter, Premier Inn reported a 6.0% fall in revpar, with total accommodation sales down 1.5% and like-for-like sales down 4.6%, blaming weaker business and consumer confidence due to Brexit uncertainty.
Tough for Travis
Similarly, after a profit warning by a sector peer last week, builders merchant Travis Perkins PLC (LON:TPK) will post what analysts say is “a relatively important update” on Tuesday.
Investors will be wondering how the economic backdrop has impacted the companys third quarter, especially after Graftons warning last week that UK business has been hit by "increased economic uncertainty" that was preventing consumers from spending on home improvement projects.
With such strong pressure from macro conditions, Peel Hunt said this might mean the benefits from Travis Perkins operational improvements may be offset.
Also hotly anticipated will be news on sales at Wickes and the plumbing and heating division, which have been dividing consensus forecasts for adjusted results.
Anglo's diversity
Diversified miner Anglo American (LON:AAL) is to deliver third-quarter production reports on Tuesday.
Shares in many companies in the sector have stumbled in the last six months amid the ongoing trade war between the US and China, the worlds two biggest economies and major base metals importers.
Anglo American could be a winner since it should be better protected from copper and iron ore volatility as its 80%-owned platinum group metals division Amplats turned a corner and has risen strongly this year thanks to rising demand for palladium, used in batteries, and platinum, which has benefited from a bullish precious metals market.
RBC Capital Markets rates the diversified miner a “top pick” and raised its target price to 2,300p, meanwhile Credit Suisse has rated it an “outperform”.
Significant events on Tuesday 22 October:
Interims: Whitbread Group PLC (LON:WTB)
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