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FTSE Rises, Pound Looks More Vulnerable as Growth Slows and Post-Brexit Tensions Mount

07/09/2021 | 06:55am EDT

Pound Looks More Vulnerable as UK Growth Slows and Post-Brexit Tensions Mount

Sterling could weaken in the near term as the U.K.'s economic growth slows and post-Brexit trade tensions with the EU persist, ING says. Noting that data on Friday showed U.K. economic growth slowed to 0.8% month-on-month in May from a downwardly revised 2.0% in April, ING analysts say that "some cracks in the so-far very positive recovery story in the U.K. may leave sterling a bit more vulnerable, especially when adding recent indications of fresh political tensions between the U.K. and EU, this time about the size of the U.K.'s settlement bill." EUR/GBP may soon rise more decisively above the 100-day moving average resistance level of 0.8610, they say. EUR/GBP last trades flat at 0.8593.

 
Companies News: 

Tharisa Reaches Record High Mining Rates, Tons Processed

Tharisa PLC said Friday that it delivered record mining and processing figures in the third quarter, noting that it was one of the strongest operational periods of its history.

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Senior Expects Fall in 1H Aerospace, Group Sales

Senior PLC said Friday that it expects a 21% fall in first-half sales in its aerospace division and that group sales for the period are likely to be 13% lower, both on a constant currency basis.

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Chamberlin to Report a Loss for Fiscal 2021

Chamberlin PLC said on Friday that it will report a loss for the year ended May 31 after losing a contract in late 2020 and the ensuing restructuring and refinancing.

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Gemfields Group Says Share-Price Rise Isn't Linked to Unpublished Information

Gemfields Group Ltd. said Friday that there is no unpublished price-sensitive information relating to the company, after shares in London closed 22% higher on Thursday.

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Empyrean Energy Shares Fall on Discounted Share Placing

Shares in Empyrean Energy PLC fell on Friday after the company said it launched a share placing of 83.7 million new ordinary shares in the company at a discounted price to raise 5.0 million pounds ($6.9 million).

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RM Secured Direct Lending to Buy Back Up to 14.99% of Issued Share Capital

RM Secured Direct Lending PLC said Friday that its shareholders have approved a resolution to buy back up to 14.99% of the company's issued ordinary share capital.

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President Energy Subsidiary Acquires 75% Interest in Undisclosed Green Hydrogen, Ammonia Company

President Energy PLC said Friday that its hydrogen and ammonia-production subsidiary Atome has acquired a 75% interest in an undisclosed northern Europe-based green hydrogen and ammonia company for nominal share value.

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M.J. Gleeson Expects FY Pretax Profit to Be Ahead of Market Views

M.J. Gleeson PLC said Friday that it expects to post pretax profit for fiscal 2021 marginally ahead of market expectations.

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LendInvest Targets Market Cap of Around GBP255.6 Mln in AIM Listing

LendInvest plc said Friday that it has proposed to be admitted to trading on the London Stock Exchange's AIM.

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Gopher Investments to Offer GBP10 Mln Break Fee to Playtech as Part of Finalto Negotiations

Gopher Investments said Friday that it is offering Playtech PLC a break fee of $10 million as part of its negotiations for the acquisition of the latter's financial trading arm Finalto.

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Philip Morris Makes $1.24 Bln Bid for UK Respiratory Drugs Company -- Update

Vectura board withdrew its recommendation of an earlier offer from Carlyle

 
Market Talk: 

UK Property Developers Rise After Land Secs Rent Update

0933 GMT - Shares in property developers rise after Land Securities Group reported upbeat progress on rent collection. The company said 81% of net rent due on June 24 had been paid as of June 7. Shares in the group and rival British Land are among the FTSE 100 top risers, rising about 3%, while FTSE 250 players Hammerson and Shaftesbury also gain. Citigroup said in a note in May that it was keeping its sell recommendation on Land Securities as there was still uncertainty on the shape of recovery and the brokerage was concerned that the office sector may face further hurdles in particular.

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Philip Morris Bid for Vectura Shows UK Companies Have Overseas Appeal

0912 GMT - Vectura recommending the new 150 pence-a-share bid from Philip Morris is a reminder that U.K. companies still appeal to "overseas predators," Russ Mould at AJ Bell says. In this deal there seems to be an element of "poacher turned gamekeeper" for Philip Morris as it looks to use its expertise in inhalation for good, making the British pharmaceutical company's inhaled drug delivery solutions a good fit, Mould says. "Vectura shareholders may be pleased this is an all-cash offer as many might have had ESG objections to being left with a position in a manufacturer of harmful cigarettes as opposed to a business working to improve people's health," Mould says. Vectura shares are up 13% at 153 pence.

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Vectura Might Get Further Bids After Philip Morris's Raised Offer

0858 GMT - The new 150 pence-a-share bid for Vectura from Philip Morris could still face competition, Peel Hunt says. The bid is just 17% below the inhaled-medicines specialist's all-time high share price, when near to mid-term growth expectations were higher, Peel Hunt says. The company is a potentially attractive strategic asset, therefore the possibility that the increased offer may result in further interest and, or, bids, cannot be excluded despite visibility on this being low, the U.K. brokerage says. "The improved bid underscores the strategic value of Vectura's technology platform, but may reduce the likelihood of further financial (private equity) participation in the sale process," the broker says. Vectura shares are up 13% at 153 pence.

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May's UK GDP Data Unlikely to Alter Outlook for Pound, Stocks

0853 GMT - Lower-than-expected U.K. economic growth in May shouldn't change the outlook for the region's assets including stocks and the pound, HSBC says. Continued growth should be positive for equities, particularly those that benefit from improving economic prospects including industrials, financials and consumer cyclicals, HSBC analyst Willem Sels says. "We foresee less direction for sterling, however," he says. "The pound has been boosted by the reopening and the U.K.'s strong vaccination performance in recent months, but as the EU is also reopening too, we now foresee less relative upside for GBP vs EUR or USD looking ahead." The U.K. economy grew 0.8% month-on-month in May, official data showed Friday. Economists in a WSJ survey expected growth of 1.3%.

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Looser Policy, Economic Growth Should Keep Supporting UK Stocks

0824 GMT - Accommodative U.K. monetary policy and economic growth should continue to support U.K. equity markets, despite a lower-than-expected expansion in economic output in May, says Dean Turner, economist at UBS Global Wealth Management. "Although the pace of growth is slowing, with an expansion of 0.8% in May, less than half that seen in April and missing expectations, it still signals that the economy is recovering strongly. We expect more good news in the coming months as the remaining Covid restrictions fall away," he says. The focus will remain on the next move from the Bank of England, which has already signalled that it will revise its estimates higher, though with inflation likely to head back to target next year the BOE won't feel much pressure to tighten policy, he says.

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Weak UK GDP Reading Poses Downside Risks to Near-Term Growth Outlook

0819 GMT - While the easing of lockdown restrictions continues to deliver a bounce in U.K. activity, it was clearly weaker across all main sectors in May, Chris Hare, senior economist at HSBC, says. "Strength in newly-reopened consumer-facing sectors, such as hospitality, is being offset by weakness in sectors which have been open for longer, such as retail," the economist says. The May print suggests a downside risk to the near-term growth outlook, Hare says. HSBC's forecast is for 5.2% on-quarter growth in the second quarter but in order to achieve that, and assuming no revisions to the back data, GDP would need to grow in excess of 2% in June, Hare says.

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UK Recovery to Pre-Pandemic Output Levels Faces Delay

0805 GMT - The U.K. economy is set to return to pre-pandemic levels in October, two months later than previously expected, as the recovery lost some steam in May, Capital Economics' chief U.K. economist Paul Dales says. The reopening of indoor hospitality in mid-May was the sole driver of growth as people returned to the pubs, restaurants and cinemas, while little progress was seen elsewhere, he says. "The bigger point, though, is that the recovery so far has been faster than most imagined possible six or 12 months ago," Dales says. Capital Economics expects the U.K. economy to emerge from the pandemic without much permanent scarring.

Contact: London NewsPlus, Dow Jones Newswires; +44-20-7842-931

(END) Dow Jones Newswires

07-09-21 0654ET

Stocks mentioned in the article
ChangeLast1st jan.
AJ BELL PLC -0.39% 407.8 Delayed Quote.-5.56%
AUSTRALIAN DOLLAR / BRITISH POUND (AUD/GBP) 0.21% 0.5465 Delayed Quote.-3.22%
CANADIAN DOLLAR / BRITISH POUND (CAD/GBP) 0.05% 0.586593 Delayed Quote.2.01%
CITIGROUP INC. -0.25% 70.65 Delayed Quote.14.58%
DJ INDUSTRIAL 0.04% 35756.88 Delayed Quote.16.57%
EMPYREAN ENERGY PLC 0.31% 8.025 Delayed Quote.56.86%
EURO / BRITISH POUND (EUR/GBP) 0.13% 0.84358 Delayed Quote.-5.58%
FTSE 100 -0.06% 7272.86 Delayed Quote.11.52%
FTSE MID 250 INDEX 0.09% 23182.35 Delayed Quote.11.93%
HAMMERSON PLC 1.29% 33.03 Delayed Quote.31.23%
HSBC HOLDINGS PLC 0.15% 447.75 Delayed Quote.18.03%
INDIAN RUPEE / BRITISH POUND (INR/GBP) -0.16% 0.009687 Delayed Quote.-3.38%
LAND SECURITIES GROUP PLC -0.23% 684.6 Delayed Quote.1.78%
PHILIP MORRIS INTERNATIONAL, INC. -0.35% 96.2 Delayed Quote.16.20%
PLAYTECH PLC 0.00% 673 Delayed Quote.67.71%
PRESIDENT ENERGY PLC 0.00% 1.95 Delayed Quote.8.33%
RM INFRASTRUCTURE INCOME PLC 0.00% 89 Delayed Quote.2.30%
SENIOR PLC -0.25% 160.1 Delayed Quote.79.83%
SHAFTESBURY PLC 0.48% 622.125 Delayed Quote.8.88%
THARISA PLC -0.53% 26.3 End-of-day quote.5.24%
THE BRITISH LAND COMPANY PLC -0.06% 491.1 Delayed Quote.0.49%
THE CARLYLE GROUP INC. 1.19% 56.29 Delayed Quote.79.04%
US DOLLAR / BRITISH POUND (USD/GBP) 0.05% 0.726945 Delayed Quote.-0.65%
VECTURA GROUP 0.00% 164.8 Delayed Quote.32.26%
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