LONDON MARKET OPEN: BAE Rises On US Buys; Fevertree Sinks On UK Sales

(Alliance News) - Stock prices in London opened mixed on Monday with trading volumes light with ...

Alliance News 20 January, 2020 | 8:47AM
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(Alliance News) - Stock prices in London opened mixed on Monday with trading volumes light with US markets closed for a holiday, as investors cheered two acquisitions by BAE Systems but sold Fevertree Drinks after a profit warning.

The FTSE 100 index was down 7.40 points at 7,667.08.

The mid-cap FTSE 250 was up 24.55 points, or 0.1% at 21,910.63, but the AIM All-Share was down 5.49 points, or 0.5% at 969.36.

The Cboe UK 100 index was down 0.1% 12,994.20. The Cboe UK 250 was up 0.1% at 19,753.66, and the Cboe UK Small Companies was flat at 12,505.40.

In European equities, the CAC 40 in Paris was down 0.2% and the DAX 30 in Frankfurt was down 0.1%.

On the London Stock Exchange, BAE Systems was the best blue-chip performer, up 3.0% after the UK defence contractor said it has made two acquisitions in the US.

The Farnborough-based aerospace firm is buying a military GPS business from Collins Aerospace - a unit of US aircraft manufacturer United Technologies - for USD1.93 billion in cash.

BAE is also buying US defence contractor Raytheon's Airborne Tactical Radios business for USD275 million in cash.

Both deals are subject to the closure of the merger between Raytheon and United Technologies.

Auto Trader Group was up 2.6% after Goldman Sachs raised the car marketplace to Buy from Neutral.

Anglo American was down 0.1% after the miner confirmed that it made a formal offer for Sirius Minerals, valuing Sirius's equity at GBP404.9 million.

Anglo American is offering 5.50 pence per share in the London-listed potash mine developer, which reflects a 34% premium to the Sirius closing price of 4.10p on January 7, the last day before the start of the offer period.

Sirius shares were up 2.0% at 5.51p.

At the other end of the large-cap index, WPP was down 1.0% after Goldman Sachs downgraded the advertising agency to Neutral from Buy.

On AIM, Fevertree Drinks was down 17%. The premium tonic water maker's 2019 performance was below board expectations - though still higher than the year before - due to a subdued trading in the UK over the Christmas period.

Fevertree said 2019 revenue is to come in at GBP260.5 million, up 9.7% from GBP237.4 million in 2018.

In addition, Fevertree said margins are lower than expected as it continues to invest in the brand for long term growth, particularly as it seeks to make inroads in the US. As such, Fevertree said earnings are set to be down 5% in 2019 from 2018. Gross and earnings before interest, tax, depreciation and amortisation margins are expected to be down 49% and 28% in 2020, respectively.

Fevertree recorded a gross profit margin of 51.8% with an Ebitda margin of 33.1% in 2018.

The Japanese Nikkei 225 index closed up 0.2% Monday. In China, the Shanghai Composite closed up 0.7%, but the Hang Seng index in Hong Kong closed down 0.7%.

The pound was quoted at USD1.2977 Monday morning, down from USD1.3030 at the London equities close on Friday, amid fears the Bank of England will cut interest rates next week.

Analysts at Lloyds said: "The move has been driven by comments from BoE Governor Carney and two other Monetary Policy Committee members (Silvana Tenreyro and Gertjan Vlieghe), all of which were regarded as dovish enough to suggest that they may vote for a near-term cut. As two members of the MPC voted for a cut at the last two meetings, support from another three (of the nine-person Committee) would be enough to ensure a majority.

"Outside of Governor Mark Carney's appearances in Davos (tomorrow and Wednesday on global issues and climate change), none of the members of the MPC are scheduled to speak on UK monetary policy, ahead of the committee going into its pre-meeting 'quiet period' before the January announcement. Given the recent tendency for central banks to try and avoid surprising markets with their policy changes, the market will be closely watching to see if any MPC member makes any impromptu comments to the media."

The euro was USD1.1099 early Monday, flat against USD1.1094 late Friday. Against the yen, the dollar was trading at JPY110.14, flat from JPY110.17 late Friday.

Gold was quoted at USD1,561.25 Monday morning, up from USD1,556.62 late Friday.

Oil was trading at USD65.60 Monday morning, up from USD64.74 late Friday.

Oil was higher on supply concerns after exports from Libya were blocked when a pipeline was shut down by armed forces. Further, in Iraq - OPEC's second-biggest producer - there was a strike at a key oil field which has hit output.

Financial markets in the US are closed on Monday for the Martin Luther King Day holiday.

By Arvind Bhunjun;

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Fevertree Drinks PLC 2,331.00 GBX -0.81 -
BAE Systems PLC 493.60 GBX 0.16
Sirius Minerals PLC
Auto Trader Group PLC 560.60 GBX 1.30 -
WPP PLC 608.40 GBX 3.43
Anglo American PLC 1,856.40 GBX 1.24

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