(Alliance News) - Stock prices in London are set for another leg lower on Wednesday after weakness in New York overnight following some disappointing US retail sales data.
In early UK company news, RSA has formally agreed to be taken over by Intact Financial and Tryg in a GBP2.7 billion deal. Croda said it will buy Iberchem for EUR820 million. British Land resumed paying dividends, though at a lower level, as it recorded a wider interim loss.
IG says futures indicate the FTSE 100 index of large-caps to open 30.93 points lower, or 0.5%, at 6,334.40 on Wednesday. The blue-chip index closed down 55.96 points, or 0.9%, at 6,365.33 on Tuesday.
"US equity markets drifted lower overnight, as US retail sales disappointed. That was enough of an excuse for investors to bank some recent gains," said Jeffrey Halley, senior market analyst at Oanda.
US retail and food service sales edged up just 0.3% month-on-month in October to reach USD553.3 billion, representing a slower rate of growth than the 1.6% recorded for September. Market consensus, according to FXStreet, had pencilled in 0.5% month-on-month rise for October.
"US retail sales sent a warning shot that Covid-19 is still with us, and its effects will not miraculously disappear overnight...In Europe, and especially the US, Covid-19 cases continue to soar, and movement restrictions across states continue to tighten," Halley added.
The number of coronavirus infections in Europe climbed past 15 million on Tuesday, according to an AFP tally from official sources.
The continent is the worst-hit region in the world, ahead of Latin America and the Caribbean which together have recorded 12.1 million cases and Asia with 11.5 million.
Globally more than 55 million Covid-19 infections have been registered since the pandemic began early in the year.
The state of South Australia announced a six-day "circuit-breaker" lockdown for its nearly two million people on Wednesday to contain a sudden coronavirus cluster in its capital city that ended a months-long streak of no infections. Schools, restaurants and factories were told to close at midnight while stay-at-home orders were issued for residents across the state.
It came as two new cases were linked to a cluster that emerged from an Adelaide hotel used to quarantine travellers from overseas, taking the outbreak to 22 cases.
In the US on Tuesday, Wall Street ended in the red, with the Dow Jones Industrial Average down 0.6%, the S&P 500 down 0.5% and the Nasdaq Composite down 0.2%.
In Asia on Wednesday, the Japanese Nikkei 225 index closed down 1.1%. In China, the Shanghai Composite closed up 0.2%, while the Hang Seng index in Hong Kong is up 0.3%.
In early UK company news, RSA Insurance said it has reached agreement with Intact and Tryg on a takeover offer valuing the London-listed insurer at GBP7.2 billion that was first announced earlier this month.
Under the deal, RSA shareholders will receive 685 pence in cash for each share, the same amount proposed earlier in November. In addition, RSA shareholders will be entitled to receive the insurer's interim dividend of 8p.
The price represents a premium of 51% to November 4's closing price in London, being the day before the announcement of Intact and Tryg's possible offer.
The deal will see Intact run RSA's Canadian, UK and international operations, while Tryg will take RSA's Swedish and Norwegian businesses. The two will co-own RSA's Danish business.
"The board of RSA is pleased to be recommending Intact and Tryg's cash offer for the company, which delivers attractive, certain value for our shareholders. The offer reflects the strength and performance of RSA during a challenging period for our industry, representing a significant premium in cash," said RSA Chair Martin Scicluna.
In more M&A news, speciality chemicals firm Croda International said it has agreed to buy Fragrance Spanish Topco, trading as Iberchem, for EUR820 million.
Iberchem was founded in 1985 and is headquartered in Murcia, Spain. Around 80% of its sales are fragrances for Personal Care and Home Care products, areas where it has a "similar customer profile" to Croda.
The acquisition is expected to be earnings accretive in the first full financial year following completion, said Croda.
The consideration will be funded via a combination of Croda's existing debt facilities and the proceeds of an equity placing, representing around 8% of its issued share capital. The placing is expected to raise GBP600 million.
Turning to trading, Croda said its outlook for the full-year remains unchanged after an in-line performance in the second half so far. The full-year charge for group-wide share-based payment schemes is forecast to be higher than previously expected, it noted, due to recent share price performance.
Adding to the morning's deal-making, British Land said it has completed on the sale of Clarges Mayfair to Deka for GBP177 million.
The sale price of the mixed-use development was 7.6% above the September valuation.
The FTSE 100 property developer also released its interim results on Wednesday. EPRA net tangible assets fell 10% to 693p at September 30 from 773p at March 31.
British Land posted a widened pretax loss of GBP757 million for the half-year to September 30, versus GBP440 million a year ago.
More positively, the company confirmed it will be resuming dividend payments with an interim payout of 8.4p. British Land back in March decided to suspend dividend payments, given the uncertain outlook, but said it has been "reassured" by the productivity of its assets when restrictions were relaxed.
"Our first half results naturally reflect the challenges in retail. Against this backdrop, we remain focused on active asset management, working to maximise rent collection and keeping our units occupied with successful retailers. There is a clear preference from shoppers and retailers for out of town, open air retail parks. Our approach and attractive asset mix means that prior to the November lockdown, we were delivering significant outperformance on footfall and retailer sales and a steady improvement in rent collection levels," said Simon Carter, incoming chief executive.
Energy utility SSE said revenue for the half-year to September 30 was GBP2.82 billion, down from GBP3.05 billion a year ago. SSE's pretax profit, however, multiplied to GBP829.5 million from GBP128.9 million a year ago.
"Reported results for the period to 30 September 2020 are significantly higher than the previous year, reflecting pre-tax exceptional gains of GBP654.4m recognised during the year mainly driven by a combination of progressing with the group's GBP2bn plus non-core asset disposal programme and IFRS 9 remeasurements on operating derivatives," SSE explained.
Adjusted pretax profit was down 26% to GBP193.9 million.
Looking to the remainder of the year, SSE said the pandemic hit to operating profit for the financial year to March 31 is expected to be towards the middle of the GBP150 million to GBP250 million range set out in June.
The dollar was lower early Wednesday in London.
Against the yen, the dollar edged down to JPY103.88 versus JPY104.22. The euro traded at USD1.1881 early Wednesday, higher than USD1.1866 late Tuesday. Sterling was quoted at USD1.3279 early Wednesday, up on USD1.3254 at the London equities close on Tuesday.
Figures from the Office for National Statistics showed annual UK inflation edged up to 0.7% in October from a rate of 0.5% in September. This was better than market forecasts, according to FXStreet, of 0.6%.
Gold was quoted at USD1,880.58 an ounce early Wednesday, lower than USD1,887.43 on Tuesday. Brent oil was trading at USD43.79 a barrel, higher than USD43.40 late Tuesday.
The economic events calendar on Wednesday has UK and eurozone inflation readings at 0700 BST and 1000 GMT respectively.
By Lucy Heming; lucyheming@alliancenews.com
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