(Alliance News) - After a lacklustre end to July, London stocks look set to take their cue from gains in Asian markets overnight and bounce into August.
On the corporate side, the month began with a deluge of deals. Meggitt agreed to be taken over by US-based Parker-Hannifin for GBP6.3 billion and Sanne Group said it would agree to a possible buyout offer of 920 pence per share in cash from Apex Group.
IG says futures indicate the FTSE 100 index of large-caps to open up 46.5 points, or 0.7%, at 7,078.80 on Monday. The FTSE 100 closed down 46.12 points, or 0.7%, at 7,032.30 on Friday.
"After a sour end to last week, risk sentiment is rebounding somewhat this morning," said Danske Bank.
In Asia on Monday, the Japanese Nikkei 225 index ended up 1.8%. In China, the Shanghai Composite was up 1.8%, while the Hang Seng index in Hong Kong was up 0.8%.
The S&P/ASX 200 in Sydney closed up 1.3% in late trade.
"Last week Asia markets saw big declines due to a regulatory crackdown in China, with the Nikkei more or less trading near to its lows this year and the Hang Seng trading at a nine-month low. The extent of the falls appeared to prompt a partial backtrack, or softening of tone by the Chinese authorities prompting a little bit of a rebound which appears to have continued today in Asia," said Michael Hewson, chief market analyst at CMC Markets.
"This looks set to translate into a positive open for European markets as we look ahead to a big week of economic data."
As Monday's data calendar kicked off, China's manufacturing sector eked out some growth in July, but saw its weakest improvement for 15 months. The headline seasonally adjusted purchasing managers' index slipped to 50.3 points in July from 51.3 in June. This left it barely above the neutral 50.0 point mark.
In Japan, meanwhile, the manufacturing sector continued to expand last month, having seen its strongest improvement since April as output and new orders drove its expansion. The headline au Jibun Bank Japan manufacturing PMI – a composite single-figure indicator of manufacturing performance - rose to 53.0 in July from 52.4 in June.
Against the yen, the dollar eased to JPY109.63 from JPY109.74 late Friday.
Still to come are manufacturing PMIs from Germany, the eurozone and the UK at 0855 BST, 0900 BST and 0930 BST respectively. A US Markit PMI is due at 1445 BST and the ISM one is reported at 1500 BST. Outside of PMIs, German retail sales are at 0700 BST.
Ahead of the data, sterling was quoted at USD1.3907 early Monday, higher than USD1.3898 at the London equities close on Friday. The euro traded at USD1.1873, up from USD1.1858 late Friday.
On the corporate side, HSBC shares in Hong Kong rose 1.9% after the lender's interim profit more than doubled from a year before. In the six months to June 30, the Asia-focused bank reported pretax profit of USD10.84 billion, up from USD4.32 billion a year before.
Helping to improve the bank's interim profit was a USD719 million credit release, swung from the mammoth USD6.86 billion provision set aside in the first half of 2020. Less positively, net interest margin worsened to 1.21% from 1.43%. HSBC declared an interim dividend of 7 US cents.
The start of the week was dominated by M&A news in London, as aerospace and defence firm Meggitt agreed to be taken over in a deal worth GBP6.3 billion.
Parker-Hannifin has offered 800 pence per Meggitt share in cash, representing a premium of 71% to Friday's closing price of 469.1p.
"Parker believes Meggitt is very well aligned with Parker and the goals of The Win Strategy, Parker's global business system, representing a unified strategic vision for its team members worldwide," said Ohio, US-based motion and control technologies firm Parker-Hannifin.
The acquisition of Meggitt nearly doubles the size of Parker-Hannifin's Aerospace Systems segment.
It has made commitments to the UK government, such as ensuring Meggitt will continue to meet its contractual obligations to the state and retaining its UK headquarters. Each of Meggitt's existing divisions will be operated under the combined Parker-Meggitt name.
Meggitt plans to recommend that shareholders vote in favour of the takeover.
Separately, Meggitt reported a 26% decline in interim revenue to GBP680.0 million, though swung to a pretax profit in the first half of 2021 of GBP33.6 million from a loss of GBP368.4 million a year ago. While noting the importance of its dividend to shareholders, Meggitt decided not to pay one for the half in light of "ongoing market conditions".
Sanne said it is in advanced talks with Apex over a possible buyout worth 920p per share in cash. This would represent a 53% premium to Sanne's closing share price of 603p on May 13, the day before the commencement of the current offer period.
With 162.2 million shares in issue, this offer would value Sanne as a whole at just shy of GBP1.5 billion.
"Having considered the possible offer, together with its financial advisers, JP Morgan Cazenove and Jefferies, the board of Sanne has indicated to Apex that the possible offer is at a value that the board would recommend, should a firm intention to make an offer pursuant to Rule 2.7 of the Code be announced on such terms," it said, adding that Apex is well advancing in its due diligence.
Apex has until August 30 to either announce a firm offer for the London-based provider of alternative asset and corporate services or walk away.
With deals abounding on Monday, life science research firm Abcam said it has agreed to buy BioVision for USD340 million.
BioVision, a wholly owned subsidiary of Boai NKY Medical Holdings, is a global supplier of life science research tools to support research, diagnostics, and drug discovery. It started supplying Abcam in 2003.
"Abcam customers' demand for BioVision products has grown consistently over time, with sales more than doubling over the past five years," said Abcam.
The deal represents a compelling strategic fit for Abcam, it said, and will bring greater control over the innovation and distribution of BioVision's product portfolio.
"BioVision has sustained strong growth over many years and, together with Abcam's brand, reach and capabilities, we are confident we are well positioned to build on this success and reinforce Abcam's ability to serve life scientists globally," said Abcam Chief Executive Alan Hirzel.
SSE, meanwhile, agreed to divest its entire stake in gas distribution operator Scotia Gas Networks for GBP1.23 billion.
The London-listed energy utility will sell its 33.3% stake to a consortium comprising existing Scotia Gas shareholder Ontario Teachers' Pension Plan Board and Brookfield Super-Core Infrastructure Partners.
Scotia Gas includes Scotland Gas Networks and Southern Gas Networks, two of the eight regulated gas distribution networks in England, Wales and Scotland, in addition to SGN Natural Gas, which provides gas to customers in the west of Northern Ireland as well as other non-regulated ancillary businesses.
SSE initially acquired a 50% equity share in Scotia Gas in 2005 for a total of GBP505 million, before selling a 16.7% stake to a wholly owned subsidiary of the Abu Dhabi Investment Authority in 2016. The consortium also has agreed to acquire the 16.7% stake in SGN owned by ADIA.
This deal will conclude SSE's GBP2 billion-plus disposals programme announced in June last year, with total proceeds amounting to over GBP2.7 billion.
"The disposal proceeds will reduce net debt in the short term and will help support the delivery of SSE's capital investment plans. As indicated in May, SSE will provide an update on these plans at its interim results in November," it said.
In the US on Friday, Wall Street ended in the red, with the Dow Jones Industrial Average ending down 0.4%, the S&P 500 down 0.4% and the Nasdaq Composite down 0.7%.
US senators on Sunday finalized a historic, trillion-dollar infrastructure proposal that is expected to be approved within days, Democratic Senate leader Chuck Schumer said.
If passed by Congress and signed into law, the bill would pump historic levels of federal funding into fixing US roads, bridges and waterways, ensuring broadband internet for all Americans and expanding clean energy programs.
A bipartisan group "finished writing the text of the infrastructure bill," Schumer told the Senate, which met for an extended weekend session in Washington.
Gold was quoted at USD1,810.69 an ounce early Monday, lower than USD1,821.81 on Friday. Brent oil was trading at USD74.69 a barrel, down from USD76.29.
By Lucy Heming; lucyheming@alliancenews.com
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