European equities enjoyed a strong boost at the end of the trading week as investors regained their risk appetite.
Miners topped the FTSE 100 risers’ list, with banks and pharma also in strong demand. Brent crude oil pulled back slightly to just below $106, but remains at elevated levels. Government bond yields eased back a touch after yesterday’s shock session where the US 30-year Treasury hit its highest level since 2004.
A seemingly amicable meeting between Donald Trump and Xi Jinping was taken as a win, given the fragile relationship between the US and China in recent years. The fact the two leaders were able to meet without any uproar is significant from a geopolitical perspective.
Xi saying that China and the US must ‘coexist in peace’ was positive, yet some might argue the whole event was more style over substance. Those hoping for progress on matters relating to AI, trade, Taiwan and Iran are still sitting on the edge of their seat, so far unfulfilled.
UK Consumer Confidence
UK consumer confidence in September was better than expected, suggesting that the summer feel-good factor has kept going.
Confidence at a two-year high will be music to the ears of new prime minister Andy Burnham as his government prepares to create a blueprint to get the country moving. He doesn’t have long to seize the opportunity while the iron is hot, as forecasts for a potential energy price cap jump of between 25% and 30% in January could see the nation start the new year with a bad case of the blues.
The largest gains in September came from improvements to how the public viewed the economy and their personal finances. There is a major risk that this positivity disappears in a puff of smoke if the Budget brings tax changes, and if oil prices remain stubbornly high which leads to a higher cost of borrowing, the price of goods and services going up, and everyone feeling the pinch.
UK Takeovers
Investors are preparing for a changing of the guard as two FTSE 100 companies prepare to delist from the UK stock market next week.
The departure of Beazley and Schroders will leave investors with less choice in the listed insurance and asset management sectors, respectively. The delistings provide a stark reminder that the UK stock market is slowly shrinking.
While changes to listing rules have made it easier and more attractive for companies to join the market, we’re still not seeing big enough flows of new listings to offset the ones heading for the door. Airtel Money’s IPO announcement this week is a positive, but the market needs the taps to fully open on new listings, not the odd drip we’ve seen in recent years.
Meanwhile, two other potential delistings were subject to important developments as bidders raised their offers. Genel Energy has raised its offer for Capricorn Energy to trump rival suitor DNO. And Peel has once again lifted its offer for property group Harworth in a last-chance effort to win over the board and shareholders.
These raised bids go to show there is still value in UK stocks and that boards and investors are not pushovers. They want a fair takeout price and certainly won’t accept anyone trying to buy a company on the cheap.
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...