FTSE 100 higher after US banks get reporting season off to a strong start, China and UK data in focus, takeover deals continue to gather pace

“The FTSE 100 made brisk progress on Monday as a solid start to the US reporting season and a sprinkling of M&A activity helped buoy sentiment,” says AJ Bell Investment Director Russ Mould.

“Given all the drama around the sector in recent weeks it felt important that the big American banks which reported last Friday beat market expectations.

“While corporate announcements from the US are likely to continue to grab the headlines, a lot of the spotlight in macroeconomic terms is likely to be drawn by China with a raft of data set to be published imminently. For a FTSE 100 index teeming with resources stocks, this could have a big bearing given China is such a rapacious consumer of commodities.

“Investors will be watching closely for signs of a recovery from a Chinese economy emerging from strict zero-Covid restrictions.

“In the UK, inflation figures for March on Wednesday will reveal if the country is finally winning its battle with the rising cost of living. So-called base effects, where the point of comparison 12 months ago saw such a surge in prices due to the Ukrainian conflict, should mean a drop-off in the year-on-year reading so there may be greater attention given to the month-on-month figure.”

M&A: Rovio, Network International, John Wood

“Takeovers seem to be falling into two camps at present. They’re either being driven by cheap valuations which means predators can strike a bargain, particularly if foreign exchange rates are working in their favour. Or deals are happening because companies have hit a wall and need fresh thinking from a new owner to create value.

“The latest wave of bids and offers cover both categories, with plenty of action on both the UK stock market and overseas exchanges.

“Angry Birds video games maker Rovio has been looking for a buyer for some time after failing to repeat its success with new intellectual property. Sega Sammy has already struck gold with Sonic the Hedgehog and now fancies its chances with Rovio’s flock of assets.

“A shared fascination with animals doesn’t guarantee future success. Sega might be able to further milk Rovio’s existing intellectual property but very few titles can be regurgitated into successful new games and spin-off activities such as films and merchandise ad infinitum.

“Payments group Network International has confirmed details of its takeover proposal from CVC and indicates the price could be right. Oil services expert John Wood also indicates there could be merit in its latest takeover proposal from Apollo and is opening up its books to the suitor so the latter can undertake proper due diligence.

“Everything is up for sale at the right price and given the uncertain economic outlook it seems that boards are minded to support takeovers as long as shareholders are not being messed about by unrealistically low offers. That situation might be a lot different in a stronger economic environment.”

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