Leading shares are regaining some ground after last week’s losses, the biggest weekly drop of 2015.
Despite uncertainties ahead of the UK Budget - and May’s election - and this week’s Federal Reserve meeting and the implications for US interest rates, the FTSE 100 is up 34.25 points at 6774.83. Sentiment has been helped by the Dax pushing through 12,000 as weall as a rise in Chinese shares as the government promised to act to support economic growth. Rebecca O’Keeffe at Interactive Investor said:
Chinese stocks reached a five year high this morning after Premier Li promised government action to support the economy if growth drops too much and threatens jobs or wages. This potential stimulus has provided some encouragement for European markets and the commodity focused FTSE 100, but markets overall remain relatively cautious.
But building materials business CRH is down 54p at £17.57 after uncertainties over the proposed merger between cement makers Holcim and Lafarge. CRH was due to buy assets from the combined group, but now Holcim wants to renegotiate the terms of the deal. Analysts at Liberum said:
CRH’s acquisition of cement assets from Holcim/Lafarge has been very well received by the market, but was always conditional on the Holcimn/Lafarge merger completing. Holcim has told Lafarge it wants to renegotiate the exchange terms of the merger as well as the board of the enlarged company. Lafarge says it will negotiate on the exchange terms, but not board structure. This could lead to the deal unravelling, which would be bad news for CRH shares.
Among the risers Next is up 130p at £78.80 ahead of this week’s full year figures, while AstraZeneca has added 16.5p to 4573.5p after positive clinical trial results for its heart drug Brilinta, although there The treatment was one of the central planks of the company’s defence against the bid from Pfizer.
Brian White at Shore Capital said:
As expected, there was a higher rate of major bleeding with Brilinta compared to placebo although reassuringly the rates of fatal bleeds or intracranial haemorrhage were low and similar between treatment groups. The observation that the study results were achieved irrespective of aspirin dose and geographical region should go some way in resolving some of the concerns highlighted from [an earlier] study.
These are important study results which bolster the class leading profile of Brilinta we believe and should, when approved, lead to use in a larger population of at risk patients than the current indication. We also believe that the association of Brilinta with the highly respected TIMI study group based at the Brigham and Women’s Hospital should further enhance the perception of Brilinta with key opinion leaders. We make no changes to our $2.7bn 2020 sales forecasts.
Elsewhere Afren is down 22% to 3.622p as JP Morgan Cazenove slashed its price target from 33p to 4p in the wake of the company’s recapitalisation. It said:
Afren announced a comprehensive and complex recapitalization. Assuming it is voted in by shareholders, it will result in equity dilution of 89%. The recapitalization covers the immediate capital needs of the business, which are significant, and then provides the foundation to continue operating. The main features, other than equity dilution, are extending maturities across the loans and notes to 2019/2020 and a shift to payment in kind for interest payments. Given the weighting to 2019, this capital structure appears heavily reliant on an improving oil price, with around $900m of principal and interest charges due in 2019.
