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“There is a chirpier end to the week for the FTSE 100 with a 0.3% rise to 7,045 in early trading. Most of the major markets in Continental Europe markets moved higher while there were mixed fortunes across Asia.
“Next week’s corporate reporting season is very important for UK investors as there are updates from a lot of big companies including Barclays, Lloyds, Royal Bank of Scotland, WPP and International Consolidated Airlines.
“The banks in particular haven’t been having a good time on the stock market this year so shareholders will want to know why investors have been so nervous towards the sector,” says Russ Mould, investment director at AJ Bell.
London Stock Exchange
“Third quarter results from London Stock Exchange show positive momentum with its clearing and index operations, and hopefully new chief executive David Schwimmer should have started making some friends given he’s now nearly three months into the top job.
“The market has been waiting with baited breath for Schwimmer to communicate his strategy for the business. While the latest results don’t give the full game plan, it is interesting to the acquisition of another 15.1% stake in LCH Group, taking the exchange’s total ownership beyond 80%.
“There has been some speculation that the new CEO could chase a bigger acquisition, given he comes from an M&A background. The obvious target is Euroclear which would strengthen London Stock Exchange’s position in Europe. That wouldn’t be an easy deal to pull off given rival ICE owns 10% of the business.
“You cannot rule out the possibility of ICE itself trying to have a go at merging with London Stock Exchange, or more plausible is a bid for the London Stock Exchange by US exchange operator CME.
“The latter is a bit busy at the moment dealing with Britain’s antitrust watchdog regarding its efforts to buy NEX Group, but longer term there could be merit in a tie-up with the London Stock Exchange.”
Intu Properties
“A 215p cash bid for Intu Properties has emerged from discussions between the shopping centre landlord and a consortium led by deputy chairman John Whittaker’s Peel vehicle (already a near-30% shareholder).
“This is not yet a formal offer – a deadline of 5pm on 1 November remains in place – but it offers some indication of what Intu shareholders can expect to receive.
“It could hardly be construed as generous, particularly as any dividends paid before the deal completes will be taken off the offer price.
“Fellow mall investor Hammerson was apparently prepared to pay the equivalent of 253.9p in an all-share offer before jilting Intu earlier this year and the company’s current net asset value is 362p. Yet an imminent revaluation of Intu’s assets might cast the price in a better light as many analysts believe retail sector property valuations will have to be marked down.”
Pendragon
“An unscheduled trading update will rarely contain good news, particularly when there is an imminent announcement in the diary already, and so it proves today with the UK’s largest independent car dealer Pendragon which has issued a profit warning.
“New car sales are plummeting in part due to disruption linked to the introduction of new global engine testing rules.
“Industry figures showed a 20% decline in new car sales in September and Pendragon says there has been a similar trend in October. One may fear this is not a blip linked to the new regulations but is also reflective of a downturn in demand for big ticket items amid an uncertain consumer backdrop.
“Unsurprisingly Pendragon is attempting to pivot to the more resilient used car market. While today’s warning might have been expected to provoke a period of retrenchment, it is spending money on new sites as well as putting cash into so-called used car factories to refurbish old inventory.
“These actions are to be applauded as it shows the business has an eye on the longer-term prize rather than hiding amid short-term pressures. Management are ultimately being proactive in response to problems which are not of their own making but instead affecting the whole industry.”
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