LONDON MARKET CLOSE: Higher close as M&A activity takes centre stage

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Stocks in London ended a turbulent week on a bright note, initially flared by a rate cut in China, and strong M&A activity as THG and M&C Saatchi attract attention from new suitors, welcome or otherwise.

Selling pressure late into the session, stemming from a poor open in New York, prevented the FTSE 100 from posting a weekly gain, however. London markets did receive a boost from M&A moves, meanwhile, with shares in beauty products seller THG and advertising company M&C Saatchi surging.

The FTSE 100 index ended up 87.24 points, or 1.2%, at 7,389.98 on Friday - falling 0.4% this week.

The mid-cap FTSE 250 index closed up 146.93 points, or 0.8%, at 19,835.95. The AIM All-Share index ended up 9.47 points, or 1.0%, at 956.64.

For the week, the FTSE 250 fell 0.4%, while the AIM All-Share added 0.1%.

The Cboe UK 100 index closed up 1.4% at 736.47. The Cboe 250 ended up 1.2% at 17,563.20, and the Cboe Small Companies rose 0.4% to 14,670.63.

In mainland Europe, the CAC 40 in Paris closed up 0.2%, while the DAX 40 in Frankfurt ended up 0.7% on Friday.

The five-year loan prime rate – on which many lenders base their mortgage rates – was trimmed to 4.45% from 4.6%, China's central bank said on Friday. The haircut to the LPR was greater than the market expected, analysts said, as China's planners try to inject life into a slowing economy.

The pound retreated from intraday highs to sit below the $1.25 mark at the time of the London equities close on Friday. Sterling was quoted at $1.2463 late Friday, slipping from $1.2503 at the London equities close on Thursday.

The euro traded at $1.0547, down against $1.0590. Against the yen, the dollar was quoted at JP¥127.86, up from JP¥127.40.

Against a backdrop of soaring inflation, data on Friday showed UK retail sales fared better than hoped in April, but consumer confidence has weakened considerably.

Retail sales volumes rose 1.4% in April on a month before, figures from the Office for National Statistics showed, reversing a month-on-month fall of 1.2% in March.

Separately, however, GfK said its long-running UK consumer confidence monitor dropped by two points to minus 40 in May, the lowest score since records began in 1974.

Eurozone consumer confidence picked up slightly in May, estimates on Friday showed, though it remains markedly below the long-term average.

According to the European Commission, meanwhile, consumer confidence in the single currency area improved to minus 21.1 points May, from minus 22 in April. May's flash figure was above FXStreet-cited forecasts of a smaller improvement to minus 21.5 points.

The figure remains some way off the long-term average for the wider European Union of around minus 10 points.

The data comes as households across the eurozone face robust inflationary pressures. The European Central Bank has so far left interest rates at historic lows, though it is now expected to lift rates this summer.

Joachim Nagel, president of Germany's Deutsche Bundesbank said the ECB will soon enact its first rate hike for more than a decade, CNBC reported on Friday.

M&A action provided some impetus to stock prices in London.

Gambling software firm Playtech closed among the best mid-cap performers. It said talks with suitor TTB Partners are continuing. The Hong Kong-based finance company expressed an interest in making an all-cash offer for Playtech back in February, after shareholders in the FTSE 250 constituent voted down an offer from Australia's Aristocrat Leisure.

TTB must announce its firm intention to make on offer for the company by June 17.

Playtech shares rose 6.7%.

THG jumped 25% to 145.00 pence. Late Thursday, it confirmed it rejected a third non-binding takeover proposal from Belerion Capital Group and King Street Capital Management, on the grounds that the offer ‘significantly undervalues’ the company.

The Belerion consortium made a proposal of 170p per share for the online beauty products seller, and has until 1700 BST on June 16 to make a firm offer or pull out. Belerion is an e-commerce and technology focused private equity firm, while King Street Capital is an alternative asset manager.

Also on Thursday, Luxembourg-based venture capital firm Candy Ventures owned by Nick Candy said that it is in ‘very early stages’ of considering a possible offer for THG.

M&C surged 30% to 214.66p. Fellow AIM listing Next Fifteen has waded into the ad agency's takeover saga, making a £310.1 million cash-and-shares offer, which has been backed.

The company is offering 0.1637 of a Next Fifteen share and 40 pence in cash for each M&C Saatchi share, valuing M&C Saatchi shares at 247.2p each.

M&C Saatchi was already the target of a hostile takeover attempt by AdvancedAdvT. Under AdvancedAdvT's most recent offer, shareholders in M&C Saatchi will for each share held either receive 2.043 new shares in AdvancedAdvT and 40 pence in cash, or receive 2.530 new AdvancedAdvT shares.

At the time the offer was made, this valued each share of M&C Saatchi at 207.5 pence and £253.6 million in total. However, M&C Saatchi rejected the offer, calling it ‘derisory’. It has recommended Next Fifteen's offer, however.

Next Fifteen shares closed 2.2% higher.

London's M&A action on Friday typifies a week which has seen a large amount of dealmaking. Vodafone shares climbed on Monday after it welcomed UAE-based Emirates Telecom as a new shareholders. Emirates Telecom snapped up just shy of a 10% stake but has no intention of mounting a takeover offer.

ContourGlobal backed a £1.75 billion takeover offer from Kohlberg Kravis Roberts & Co, AssetCo's buy of River & Mercantile received approval and more recently, Homeserve agreed to be taken over by Brookfield Infrastructure Partners for £4 billion.

Markets in New York were lower at the time of the European equities close. The Dow Jones Industrial Average was 0.7% lower, the S&P 500 down 0.8% and the Nasdaq Composite falling 0.9%.

Ross Stores became the latest US retailer to report poor quarterly results. The stock was down 22% at the time of the European close.

Overnight, posted a first quarter sales fall, heaping more misery on the US retail sector, after a string of poorly-received results this week.

In the first quarter ended April 30, the company's sales fell 4.1% year-on-year to $4.33 billion from $4.52 billion. Its pretax profit declined 28% to $449.5 million from $623.6 million a year earlier.

Gold was priced at $1,846.32 an ounce on Friday in London, down from $1,848.44 late on Thursday. Brent oil was trading at $112.40 a barrel, firming on $110.05.

Monday's economic calendar has the Rightmove UK house price index overnight, before the latest Ifo German business climate index at 0900 BST.

The local corporate calendar has annual results from software company Kainos Group. DIY retailer Kingfisher, the owner of B&Q, posts first quarter numbers.

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