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London open: Nervous investors eye US data, central bank meetings
Equities began the morning slightly lower, with news of a possible multi-billion dollar fine against German lender Deutsche Bank souring sentiment towards the wider financial sector, including on this side of the channel.
As of 0828 BST, the Footsie was trading lower by 14.91 points to 6,714.79.
Another decline in crude oil futures on the back of reports of increased exports from Libya and Nigeria was weighing on markets too.
Acting as a backdrop, investors were keeping an eye on developments at the European Union’s extraordinary post-Brexit summit in Bratislava and a spate of US data due out later in the session.
“They will likely agree to deepen cooperation in security and defense policies and could announce some concrete initiatives. However, we think they are unlikely to come up with proposals for the euro area as positions are different across member states”, economists at Barclays Research told clients in a research note.
In any case, trading was expected to remain restrained ahead of next week’s central bank policy meetings in the States and in Japan.
CMC Markets’ Michael Hewson said: “Equity markets look set to end a choppy week with no clearer idea of where to go to from here than they did at the end of last week. One thing is certain there is increasing anxiety that for all the narrative from central bankers it is increasingly obvious that it is going to be extraordinarily difficult for policymakers globally to improve economic conditions in any significantly meaningful way from where we are now without politicians help.
“This looks some way off and helps explain this week’s weakness in equity and bond markets.
“Having now moved beyond last week’s ECB decision to keep policy unchanged and yesterday’s similar action from the Swiss National Bank and Bank of England attention now turns to next week’s Bank of Japan and US Federal Reserve decisions where there is likely to be a similar outcome.”
There are no major UK data releases due, but in the US, the consumer price index is at 1330 BST, while University of Michigan sentiment is at 1500 BST. At 1900 BST Baker Hughes was due to release its latest weekly tally of US oil rigs in operation.
Consumer price inflation in the States was forecast to rise to a 1.0% year-on-year pace in August from the 0.8% clip observed in the month before, with core prices seen accelerating to a 2.3% year-on-year pace from 2.2% in the month before.
“Domestic price pressures have continued to build as slack in the economy has diminished, providing the main driver of higher inflation. We expect these trends to continue for the rest of 2016,” Barclays said in a note sent to clients on 9 December.
In corporate news, aviation support and aftermarket services company BBA Aviation announced on Friday that, after a number of approaches and a formal review, it has reached agreement with John Menzies on the terms of the sale of commercial aviation services subsidiary ASIG for $202m cash.
The FTSE 250 firm said Menzies is funding the acquisition through raising additional debt and equity and, in addition to customary approvals, the transaction will require the approval of its shareholders.
As a result of that process, the disposal is expected to close around the end of 2016.
Veterinary product manufacturer Dechra Pharmaceuticals agreed to buy the business and assets of Apex Laboratories, which sells branded animal products in Australia and New Zealand, for AUS$55m (£31.3m).
The acquisition, to be finalised on 14 October, will be funded from cash and debt resources, and is expected to be earnings enhancing in the first 12 months.
Phoenix Group has confirmed it is evaluating the possibility of acquiring Abbey Life Assurance following Bloomberg and Reuters reports on Thursday that Deutsche Bank was nearing a deal to sell its UK insurance business to Phoenix.
“As stated at the time of the interim results on 25 August 2016, Phoenix continues to explore further acquisition opportunities in the UK closed life sector. In this context, Phoenix is in advanced discussions with Deutsche Bank in relation to a possible acquisition of Abbey Life,” the FTSE 250 company said on Friday.
It added that there can be no certainty the discussions will lead to a transaction.
Acacia Mining reiterated its full-year production guidance for its Bulyanhulu mine and for the group as a whole, despite setbacks in resuming production at its processing plant at the former site following planned maintenance.
Thanks to the strong performance to date at North Mara, one of its three mines in operation in Tanzania, the outfit still expected its total third quarter output to be in line with that of the first quarter.
