- FTSE ticks up at the open
- Berkeley Group trading in line but transaction levels struggle
- Europe shrugs off French power void
- American indices retreat from record highs
- Non-farm payrolls in focus – expected to increase by 220,000
- More political instability – this time its South Korea
- Brent Crude steady at $72 despite OPEC+ delay to output hike
- Aviva and Direct Line agree deal terms
Derren Nathan, head of equity research, Hargreaves Lansdown:
“The FTSE 100 has pulled back this morning after notching up a small gain yesterday. The main corporate news of the day is a preliminary agreement on an offer by insurer Aviva for Direct Line Group following the rejection of an earlier proposal. More on that below.
Housebuilder Berkeley Group has released its half year numbers. An increase in completions drove up both sales and operating profits although slower activity within its joint ventures held back the bottom line. Volumes are trending around a third lower than last year, and while full year pre-tax guidance of £525mn remains in-tact, it does imply a second half slowdown. The group’s broadly supportive of the Government’s efforts to boost newbuild activity but there’s still a lot of work to do. As a case in point housing starts in London fell to just 8,450 in the twelve months to 30 June 2024, highlighting the huge gap to be closed if the 80,000 annual target for the capital is to be met.
European stocks are close to a one-month high as traders assess rapidly unfolding political events in France. There’s some hope that President Emmanuel Macron will serve out his term and that a budget can be passed in the coming weeks as the EU’s second largest economy looks to tackle its debt crisis. But until President Macron announces a replacement for Prime Minister Michel Barnier, uncertainty is likely to prevail. Finding a candidate who can unify a deeply polarised nation will be no easy task.
US Stocks gave up a little ground but continue to hover near record highs as markets await today’s key US jobs report. After October’s industrial action and hurricanes, nonfarm payrolls are expected to bounce back to the tune of 220,000 new positions with unemployment expected to hold stable at 4.1%. Should the labour market come in even stronger, expectations for a further rate cut by the Fed later this month could be dented.
Asian stocks were mixed overnight. Chinese markets were broadly up ahead of next week’s economic planning meeting as investors hope for further stimulus. But other markets in the region largely tracked Wall Street’s losses with traders closely watching events in South Korea where moves are underway to impeach President Yoon Suk Yeol after a failed attempt to impose martial law. As a major player in the strategically important semiconductor industry developments here could have far reaching implications.
It’s been a bumpy week for oil prices, but Brent Crude has come back down to near where it started the week at below $72 per barrel. A three-month postponement by OPEC+ to planned production hikes hasn’t been enough to allay concerns of oversupply in the market.”
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“Direct Line has finally relented, accepting Aviva’s 275p per share offer after resisting an earlier proposal in recent weeks. The deal, a mix of cash, shares, and a small dividend, delivers a 73% premium to Direct Line’s pre-offer price. Direct Line’s board had been holding out, insisting they could make it on their own. But even they had to admit that Aviva’s proposal is a golden ticket they’d struggle to match independently. Confidence in their solo strategy aside, this offer was just too good to pass up.
Let’s not sugarcoat it: Direct Line has hit some serious potholes lately. Market share has been sliding, underwriting hasn’t exactly been flawless, and regulators have been knocking on the door. But with a fresh leadership team at the wheel, the company has been working on a bold turnaround plan. For Aviva, the price is pushing the limit of good value but snapping up Direct Line could be a strategic jackpot. It cements their place as a heavyweight in the UK home and motor insurance markets and brings fresh opportunities to steer Direct Line’s transformation, while squeezing out efficiency gains from their combined scale.”
