- Canal+ makes a disappointing debut on the London Stock Exchange.
- Cautious trading ahead of Fed interest rates decision due this week.
- Entain shares fall by around 5% after its accused of money laundering failings.
- Deal to sell Royal Mail signed sealed and delivered before Christmas following government approval of takeover.
- The huge appeal of weight loss drugs shows up in performance of Polar Capital Global Healthcare Trust.
- Brent crude drops slightly in prices to trade around $73 a barrel.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’It’s been a lacklustre Monday so far in London, with overall trading muted and a disappointing debut for Canal+. It was not a blockbuster open for the film production company which saw shares fall by more than 13%. However, IPOs are often hit with volatility during the first few hours, days and even weeks of trading, and the choice of London as a destination for the spin off company is still a boost for the City, especially given that the decision was made due to London’s appeal among international investors. Its former parent company Vivendi is also spreading cheer in Paris and Amsterdam where it’s spun off Louis Hachette and Havas which both rose as trading kicked off. The triple listing is a bonus for the European bourses, given New York gains so much attention. For London the listing of Canal+ is a bright spot in what’s been a slow year and marks the biggest listing since GSK spun out Haleon in 2022. In terms of an IPO pipeline, 2025 does looks a little more encouraging. Interest rate cuts, with more eyed on the horizon will be helping with confidence, The stability the new government has brought is also helping, after years of political uncertainty in the UK. But the US market, given its performance over the past year is still a tough act to follow.
Betting giant Entain is the biggest faller on the FTSE 100 in early trade with shares down by more around 5%. It’s been stung by a civil penalty proceeding being brought against it by AUSTRAC, the Australian regulator with a focus on stopping money laundering and terrorist financing. It’s accused of systemic failures” in its approach to regulatory compliance, and not having the right procedures in place to spot and block criminals from using its sites. It’s unclear what fines will arise from the lawsuits but Entain has said the costs could be ‘material’ and the uncertainty has unsettled investors.
Overall, there is treading water going on at the start of a week which will be dominated by interest rate decisions, with speculation swirling about what 2025 will hold for central bank policy. The Federal Reserve is expected to cut interest rates again, but a note of caution is expected to creep into comments from the chair Jerome Powell, with a more of a gradual reduction of rates next year, given the resilience of the economy and with some price rises remaining persistent. The Bank of England is widely expected to keep rates on hold, especially given that inflation data due out on Wednesday is set to show that the headline rate for November jumped again from 2.3% to 2.6% further away from target. A weakening UK economy may make some policymakers more reticent about sitting on their hands, but February still looks likely to be the date of the next rate reduction.
The deal to sell Royal Mail has been sealed and delivered before Christmas. Czech billionaire Daniel Kretinsky is getting an early present, in the form of approval by the government for his company’s takeover of Royal Mail’s parent company, IDS. The £3.6 billion deal will see the service move into foreign ownership after being set up more than 500 years ago, by Henry VIII. It’s a historic moment, given Royal Mail’s long record of service to the UK public. Given how crucial the service is for society, there are significant legally binding commitments attached to this deal. UK government is set to retain a ‘golden share’ requiring it to approve further changes to ownership or its UK HQ. Mr Kretinksy had already promised to maintain the Universal Service Obligation for one price, whatever the distance. Union demands for no compulsory redundancies, a workers group to give employees a greater voice in management and a 10% share of any dividends paid to Mr Kretinksy also appear to have been met. It’s been a tough few years for Royal Mail, as it grapples with declining letter volumes and more competition for its parcels business. But Mr Kretinsky clearly sees opportunity ahead in the underperforming Royal Mail business, where there have been early signs of improvement, but profits remain propped up by the international business, GLS. The underlying business is still under pressure, and it’s just been fined £10.5 million for not meeting its obligations for delivering second class letters. It does seem likely that there will be changes to the universal service obligation with a review under way. Maintaining an infrastructure built for 20bn letters when you’re now only delivering 7 billion hardly makes for an efficient operation. IDS wants to be allowed to right-size infrastructure to reflect the modern-day reality, and conversations are underway with the regulator. But any reforms are likely to be a long time coming.
The huge appeal of weight loss drugs is showing up in the performance of Polar Capital Global Healthcare Trust. Biotech and pharma have helped the Trust outperform its benchmark, the MSCL AWI Healthcare Index over the past 12 months to September. One of the portfolio picks – the Danish Group Zealand – has been a highlight given its trials for a new weight loss drug to rival the likes of Wegovy. Shares in Zealand had gained 155% over the 12 months to September, although they have slipped a little since, given the hurdles it still needs to overcome to take the drug to market. However, it’s clear that there is huge appetite for any developments in this field, given how weight loss drugs have such mass appeal in development markets.
Brent Crude has slipped back a little as drivers of the recent rally ease off and traders switch their attention to the Federal Reserve meeting. However, forecasts of tighter supplies in world markets remain amid tougher sanctions expected on Russia and Iran, while there are hopes that China’s stimulus plan will boost demand in the economy, having a knock-on effect on appetite for energy.”
