Traders are betting that takeover fever will soon pep up shares in drug-maker Shire .
While it was TUI Travel (LSE: TT.L - news) , up 11.1 at 292½p, that topped the FTSE 100 (FTSE: ^FTSE - news) on news it had received a merger approach from German majority shareholder TUI (Xetra: TUAG00 - news) , Shire (LSE: SHP.L - news) climbed 49p to £20.82 on revival of talk that fellow drug giant AstraZeneca (LSE: AZN.L - news) , down 4½p at £30.37, may have a tilt at the company.
Astra’s new chief executive, Pascal Soriot, is expected to set out his vision for the drug-maker on the release of its full-year results on January 31, and some analysts and investors think mergers and acquisitions could be part of his growth strategy. On Tuesday he caused a stir by scrapping two senior executive roles in his bid to streamline the company’s management structure.
Speculation that Mr Soriot may go on a shopping spree was sparked by his decision to suspend the company’s share buyback programme on his first day in the job, at the start of October. The company had planned for $4.5bn (£2.8bn) of buybacks, but they were halted after just $2.3bn. Spokesmen for AstraZeneca and Shire said they did not comment on market speculation.
Overall, however, Shire and TUI were moving against the wider FTSE 100 , which slid 13.33 points to 6,103,98. The World Bank sparked worries over the global economy by cutting its outlook for world growth this year, while there was disappointing data from China that showed foreign direct investment last year fell for the first time since 2009.
“The jitters continue for a second successive day in London,” said Chris Beauchamp, a market analyst at IG (LSE: IGG.L - news) . “The post-fiscal cliff rally has been looking weaker and weaker of late, as the bulls struggle to lift markets beyond recent highs.”
There has been a sense of caution in the Square Mile this week, following the sharp rally global markets saw at the start of the year in the wake of the compromise deal on the package of spending cuts and tax rises that had threatened to push America’s economy into recession.
Jupiter Fund Management , which reported a 5.1pc increase in assets under management in the three months to December 31, said it remained “cautious on the short-term outlook due to continued market uncertainties”, despite “strong” flows into mutual funds in the second half of 2012. That muted assessment, as well as profit-taking in the wake of a good run from the shares, saw Jupiter dip 8.6 to 316.4p.
Riskier mining shares, sensitive to the prospects for the broader economy, were among the heaviest fallers on the benchmark index.
Anglo American (LSE: AAL.L - news) shed 60p to £19.01 after news of 14,000 jobs cuts at Amplats, its South African platinum unit, sparked off industrial action. The company was hit by a two-month strike at its operations in the country last year.
On the FTSE 250 (FTSE: ^FTMC - news) - 11.15 lower at 12,763.64 - fellow platinum producer Lonmin fell 19.7 to 326.3p, the biggest fall on the mid-cap index. One trader said sentiment towards the company was hurt by new registrations data that showed demand for cars in Europe last year tumbled to the lowest since 1995. Platinum is used in autombiles’ catalytic converters.
Lonmin (LSE: LMI.L - news) shares had shown strong form of late, having risen for five consecutive days before today’s session. They were bolstered on Tuesday by the announcement of the cuts at Amplats, which sent platinum prices higher, and another dealer suggested that investors were profit-taking following those gains.
Vodafone (LSE: VOD.L - news) was also among the blue-chip fallers on worries over deteriorating organic service revenue growth. Deutsche Bank (Xetra: 514000 - news) analyst David Wright cut the broker’s recommendation on the telecoms group to “hold” from “buy”, arguing that earnings growth at Vodafone would only stay positive because of the contribution from its US joint venture and the group’s share buyback programme. Mr Wright also raised concerns over Vodafone’s dividend and said cover for the payout was “increasingly at risk”.
Nomura analyst James Britton, who has a “neutral” rating on the shares, cast his eye over the group’s dividend. He noted that the cost of buying airwaves on which to operate and acquisition needs may lead to a rebasing of the ordinary payout, which would help reduce the company's dependency on dividends from the Verizon Wireless joint venture.
Investors hoping Verizon Communications will buy Vodafone out of their venture may be disappointed too, according to Mr Britton, who reckoned tax issues would make a sale difficult. A full merger with Vodafone was also unlikely at present, he said. Shares in the company shed 3 to 160p.
Banks were under pressure as investors worried that British lenders may need more capital to protect their balance sheets. Lloyds Banking Group (LSE: LLOY.L - news) ended the session 1.36 lower at 53.01p, Royal Bank of Scotland (LSE: RBS.L - news) dipped 4 to 350.1p and Barclays (LSE: BARC.L - news) fell 2 to 293.4p.
Elsewhere on the FTSE 100, United Utilities (LSE: UU.L - news) rose of 14½ to 712p. Dealers said there had been a revival of tired bid speculation in recent days, although they had not heard any during today’s trading session.
Retailers once again drew attention as the stream of Christmas updates continued. French Connection (LSE: FCCN.L - news) was a stand-out and lost 2¼ - 7.6pc - to 27¼p after sounding a profit warning in an unscheduled statement to the market.
Nervousness ahead of electronics group Dixons ’ latest update tomorrow saw the shares fall as much as 1.68 before recovering some ground and closing down just 0.08 at 27.11p.
Experts at Barclays were generally downbeat about the outlook for the British consumer, forecasting that discretionary income would grow by only 2.6pc in cash terms this year, and arguing that “investors are expecting too much from 2013, vis-à-vis a UK consumer recovery”.
Espirito Santo analyst Caroline Gulliver said the news came at an unfortunate time, denting customer confidence as the group seeks to revive trust in its Everyday Value and own label products.