PR: US opens higher as Buffett helps himself to Castparts
At US$32bn (USS37bn including debt) the transaction sets a new record for the Oracle of Omaha.
US Open
Wall Street made a positive beginning to the week’s trading as investors followed cautious optimism from benchmarks in Europa and Asia.
One reason is the anticipation that China will seek fresh stimulus, following the release of more poor economic data.
In the US, attentions will be on Stanley Fisher and Dennis Lockhart, voting members at the Federal Reserve, as their respective speeches will be picked apart for monetary policy clues.
The Dow Jones Average was up around 150 points, 0.9%, at 17,529 while the S&P 500 and Nasdaq are also made similar gains to 2,095 and 5,086 respectively.
Precision Castparts is the standout feature today following the news that Warren Buffett’s Berkshire Hathaway (NYSE:BRK) is buying the industrial manufacturing group.
It is far from the first deal, it is unlikely to be the last, but, it could be the biggest so far.
At US$32bn (USS37bn including debt) the transaction sets a new record for the Oracle of Omaha.
Berkshire Hathaway was already a 3% shareholder in the Oregon based airplane parts maker, which shot up around 20% in early dealings to US$231 per share.
The spotlight was also on Chinese e-commerce giant Alibaba (NYSE:BABA) which has performed something of a strategic handbrake-turn with its latest deal.
It is going all ‘bricks and mortar’ with the acquisition of a 19.9% stake in Suning for around US$4.6bn. Shares climbed more than 1% to US$79.
According to experts, the rationale lies in the shop chain’s logistical network, which will allow Alibaba to gets goods to its own customers more quickly. Having an offline as well as online presence is also a growing trend in China, analysts add.
Elsewhere among the tech stocks there’s likely to be some switching and changing as investors adjust to Netflix and Amazon’s apparent outperformance compared with Apple, Twitter and Facebook which have all seen some post-earnings pressure.
Of the tech stocks, Twitter made the biggest rebound after it was upgraded by Monness, Crespi, Hardy & Co to ‘buy’ from ‘neutral’. Shares jumped 3.5% to US$28.
Lunchtime Report
London’s main index struggled to bounce back from earl losses as mining and oil stocks weighed.
“Despite the rare appearance of a bit of green in the commodity sector, Brent Crude is still holding firm at 6 month lows whilst copper isn’t too far away from last week’s 6 year nadir” Connor Campbell at Spreadex said.
This spelled more bad news for Footsie’s oil and mining stocks, with BP (LON:BP) down 1.2% to 381p, Shell (LON:RDSB) 1.6% lower to 1,874p and Anglo American (LON:AAL) down 1.85% to 785p, leading the fallers.
In Greece, Athens officials are quite hopeful about achieving the third bailout, but UK traders don’t seem share their optimistic outlook.
“The Greece government seem to think getting its hands on the money will be a doddle, but some creditors are not so willing to hand over the cash just like that” broker IG said.
According to reports, German government spokesperson Steffen Seibert suggested that Merkel and co. might not be the biggest fans of the pace of the deal’s progress, favouring thoroughness over hast.
Reports of an impending, and successful, end to the third bailout negotiations appear to have helped the DAX and CAC maintain their mild growth, up 43 points to 11,534 and 21 points to 5,176 respectively, but did not help the FTSE 100, which lost almost 50 points to 6,670.
In M&A news on the index, UK pharma giant Shire (LON:SHP) continues to be shunned by takeover target Baxalta as it goes on the charm offensive with shareholders.
Shire has reportedly been holding ‘encouraging’ talks with Baxalta’s shareholders over the last couple of days to try and persuade them to the benefits of a deal. Shares were 1% higher to 5,353p.
Away from the FTSE 100, Vehicle insurance provider esure (LON:ESUR) blamed a hike in the number of UK road accidents for its first half profit fall and interim dividend cut.
The Sheila's Wheels insurance and GoCompare.com comparison site owner, said its “combined operating ratio”, which measures claims and expenses as a percentage of premiums, rose to 95.8% from 91% in the six months previous. Shares dropped 10.9% to 236p.
Conversely, Vedanta Resources (LON:VED) is likely to resume operations at its iron-ore mining operations in Goa today after receiving the necessary approvals. Shares jumped almost 10% to 490p.
In the world of small caps, shares in Fitbug (LON:FITB), a UK pioneer in wearable technology, fell almost 30% to 2.85p after it unveiled a £1.67mln fundraise and the restructuring of its debts.
The new stock was issued at 2.5p a share, which compares to a closing price on Friday of 4p.
Meanwhile, a multi-national company that was set to back Independent Oil & Gas (LON:IOG) has got cold feet over its proposed investment because of falling oil prices.
The announcement was made after the market closed on Friday and shares dropped almost 45% to just under 6.5p.
Elsewhere, Amur Minerals (LON:AMC) signed a collaborative agreement with the Russian government's Far East and Baikal Region Development Fund to help attract investment for its Kun-Manie nickel development. Shares climbed 10% to 18p.
Timber and biomass supply specialist Active Energy (LON:AEG) has named a legal and corporate finance expert as a new non-exec director. Investors cheered the news, sending shares 10% higher to 6.5%.
Most followed
British gin is being served in embassies across the world in attempt to drum up business for the spirit, The Daily Telegraph reports.
I am not sure how well that move will go down with the Scottish National Party, but the aim is, apparently, for gin exports to one day match the £4bn export market for Scotch whisky.
I’ll drink to that … so long as the drink is not gin.
I’ll also drink to the news that three new breweries are opening in Britain every week, though the rate at which pubs are shutting down they will soon be dealing exclusively with the take-home trade.
Marcus Jones, Britain’s Community pubs minister – yes, there really is one, and I think his job is to save the pub not oversee the rapid demise of the British boozer – said the news shows “Britain is back on the map as a global brewing powerhouse”.
“We gave the world the IPA [India Pale Ale] and the Great British pint has been revered ever since. This brewing boom means we are not only creating some of the world's best beer that we all enjoy in our local pub and at home but also thousands of jobs and a multibillion-pound boost to the economy,” said Jones.
Meanwhile, the Campaign for Real Ale (CAMRA) reported last month that 29 pubs close down each week in Britain.
The pressure group, which is holding its Great British Beer Festival at Olympia this week, is running a campaign to encourage its members to nominate their local pub as an asset of community value (ACV), which will make it harder for pubs to be closed and converted into residential properties.
Back to the subject of Scotland, where the government is to formally ban the production of genetically modified (GM) crops in the country, possibly in an attempt to get noted celebrity opponent of GM crops Gwyneth Paltrow to move to the country.
There is already a moratorium on planting GM crops north of the border, but the Scottish government’s plans to implement a formal ban set it apart from the Conservative government in Westminster, which has indicated it is in favour of the commercial cultivation of GM crops in England.
In other agricultural news, two cows have been herded – if that’s the right word for a couple of cows – through the aisles of a branch of Asda in protest at the low price
Insurer esure (LON:ESUR) has warned that motorists will pay the price for a rise in claims.
Many of us were of the opinion that motorists always paid the price for a rise in claims, but it is nice of the company, which owns the Gocompare.com price comparison web site, to warn us of an impending rise in premiums.
Moving from the road to the air, fastjet (LON:FJET) has revealed strong passenger statistics for July, partly as a result of the addition of flights to Malawi to its network.
The low-cost African carrier said its operations in Tanzania transported 71,763 passengers in July, surpassing the previous monthly record set in April.
The load factor – a measure of how full its airplanes were – was 72%.
London Open
London’s blue chip stocks sunk this morning as a new Greek deadline and disappointing Chinese data weighed on the FTSE 100.
Analysts believe Beijing may have to ramp up its stimulus programme after world’s second-largest economy revealed disappointing producer prices, consumer inflation and trade numbers.
China saw its biggest exports fall for 4 months, with lower than excepted import figures joining the fray, but the prospect of monetary easing actually led to a 3.5% rise in the Shanghai Composite Index.
Meanwhile, Greece is claiming that negotiations on a new debt deal could successfully end as early as tomorrow morning, leaving the Greek saga firmly on track for a somewhat happy ending.
It needs to complete a deal before the next payment to the European Central Bank is due on August 20.
In the UK, Footsie dropped 63 points to 6,655 with miners languishing at the bottom of the index.
Antofagasta (LON:ANTO) was near the bottom after Liberum repeated a 'sell' stance on the mining share.
It does not expect to see a "sustained" recovery in the copper price until the inflection point of supply and demand in 2017 as China's economy shifts over the next two years to services rather than investment. Shares eased 2.5% to 574p.
Away from the index, vehicle insurance provider esure (LON:ESUR) was the biggest faller in the midcap space, as it cut its interim dividend as profits dropped.
The Sheila's Wheels insurance GoCompare.com price comparison site owner, said pre-tax profit fell 21% to £46.5mln in the six months to the end of June.
In small caps, Nostrum Oil & Gas, has made the latest approach for Tethys Petroleum (LON:TPL, TSE:TPL), a company it has been after for some time.
The offer is for C$0.2185 per share and Nostrum has also agreed to provide an unsecured US$5mln loan facility to Tethys. Shares in Tethys jumped 8.5% to 8p.
Meanwhile, North Sea oil explorer Independent Oil & Gas (LON:IOG) has been left in the lurch by an unnamed big cap backer, which has pulled out of a planned investment in the firm as a result of falling oil prices. Shares plummeted 56% to 5.1p.
