Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

AbbVie buys Shire; FTSE recovers after Ukraine plane crash

AbbVie buys Shire; FTSE recovers after Ukraine plane crash

Shares in Shire (SHP) have jumped after the pharmaceutical group's protracted takeover by US rival AbbVie (ABBV.K) was finally agreed, with the companies announcing a £53.19-per share deal.

Shire jumped 145p, or 3.1%, to £49.50 on the news. AbbVie's offer was the fifth it had made for the Dublin-based company, with the previous four all having been rejected. Shire said on Monday it would recommend the fifth bid to shareholders.

The news helped the FTSE 100 move into positive territory, after losses in the morning's trading amid bearishness from investors over the geopolitical impact of the shooting down of a passenger plane in the Ukraine.

The FTSE 100 was up 11 points, or 0.2%, at 6,748 points.

The Accumulator: Russia in the red

A week that started well for stock markets is ending in uncertainty as investors await the next developments from the plane crash in the Ukraine.

Our exclusive Accumulator table shows global markets, and the FTSE 100, were up – marginally – in the week to yesterday. But the headline figures hide the optimism among investors at the beginning of the week, quickly replaced by bearishness as first US sanctions against Russia, then the shooting down of a passenger plane in the Ukraine, hit market sentiment.

Investors had begun the week in a good mood, with positive earnings reports prompting jumps in US markets, and the FTSE 100 gaining ground as pharmaceutical company Shire rose after saying it would recommend a bid from US rival AbbVie to shareholders. Better-than-expected growth in China added to the optimism.

But the latest batch of US sanctions against Russia hit markets hard. Russia’s Micex index fell 2.4% on the news, with oil and gas groups Novatek (NVTK.MM) and Rosneft (ROS.MM), specifically targeted by the measures, dropping 5.5% and 4.3% respectively yesterday.

The MSCI Russia index is down 4.7% over the week to Thursday, bringing an abrupt end to a months-long relief rally for the country’s stock market, as concerns over Ukraine tensions had begun to ease.

And that figure doesn’t take into accounts the further falls today, as investors have weighed up the impact of the plane crash in the Ukraine.

The oil price is also worth noting. Oil was up 0.1% in the week to Thursday, and notched up further gains today, meaning it is likely to end the week up for the first time in a month. Concerns over the impact to supplies caused by fighting in Iraq had been easing, leading the oil price to fall from the $115 per barrel level it had hit in June. But the Russia sanctions, Ukraine plane crash and the advance of Israeli troops into Gaza have led to a jump in the price from below $106 on Wednesday to over $108.

FTSE falls further on Ukraine plane crash fallout

(10:02) The FTSE 100 has continued its march downwards as bearish sentiment prevailed after a passenger plane was shot down over eastern Ukraine, fuelling tensions between Russia and the West.

The UK blue-chip index shed 20 points, or 0.3%, to 6,718 points in uneasy trading as investors dwelt on the possible fallout from the Ukraine plane crash. The US has criticised Russian arming of rebels in Ukraine after the shooting down of the plane by a suspected Russian-made missile, resulting in the death of all 298 people on board.

The Russian stock market has continued to fall, albeit not as drastically as yesterday, when the US announcement of sanctions against specific Russian firms took its toll. The Micex was down 1.2% in the morning's trading.

Jasper Lawler, market analyst at CMC Markets UK, said markets would remain bearish amid the uncertainty over the crash.

'Unless somebody takes credit, it could take a number of days to determine who's to blame and until then markets could be faced with risk-off sentiment,' he said.

House builders were the biggest fallers on the FTSE 100, with Barratt Developments (BDEV) down 3.2% at 352p and Persimmon (PSN) falling 1.9% to £12.43.

Royal Bank of Scotland (RBS) was also amongst the biggest fallers, dropping 6.9p, or 2.1% to 316.8p on news of a Competition and Markets Authority (CMA) investigation into services for small businesses and personal current accounts.

The CMA said there was a lack of competition among banks, and it could force a break-up of banks deemed too dominant, requiring them to sell branches. RBS and Lloyds Banking Group (LLOY) are most at risk from the CMA investigation as they are the biggest banks for current accounts and small businesses. Lloyds fell 0.4% to 72.9p on the news.

Among the few risers on the FTSE 100 was British Airways owner International Consolidated Airlines Group (ICAG), as it pared some of the losses made in yesterday's trading, when airlines stocks were hit following the events in the Ukraine.

Gold miner Randgold Resources (RRS) rose 25p, or 0.5%, to £51.15, helped by a surging gold price prompted by geopolitical uncertainty. The gold price has dipped slightly after jumping 1.5% overnight, but is likely to be continued to be supported by risk aversion among investors. It is currently trading at $1,309.30. The oil price has meanwhile climbed above $108 per barrel.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Your Business: Cover Star Club

Profile: The godfather of fund-of-hedge-funds on the sector's future

Profile: The godfather of fund-of-hedge-funds on the sector's future

When Dixon Boardman started 26 years ago ‘there were 600 hedge funds and only 100 had $100 million – it was not even a cottage industry,’

Wealth Manager on Twitter