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Vodafone weighs as deal-making can't dispel market angst
Two major corporate deals failed to entice investors into shares on Tuesday morning, with European stocks constrained by uncertainty over military action against Syria and angst ahead of major economic reports that could impact on the fate of US stimulus.
Vodafone (VOD.L) shares weighed on the UK’s FTSE 100 benchmark index, down 3.5% to 205p as investors sold the shares that have gained 11% over the past five days. That’s despite the telecoms company announcing the third largest corporate deal in history, with Verizon Communications to pay $130 billion (£84 billion) for Vodafone’s 45% stake in Verizon Wireless. Of that $84 billion will be dished out to investors in cash and shares.
In another big deal that might normally boost market spirits, Microsoft has agreed to buy Nokia’s mobile phone business and license its patents for €5.4 billion.
But rumours of an imminent US strike on Syria, subsequently attributed to missile tests, put paid to any share price gains in Europe. They also ensured more oil price gains, with Brent crude futures back above $115 per barrel.
Despite support from resources companies including Tullow (TLW.L), Rio Tinto (RIO.L) and BHP Billiton (BLT.L), the FTSE 100 was stagnant at 6,500, having rallied 93 points yesterday. Europe’s Stoxx 50 was also unchanged.
A string of analyst downgrades weighed on security firm G4S (GFS.L) . The shares shed 0.8% to 258p after Credit Suisse became the latest investment bank to cut its earnings forecast.
Expectations for G4S have been reduced by as much as 22% for the next two years and Credit Suisse said it no longer expected its shares to outperform given the challenges in the UK government market. It now ranks the stock as 'neutral'.
On currency markets the British pound crept higher, to $1.5556, after yet more upbeat economic news. Survey data (PMI) showed British construction activity grew at its fastest in nearly six years in August to 59.1 (over 50 signifies expansion).
Additionally, the OECD, a forecasting organization representing a group of developed countries, raised its expectations for 2013 UK GDP to 1.5% from its previous guess of 0.8%.G4S PLC (GFS.L)G4S PLC (GFS.L)
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on Dec 06, 2013 at 14:28