Weekly review
The FTSE 100 ended the week 21.86 points higher, closing at 7,269.92 on Friday.
Equity view
Healthcare facilities investor Primary Health Properties has agreed to acquire a medical and office facility in the North East of England for a total of £10.0m. Primary Health stated the acquisition, expected to complete in the second quarter of 2022 following a comprehensive refurbishment of the premises, will increase its portfolio to a total of 521 assets, with a contracted rent roll of over £140.0m.
UK chemicals group Johnson Matthey has sold its health business to Altaris Capital Partners for £325m, the company said on Friday. It will keep around 30% of the division and said it expects to realise “significant additional future value”. The sale is expected to result in an accounting loss of around £200m.
Fund administrator Sanne said on Friday that it expects to report a jump in full-year new business wins amid a recovery in its end markets. In an update for the year to the end of December 2021, the company said it has continued to see a "healthy recovery" in its end markets despite the ongoing coronavirus pandemic.
British multinational bank HSBC has been fined £63.94m by the Financial Conduct Authority for failings in its anti-money laundering processes. Although the watchdog acknowledged that HSBC used automated processes to monitor transactions as part of an effort to identify possible financial crime, the FCA said three key parts of the bank's transaction monitoring systems displayed serious weaknesses over a period of eight years from March 2010 to March 2018.
UK fund manager Schroders on Thursday confirmed it was in talks with renewable energy investor Greencoat Capital about taking a “significant” stake in the company. “There is no certainty these talks will lead to any final agreement,” Schroders said in a statement, adding that it continues to “evaluate potential acquisition opportunities in line with its strategy to build a comprehensive private assets platform and enhance its leadership position in sustainability”.
Aviva has increased its share buyback programme to as much as £1bn and extended the time period for the repurchases to be made. The FTSE 100 insurer announced a £750m buyback in August due to end on 17 February to return cash from disposals to shareholders. It has extended the deadline to 31 March and increased the maximum number of shares to 392 million from 300 million.
Commercial property investor LXI REIT has acquired a 16-acre long-let property in Middlesbrough valued at £58.9m from Knight Frank. LXI REIT said on Thursday that it would satisfy the acquisition of the asset, currently let to Sainsbury's, via the issue of 35.71m new ordinary shares at an issue price of 145.0p each, a 9.4% premium to the company's ex-dividend EPRA NTA on 30 September, and a further £7.0m in cash.
Ascential has sold its MediaLink division in a $125m cash deal, the FTSE 250 firm announced on Thursday. MediaLink, a US-based consultancy to the media and marketing sectors, has been sold to United Talent Agency, a US entertainment and sports group. Last year MediaLink generated revenues of $44.2m and adjusted earnings of $10.1m, and its gross assets as at 30 June 2021 were $80.6m.
Online gambling group 888 Holdings on Wednesday said it had sold its bingo businesses to the Broadway Gaming group for $50m on a cash-free debt-free basis, including a potential earnout of up to $4m. 888 agreed to provide Broadway certain transitional services for a period of up to 12 months from completion, in accordance with an agreed fee schedule.
Sales and marketing firm DCC has acquired US sales and distribution business Almo for approximately $610.0m, its largest acquisition to date. DCC, which acquired Almo via its DCC Technology unit, said on Wednesday that the acquisition "materially expands" its "successful and growing" North American business, more than doubling its size.
A Covid-19 vaccine booster being developed by GlaxoSmithKline and Sanofi has been shown to be effective across all age groups tested, according to data released by the UK drugs firm on Wednesday. Rather than develop its own vaccine, GSK has instead focused on launching an adjuvant to boost the efficacy of other vaccines, including one developed by French peer Sanofi, and on Wednesday the firm said a single booster dose of the drug candidate delivered "consistently strong immune responses".
Power generation firm Drax said on Wednesday that it had appointed Worley Europe to begin a front-end engineering design (FEED) study for its bioenergy with carbon capture and storage (BECCS) project. Drax stated the programme of works would provide it with detailed design information and costings, which alongside confirmation of a financial model for BECCS and planning approval, would allow the FTSE 250-listed company to make a final investment decision in 2024, meaning its first unit would commence operation in 2027 and the second by 2030.
Pest control services provider Rentokil Initial has agreed to acquire Terminex in a stock and cash deal that values the business at roughly $7.6bn. Rentokil said on Tuesday that it will issue to Terminix shareholders approximately 643.29m new Rentokil Initial shares and around US$1.3bn in cash in order to satisfy the transaction, implying a value of $55.0 per share of Terminix common stock - a premium of 47.0% over the shares' closing price on 13 December.
Chemring increased its final dividend as the company reported an 8% increase in annual underlying profit despite a weakening of the US dollar. Underlying pre tax profit for the year to the end of October rose to £55.9m from £51.7m a year earlier as revenue dropped 2% to £393.3m.
French telecoms giant Altice said it had increased its stake in Britain’s BT Group to 18% and reiterated that it had no plans to stage a takeover under UK rules. Altice, owned by Patrick Drahi, bought a further 585.5m BT shares after building a 12% stake in June at a cost of £2.2bn – making it BT’s biggest shareholder.
Travis Perkins said on Tuesday that it was extending its share buyback programme by £70m. The builders’ merchant will extend its initial £100m share buyback programme and this will also be returned through a buyback of Travis Perkins ordinary shares.
Homewares retailer Dunelm revealed on Monday that chief financial officer Laura Carr will leave the group in June 2022 to take up a new position elsewhere. Dunelm stated a search for Carr's successor was being initiated.
Infrastructure investment company International Public Partnerships has committed to invest AUD $17.0m (£9.19m) in the Flinders University Health and Medical Research Building in South Australia. International PPL, which was awarded the project via a subsidiary and as part of a consortium that includes Amber Infrastructure and Tetris Capital, will enter into a 25-year lease arrangement with the University, with the facility reverting to the University at the expiry of the lease term.
Home repairs and improvement business HomeServe, said it had sold policies shared with Piedmont Natural Gas Company to the same affinity partner for around $22m. The deal between Homeserve and US-based Piedmont was due to expire next April. Homeserve decided to sell the policy book rather than continue managing it in a run-down to the end of the arrangement.
Retailer Frasers Group has launched a fresh £70m share buyback programme, it confirmed on Monday. The former Sports Direct, which is run and controlled by Mike Ashley, said the programme would start on Monday and run until April 2022. The maximum number of shares that may be purchased under the scheme is 10m.
Economic news
Britons splashed out at the start of December but the new coronavirus variant, Omicron, may have led some consumers to shift their spending online, the results of a closely-followed survey revealed. According to BDO's High Street Sales Tracker, total like-for-like retail sales jumped by 10.4% over the week ending on 12 December when compared with the same seven-day stretch one year before.
The Bank of England’s chief economist has confirmed that further rate rises would be likely should inflation persist. On Thursday, the BoE surprised markets when it increased interest rates to 0.25% from 0.1%, on the back of surging inflation. The current rate of inflation in the UK is 5.1%, the highest level since September 2011 and well above the BoE’s 2% target.
The CMA has provisionally found Cellnex’s proposed purchase of CK Hutchison’s telecoms towers would harm competition. It said the proposed deal, in which Cellnex has agreed to buy CK Hutchison’s UK passive infrastructure assets, formed part of a broader set of transactions worth £8.6bn involving the sale of CK Hutchison’s assets in a number of European countries.
Halifax is predicting flatter house price growth in 2022 following the bumper gains seen this year, but warned there remained considerable uncertainty around its forecast. The mortgage lender said the housing market had continued to "defy expectations" in 2021, with property prices rising by 8.2% despite the pandemic.
Retail sales unexpectedly jumped in November, official data showed on Friday, boosted by strong demand for clothing and a bumper Black Friday. The Office for National Statistics said retail sales volumes rose by 1.4% in November, following growth of 1.1% in October, which was revised up from 0.8%. The November increase was above consensus, with most analysts looking for growth closer to 0.8%.
Consumer confidence has eased, a closely-watched survey published on Friday showed, hit by the emergence of the Omicron variant and the rising cost of living. The GfK consumer confidence index eased one point to -15 in December. Within that, expectations for the general economic situation over the coming year also fell one point, to -24, while the major purchase index lost three points to -6.
Chancellor Rishi Sunak will hold talks on Thursday with representatives of the hospitality and business leaders, raising hopes of government support for sectors hit by the Omicron variant. Sunak will speak to business leaders by video link from California where he is on a four-day official trip, the Financial Times reported. Unions and the Labour opposition have accused him of going missing with pubs, restaurants and other businesses facing cancellations at what should be their busiest trading time.
The Bank of England voted for a surprise increase in interest rates to 0.25% on Thursday to stop inflation taking hold with prices rising faster than expected. At its last meeting of 2021 the BoE's monetary policy committee voted 8-1 for rates to rise from their record low of 0.1%. External member Silvana Tenreyro voted to keep rates unchanged. The MPC voted unanimously to stick to its targets for buying bonds.
UK economic activity slowed sharply in December, research showed on Thursday, hit by tighter pandemic restrictions and growing uncertainty over the spread of Omicron. The flash IHS Markit CIPS UK composite output index for December plunged to a 10-month low, coming at 53.2 against 57.6 in November. It was also well below consensus expectations of 56.3.
Deutsche Bank said on Wednesday that it now expects headline consumer price inflation to peak above 6% in April next year, marking the highest annual rate of inflation since the Bank of England's independence in 1997. The bank reviewed its forecast after data released earlier by the Office for National Statistics showed that annual inflation surged to 5.1% in November from 4.2% the month before. This was above consensus expectations of 4.8% and the Bank of England’s forecast for 4.5% and marked the highest annual rate since September 2011.
International events
Eurozone inflation surged to its highest rate on record in November, official data confirmed on Friday, as energy costs surged. According to Eurostat, the European Union’s statistics office, the annual inflation rate in the Eurozone was in line with consensus and its first estimate at 4.9%, up from 4.1% in October and -0.3% in November 2020. In the wider EU, the annual rate was 5.2% compared to 4.4% in October and 0.2% a year previously.
European Union new passenger car registrations fell for the fifth consecutive month in November, according to industry data released on Friday, with the number sliding 20.5% year-on-year to 713,346 units. The European Automobile Manufacturers’ Association (ACEA) said that in volume terms, the result marked the lowest November total on record since 1993.
German business sentiment deteriorated in December amid worries about coronavirus, according to a survey released on Friday by the Ifo Institute. The business climate index fell to 94.7 from 96.6 in November, missing expectations for a reading of 95.3.
The Bank of Japan on Friday said it would wind back emergency Covid pandemic-funding but extended financial relief for small firms. It joins other central banks in scaling back purchases of commercial paper and corporate bonds, but at a slower pace as the Omicron variant of the virus spreads rapidly and threatens economic recovery.
Manufacturing activity in the US mid-Atlantic region slowed sharply at the end of 2021, even as supply chain pressures eased. The Federal Reserve Bank of Philadelphia's factory sector index slumped from a reading of 39.0 for November to 15.4 in December. Economists had forecast a drop to 27.0.
The European Central Bank left interest rates unchanged on Thursday as it said it would phase out its emergency bond-buying programme and increase other stimulus measures. The ECB left is key refinancing and deposit rates at 0.00% and -0.50% respectively, in line with consensus expectations. In addition, the marginal lending facility rate was kept at 0.25%, also in line with consensus.
The eurozone economy slowed in December as the effect of rising coronavirus infection rates on the region's service sector more than offset stronger manufacturing growth, a survey showed. IHS Markit's "flash" eurozone purchasing managers' index fell to a nine-month low of 53.4 from 55.4 a month earlier. A reading of 50 marks the difference between growth and contraction.
The Federal Reserve announced that it would taper its asset purchase programme more quickly, as expected, likely paving the way for interest rate hikes in 2022. However, in his post-meeting press conference, the central bank's chairman, Jerome Powell, demurred from providing an exact timeline for rate increases.
Americans consumed with a little less abandon than expected last month, spending less on automobiles and parts and on electronics. According to the Department of Commerce, in seasonally adjusted terms, US retail sales volumes rose at a month-on-month pace of 0.3% in November to reach $639.83bn.
The cost of goods purchased from overseas increased more quickly than expected during the previous month, chiefly as a result of dearer natural gas prices. According to the Department of Labor, US import prices increased at a month-on-month pace of 0.7%, undershooting economists' forecasts for a rise of 0.8%.