UK equities suffer lacklustre session
Investors lacked conviction on Monday when London-listed banks and a substantial drop in the gold price dragged indices under
The FTSE 100 index shed 11.7 points or 0.2% to close at 5,310.7—maintaining its hold on the 5,300-point resistance level and still up more than 50% since March lows. The FTSE 250 index lost 22.7 points or 0.3% to settle at 9,173.3 on Monday.
London-listed banks featured heavily on the blue-chip casualty list on Monday, led lower by Royal Bank of Scotland and Lloyds Banking Group, down 4.7% and 4.1%, respectively. The two groups, both of which were forced to hand over substantial stakes this year in return for being bailed out by the UK government, were hit by concern Chancellor Alistair Darling will announce a tax on excessive bonus payments when he issues his pre-Budget report this Wednesday.
Other banks were also under the cosh, with Barclays, HSBC and Standard Chartered slipping 1.4%-2.1% lower as investors cashed in profits following Friday’s sector rebound. Standard Chartered was also sold-off on fears Dubai World may opt to sell its Istithmar holding in the Asia-facing bank in order to help renegotiate debt facilities.
A member of the Dubai government said in a weekend television interview that the investment group may sell assets in both the United Arab Emirates and abroad to service its debt.
Elsewhere, with gold falling almost 2%, metal extractors Eurasian Natural Resources fell back 2.1% and Fresnillo slid 1.8%.
Together these banking and mining sector losses helped offset gains from a broad range of industries. Travel operators Thomas Cook and TUI Travel each climbed 1.9% and 1.5%, respectively, as bargain hunters sought out the previous week’s casualties.
Oil and gas producers Cairn Energy, BG Group, BP and Royal Dutch Shell took on 0.3%-0.7% apiece, shrugging off a 1.5% fall in the price of crude.
The main excitement was on the second tier, however, where mid-cap waste management company Shanks confirmed it has received a “highly preliminary” offer priced at 135p per share—a 50% premium compared to Friday’s closing price—from an unnamed private equity firm but said that it considers a price tag of at least 150p per share in cash would deliver appropriate value to shareholders. Press reports claimed US private equity firm Carlyle Group was the suitor in question.
Shanks surged a whopping 42.6% higher on the FTSE 250 index amid hopes it could secure an offer priced at a 70% premium to its most recent share price prior to today’s news. Analysts commenting on the takeover developments noted that high multiples have been paid in the past for Shanks’ peers.
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