European stock rally fades despite M&A surge and Wall Street gains
The U.K.’s FTSE 100 closed lower on Monday, as the pound strengthened and the earlier M&A-driven rally faded in the afternoon.
News that SoftBank has sealed the deal to sell Cambridge-based Arm for up to $40 billion, and optimism over a coronavirus vaccine, buoyed London markets in early trading.
The FTSE 100 UKX, -0.09%, the index of London’s top 100 stocks by market capitalization, rose 0.5% in Monday morning trading, before falling back later in the day.
The pound was up 0.6% against the dollar GBPUSD, -0.03% and up 0.35% against the euro GBPEUR, -0.19%, as opposition to the government’s controversial post-Brexit bill grew, and BNP Paribas claimed a so-called no-deal Brexit wasn’t inevitable. Sterling’s rise hurt the internationally-exposed FTSE 100, while the more domestically-focused FTSE 250 MCX, +0.69% rose 0.7%.
BP BP, -1.88% stock slipped 1.9%, as the company warned global oil demand may have already peaked. Under two of the oil major’s three scenarios in its 2020 energy outlook, global demand will never return to precoronavirus levels, and in the third the peak is reached around 2030.
Shares in British security services company G4S GFS, +25.05% rocketed 26%, after Canada’s GardaWorld said it had made an approximately £2.96 billion ($3.81 billion) all-cash offer for the group. G4S shares are down nearly 16% year-to-date.
SoftBank 9984, -0.64% announced late on Sunday that it has sold chip designer Arm after four years of ownership to U.S. graphics chip maker Nvidia NVDA, +5.81%. Arm, one of Britain’s most important homegrown technology companies, will be sold for $21.5 in stock and $12 billion in cash, with another $5 billion subject to Arm’s financial performance and $1.5 billion earmarked for stock to Arm employees.
All eyes are on British regulators’ expected scrutiny of the deal. “Any deal is likely to face significant regulatory obstacles, not only from U.K. authorities who have already been on the receiving end of broken promises from previous U.S. companies, circa Cadbury and the Kraft takeover, but also U.S. and EU regulators who may have concerns over the huge dominance this purchase would give Nvidia over the global chip market,” wrote Michael Hewson, an analyst at CMC Markets.
Optimism over a coronavirus vaccine helped stocks earlier in the day. The University of Oxford announced over the weekend that it would be resuming its trial with AstraZeneca AZN, -0.34% after it was halted last week due to an “unexplained illness” in a participant. U.S. drug giant Pfizer’s PFE, +2.60% chief executive, Albert Bourla, said in an interview on Sunday that a successful vaccine could be distributed in the U.S. as early as the end of this year.
The biggest gainer on Monday was online grocery company Ocado OCDO, +3.92%, which rose 3.9%. Ocado will release its third-quarter results on Tuesday, which should give investors an update on its new joint venture with Marks & Spencer, which it sold half of its retail business to for £750 million last year.
Other gainers included Informa INF, +1.89%, GVC Holdings GVC, +1.25%, and BAE Systems BA, +2.40%.
Precious metals miner Fresnillo FRES, -3.58% plunged as much as 6.6% in Monday trading, leading the FTSE’s list of losers. British telecom Vodafone VOD, -0.54% dipped as much as 0.9%, as the group remains in talks to complete selling its Egyptian unit to Saudi Telecom.
European stocks closed higher on Monday but gave back earlier gains driven by vaccine hopes and a flurry of M&A activity.
The Stoxx Europe 600 index SXXP, +0.14% rose 0.2% after ending last week nearly 1.7% higher, the best weekly return since the week ending August 7. The French CAC 40 FR:PX1 rose 0.4%, but the German DAX DAX, -0.07% and the FTSE 100 index UKX, -0.09% fell 0.1%.
Investors will hear from the Federal Reserve, the Bank of England and the Bank of Japan in the coming days in a busy week for central bank meetings.
European stocks faded in the afternoon despite a strong start on Wall Street. The Dow Jones Industrial Average DJIA, +1.18% climbed 1.4%, or 377 points, in early trading, while the S&P 500 SPX, +1.27% was 1.7% up and the Nasdaq COMP, +1.87% was 2.4% higher.
Renewed hopes over a coronavirus vaccine also helped improved sentiment at the beginning of the week.
Pfizer Inc.’s PFE, +2.60% chief executive officer Albert Bourla said in an interview Sunday that the drug maker should know if its COVID-19 vaccine candidate will work by the end of October — and if approved, it could be distributed in the U.S. by the end of the year. Pfizer is partnering with German drug maker BioNTech BNTX, +3.60% on the vaccine’s development.
Oxford University also announced Saturday it would resume a trial for the coronavirus candidate it’s developing with AstraZeneca AZN, -0.34%. The study was halted last week following a U.K. patient falling ill pending a review into the “unexplained illness.” Oxford University said it has been deemed safe to continue. Shares of AstraZeneca rose 0.5%.
U.S.-based Gilead Sciences Inc. GILD announced a $21 billion deal on Sunday to buy biotech Immunomedics Inc. IMMU, maker of a key breast-cancer drug.
Japanese technology conglomerate SoftBank Group Corp. announced a $40 billion deal late Sunday to sell U.K.-based microprocessor designer Arm Holdings to chipmaker Nvidia NVDA, +5.81% for a mix of cash and stock.
The technology sector was also lifted by M&A, with shares of chip equipment maker ASML Holding NV ASML, +2.42% ASML, +0.89% up 0.9%.
And the race for TikTok is heating up. Software group Oracle Corp. ORCL, +4.31% had been tipped to take over the video-sharing app’s U.S. after China’s ByteDance apparently rejected an offer from technology giant Microsoft Corp. MSFT, +0.67% But in the latest twist, Chinese state media say ByteDance has turned down Oracle as well.
Elsewhere, Euronext NV ENX, -2.45% said Monday that it has submitted a non-binding offer to acquire Borsa Italiana from London Stock Exchange Group PLC LSE, -0.77%. The pan-European exchange partnered with Italian lenders Cassa Depositi e Prestiti Equity and Intesa Sanpaolo SpA ISP, -0.01% on the offer. Euronext shares slipped 2.5% and London Stock Exchange shares fell 0.8%.
The calculation results are for reference only