Leading shares recover but Arm falls back following disappointing update from Apple
As markets staged a mini-revival after recent falls, financial companies were in the spotlight.
Fund management firm *F&C Asset Management* jumped 7.1p or 6% to 123.5p, the biggest riser in the FTSE 250, on hopes of a bid battle for the business. F&C has agreed a £708m or 120p a share offer from Bank of Montreal, but its second biggest shareholder Standard Life Investments said it was keeping its options open in the event of a rival bid. David Cumming, global head of equities at Standard Life Investments - which holds 10.2% of F&C - said:
The price agreed represents an attractive valuation from the standpoint of the Canadian Bank. Consequently we intend to keep our options open should another suitor for F&C emerge.
Meanwhile Aviva Investors, which owns 12.11% of F&C, has thrown its weight behind the deal, unless a competing offer worth at least 10% more is made.
Elsewhere banking shares moved higher, with *Lloyds Banking Group* up 2.45p to 82.85p as it announced 1,080 job cuts, and *Royal Bank of Scotland* recovering 11.7p to 343.9p after surprise news on Monday of £3bn of new provisions for past misconduct, suggesting it could make a full year loss of some £8bn.
Overall, after two days of heavy falls on worries about emerging markets, the FTSE 100 finished 21.67 points higher at 6572.33. It was not a convincing rally, with Turkey's central bank tipped to possibly announce a rate rise on Tuesday night to protect a tumbling lira, and the US Federal Reserve meeting to make its own policy decision. In Ben Bernanke's last meeting as chairman, many believe the Fed will sanction another $10bn cut in its monthly bond buying programme. But any tapering of the financial stimulus could have a knock on effect on emerging markets, adding to the worries which have engulfed investors in the past few days.
There were mixed signals from the US economy, with poor durable goods data but positive confidence numbers, for Bernanke and his colleagues to assess.
But in the UK, the 1.9% growth in GDP in 2013 proved positive for sentiment.
Following *Apple*'s disappointing outlook overnight, with a revenue forecast below expectations, *Arm* - whose technology is used in the US company's products - lost 13p to 944.5p. Apple itself fell more than 8% in early trading before recovering slightly after activist investor Carl Icahn said he had bought another $500m worth of shares to take his stake to $4bn. Icahn wants Apple to return more cash to shareholders.
The news from across the Atlantic was an opportunity for Liberum Capital to repeat its sell rating on Arm. Analyst Janardan Menon said:
Apple shares were sharply down following weaker than expected iPhone shipments in its December quarter and weaker than expected revenue guidance for its second quarter ending March.
Apple sold 51m iPhones in the quarter, below street expectations in the region of 54m to 56m. The company blamed supply constraints as well as shifting carrier upgrade practices for the shortfall. Along with Samsung's weak fourth quarter smartphone sales and first quarter guidance, these figures further highlight the on going slowdown in the smartphone market, particularly at the high-end.
Smartphones account for the majority of Arm's royalty revenue and the slower sales in this segment is expected to reduce Arm's royalties below current market expectations. We regard the stock as being over-valued and reiterate our sell recommendation.
Elsewhere *Amec* added 18p to £10.38 on news of a $974m consortium contract win from BP.
*Carnival* sailed 70p higher to £25.48 following a positive update from rival Royal Caribbean and news that Numis had raised its recommendation from hold to buy. The broker said:
Royal Caribbean has reported 2013 earnings per share of $3.17, 4% ahead of consensus, and its 2014 guidance is positive (net yields plus 2%-3% in constant currency). We believe that the read-across to Carnival is positive and we have increased our 2014 earnings per share forecast by 13%, our target price from 2,250 to 3,000p and we have upgraded to buy.
We remain positive on scope for yield and earnings recovery [at Carnival]. In 2013 sentiment (passenger and investor) was badly affected by the issues with Carnival Dream and Carnival Triumph. This had an impact on both costs and yields: Carnival had to discount more heavily than the competition. Royal Caribbean's reported yields are now less than 3% short of the 2008 peak, whilst Carnival's yields are still 14% lower.
But *Fresnillo* fell 24p to 751p after the Mexican precious metals miner fell just short of its 2013 gold production target.
The company had already cut its forecast for gold by 8.4% in December to 425,900 ounces, due to a ban on the use of explosives at its Minera Penmont mine. In the event it produced a slightly disappointing 425,831. But silver production rose 4.3% on the previous year to 42.7m ounces, ahead of the 41m it had forecast. It expects 43m ounces of silver production in the current year and 450,000 ounces of gold, given the resumption of production at the Herradura mine in March after the explosives issue is resolved.
Among the mid-caps media group *UBM* rose 7.5p to 712p on hopes of a break-up of the group after activist investor Hengistbury was revealed to have a 5.2% stake. Analyst Alex DeGroote at Panmure Gordon said:
UBM is an obvious break-up story, and on our estimates the shares are around 30% undervalued at current levels.
Finally, the prospect of longer lasting and faster charging mobile phone batteries may have come a step closer after an update from Aim-listed *Ilika*. The company announced that its process for producing solid-state batteries stacked one on top of the other had successfully been tested and shown to generate an improved performance compared to single cell batteries.
Its shares closed 8% higher at 44.25p. Reported by guardian.co.uk 8 hours ago.
As markets staged a mini-revival after recent falls, financial companies were in the spotlight.
Fund management firm *F&C Asset Management* jumped 7.1p or 6% to 123.5p, the biggest riser in the FTSE 250, on hopes of a bid battle for the business. F&C has agreed a £708m or 120p a share offer from Bank of Montreal, but its second biggest shareholder Standard Life Investments said it was keeping its options open in the event of a rival bid. David Cumming, global head of equities at Standard Life Investments - which holds 10.2% of F&C - said:
The price agreed represents an attractive valuation from the standpoint of the Canadian Bank. Consequently we intend to keep our options open should another suitor for F&C emerge.
Meanwhile Aviva Investors, which owns 12.11% of F&C, has thrown its weight behind the deal, unless a competing offer worth at least 10% more is made.
Elsewhere banking shares moved higher, with *Lloyds Banking Group* up 2.45p to 82.85p as it announced 1,080 job cuts, and *Royal Bank of Scotland* recovering 11.7p to 343.9p after surprise news on Monday of £3bn of new provisions for past misconduct, suggesting it could make a full year loss of some £8bn.
Overall, after two days of heavy falls on worries about emerging markets, the FTSE 100 finished 21.67 points higher at 6572.33. It was not a convincing rally, with Turkey's central bank tipped to possibly announce a rate rise on Tuesday night to protect a tumbling lira, and the US Federal Reserve meeting to make its own policy decision. In Ben Bernanke's last meeting as chairman, many believe the Fed will sanction another $10bn cut in its monthly bond buying programme. But any tapering of the financial stimulus could have a knock on effect on emerging markets, adding to the worries which have engulfed investors in the past few days.
There were mixed signals from the US economy, with poor durable goods data but positive confidence numbers, for Bernanke and his colleagues to assess.
But in the UK, the 1.9% growth in GDP in 2013 proved positive for sentiment.
Following *Apple*'s disappointing outlook overnight, with a revenue forecast below expectations, *Arm* - whose technology is used in the US company's products - lost 13p to 944.5p. Apple itself fell more than 8% in early trading before recovering slightly after activist investor Carl Icahn said he had bought another $500m worth of shares to take his stake to $4bn. Icahn wants Apple to return more cash to shareholders.
The news from across the Atlantic was an opportunity for Liberum Capital to repeat its sell rating on Arm. Analyst Janardan Menon said:
Apple shares were sharply down following weaker than expected iPhone shipments in its December quarter and weaker than expected revenue guidance for its second quarter ending March.
Apple sold 51m iPhones in the quarter, below street expectations in the region of 54m to 56m. The company blamed supply constraints as well as shifting carrier upgrade practices for the shortfall. Along with Samsung's weak fourth quarter smartphone sales and first quarter guidance, these figures further highlight the on going slowdown in the smartphone market, particularly at the high-end.
Smartphones account for the majority of Arm's royalty revenue and the slower sales in this segment is expected to reduce Arm's royalties below current market expectations. We regard the stock as being over-valued and reiterate our sell recommendation.
Elsewhere *Amec* added 18p to £10.38 on news of a $974m consortium contract win from BP.
*Carnival* sailed 70p higher to £25.48 following a positive update from rival Royal Caribbean and news that Numis had raised its recommendation from hold to buy. The broker said:
Royal Caribbean has reported 2013 earnings per share of $3.17, 4% ahead of consensus, and its 2014 guidance is positive (net yields plus 2%-3% in constant currency). We believe that the read-across to Carnival is positive and we have increased our 2014 earnings per share forecast by 13%, our target price from 2,250 to 3,000p and we have upgraded to buy.
We remain positive on scope for yield and earnings recovery [at Carnival]. In 2013 sentiment (passenger and investor) was badly affected by the issues with Carnival Dream and Carnival Triumph. This had an impact on both costs and yields: Carnival had to discount more heavily than the competition. Royal Caribbean's reported yields are now less than 3% short of the 2008 peak, whilst Carnival's yields are still 14% lower.
But *Fresnillo* fell 24p to 751p after the Mexican precious metals miner fell just short of its 2013 gold production target.
The company had already cut its forecast for gold by 8.4% in December to 425,900 ounces, due to a ban on the use of explosives at its Minera Penmont mine. In the event it produced a slightly disappointing 425,831. But silver production rose 4.3% on the previous year to 42.7m ounces, ahead of the 41m it had forecast. It expects 43m ounces of silver production in the current year and 450,000 ounces of gold, given the resumption of production at the Herradura mine in March after the explosives issue is resolved.
Among the mid-caps media group *UBM* rose 7.5p to 712p on hopes of a break-up of the group after activist investor Hengistbury was revealed to have a 5.2% stake. Analyst Alex DeGroote at Panmure Gordon said:
UBM is an obvious break-up story, and on our estimates the shares are around 30% undervalued at current levels.
Finally, the prospect of longer lasting and faster charging mobile phone batteries may have come a step closer after an update from Aim-listed *Ilika*. The company announced that its process for producing solid-state batteries stacked one on top of the other had successfully been tested and shown to generate an improved performance compared to single cell batteries.
Its shares closed 8% higher at 44.25p. Reported by guardian.co.uk 8 hours ago.