Leading shares are - unsurprisingly - on the slide after the latest Greek developments saw the International Monetary Fund, one of its trio of lenders, leave the negotiating table.
But there are some bright spots among a - so far - downbeat day. BT is up 2.2p at 449.05p despite watchdog Ofcom proposing controlling the prices the company can charge for some of its high speed business lines. Investors have been buoyed in recent days for the prospects of BT’s television service, following the launch of its Champions League plans.
Meanwhile Royal Mail has added 6.7p or 1.3% to 500p, recovering from a decline in the wake of the UK government’s sale of £750m worth of shares in the business.
Elsewhere Imperial Tobacco has added 9p to £32.76 after Morgan Stanley raised its price target from £35 to £36. The company is due to buy a number of brands once the US merger between Reynolds America and Lorillard completes, and Morgan Stanley said:
We raise our 12-month price target to 3,600p and reaffirm our view that Imperial offers the most attractive near-term risk-reward in US and European tobacco ahead of today’s Reynolds-Lorillard merger closing. We see potential earnings per share accretion of around 16%, suggesting pro forma 2016 earnings per share of 245p.
We remain confident in our view of the transaction’s financial benefits, which reflect an expectation of: (i) close to $800m in EBITDA from the acquired business (post-synergy and pricing reinvestment) and an around 3.75% cost of financing; (ii) A related amortization tax shield; and (iii) Very modest refinancing of existing debt.
Price repositioning can restore some competitiveness to Imperial’s US portfolio: many investors have expressed deep skepticism that Imperial has the wherewithal (both financially and strategically) to hold share on its a portfolio of historically declining brands. While we agree that long term share growth could prove challenging, our prior analysis suggests that: (i) Share declines on the acquired brands have moderated in recent years (around 250 basis points since 2004); and (ii) Winston has proven responsive to targeted promotional support in the past.
Overall the FTSE 100 is down 36.09 points at 6810.65, with very little in the way of economic data to keep investors distracted from the continuing crisis in Greece. One set of figures which could have an impact is the University of Michigan confidence numbers. Traders will be keen to see if they provide any further clues as to when the US Federal Reserve might raise interest rates.
Tony Cross, market analyst at Trustnet Direct, said:
For now...the market remains on the back foot and with many starting to fear the worst with regard to Greece, it will be wholly understandable if we spend the remainder of the day in a rather subdued mood.
Supermarkets have slipped back following their recent gains thanks to better than expected figures from Sainsbury. Sainsbury itself is down 5.3p at 258.7p, while Morrisons is 2.5p lower at 179.1p.
Among the mid-caps Synergy Health, whose combination with Steris Corporation is being contested by the US Federal Trade Commission, has added 49p to £18.04 after N+1 Singer raised its recommendation from hold to buy. It said:
The FTCs decision to challenge Synergy’s merger with Steris has precipitated a sharp fall in the share price to a level we think looks compelling whether Synergy remains independent or not. If the merger completes, then a quick 20% plus return is possible. If not, then we expect Synergy to be more explicit in its growth ambitions, which in turn should lead to forecast upgrades. We therefore move the stock back onto the buy list.
But Petra Diamonds has lost 17.8p to 152.6p after its revenue forecast came in at $430m compared to $471.8m last year and concensus estimates of around $447m.
