It was only a couple of weeks ago that stocks tumbled as investors panicked about the Delta variant. The worry was that this strain of Covid might cause havoc with the global recovery, which the markets had been betting on heavily since the vaccination rollout began at the end of last year. “People are freaking out about the Delta variant,” one edgy trader said.
The City is a fickle place, though. That Monday sell-off in mid-July proved to be little more than a blip and the message from the Square Mile is that the market needn���t have “freaked out” quite so much.
“Delta [variant] is a wild card but we believe that the third wave might not result in the renewed strict lockdowns,” Mislav Matejka, JP Morgan’s chief global equity strategist, said. “The consensus has likely become too bearish on Delta fallout as well.”
Outside the City sentiment towards the Delta variant has improved in the past week and news headlines have become more positive, particularly in the UK, where deaths remain persistently lower than in previous waves, while new cases have fallen sharply since the mid-July peak.
That optimism has been reflected in UK share prices, as it was again yesterday. The FTSE 100, London’s blue-chip index, rallied 49.42 points, or 0.7 per cent, to 7,081.72, its best in two weeks. The real action was on the second tier though, where the FTSE 250, home to more UK-biased stocks, pushed deeper into record territory as it rose another 259.84 points, or 1.1 per cent, to close at 23,208.67.
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Not for the first time this year, the mid-cap index was buoyed by a wave of takeover activity.
Sanne Group, a provider of administration services for specialist fund managers, revealed that it was in “advanced discussions” with Apex, the fund servicing group, about a possible £1.5 billion buyout. The news sent the shares up 64p, or 7.6 per cent, to 908p, close to the 920p-a-share that Apex is thinking of offering.
Meggitt, the aircraft engineer, soared 266p, or 56.7 per cent, to 735p after it confirmed that the mystery bidder mentioned in this column last week was its American peer Parker-Hannifin, which has tabled a £6.3 billion bid.
With the spotlight again firmly on the aerospace and defence sector, some of Meggitt’s peers headed higher. Melrose, the aircraft parts maker, ascended 8¼p, or 5.2 per cent, to 168½p; Rolls-Royce, the jet engine maker, added 3¾p, or 3.8 per cent, to 103½p; and Babcock, the defence contractor, advanced 7½p, or 2.9 per cent, to 263¼p.
ConvaTec, the maker of colostomy bags, tumbled to the foot of the City leaderboard as its post-results selloff continued. Analysts at Stifel did away with their “buy” rating after Friday’s profit margin warning. The shares, which fell more than 8 per cent in the previous session, dropped another 12¼p, or 5.2 per cent, to 224¾p yesterday.
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Reckitt Benckiser shares steadied after their slide last week, when the consumer goods group also warned about its margins. Analysts at Bernstein, among Reckitt’s bears before, lifted their rating to “market perform”, with their concerns about margins and growth “adequately reflected” after the sell-off. The stock improved 92p, or 1.7 per cent, to £56.15 as it bounced off a 16-month low.
TMT Investments, the Aim-quoted venture capitalist, rose ¾p, or 6.6 per cent, to 11¼p after Bolt, the Uber rival in which TMT was an early investor, raised another $713 million. The latest fundraising means that TMT’s investment in Bolt has almost doubled to about $66 million.
Firm’s high hopes for cannabis
A cash shell on Aim is to bring to market a maker of medicinal cannabis as London’s growing reputation as a home for pot stocks continues to blossom.
Hellenic Dynamics, which is building a 200,000 square metre farm near Thessaloniki in northern Greece, will join London’s junior market after reversing into UK SPAC.
UK SPAC was previously known as Mountfield Group until it sold off its flooring business in March, since when it has been looking for something to buy. This deal for Hellenic moves it into the increasingly popular cannabis sector.
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Analysts estimate that the medicinal cannabis market in Europe will surpass £26 billion come 2027.
The listing, if it goes ahead as planned, will value Hellenic at over £50 million, UK SPAC said.
Hellenic, which was set up just over two years ago, plans to grow and sell dried cannabis flowers and oils. “With patient demand for medical cannabis increasing and a willingness among governments to regulate and open up this important market, we are very optimistic about our future as a listed company,” Hellenic said.
UK SPAC shares have been suspended while the deal completes.
Wall Street report
Unease about the spread of a more contagious coronavirus variant battled with encouraging company earnings for investors’ attention, leaving the markets edgy. The Dow Jones industrial average closed at 34,838.16 points, down 97.31.
