FTSE 100 outperforms, sterling slips, Biogen soars

CMC Markets

The slide in sterling is helping the FTSE 100 outperform its Continental counterparts.


All eyes remain on the political developments surrounding Brexit. Prime Minister Johnson is hoping to have a vote on the withdrawal agreement bill later today, but a spokesperson for the government suggested the vote on the bill could be pulled should the programme motion be voted down. Recently, equities as well as sterling have been moving higher when it looks like the government is making progress in relation to Brexit, but any signs that MPs are trying to derail Brexit or delay it, markets tend to move in the opposite direction.    

The food delivery sector is on focus as Just Eats’ board rejected an approach from Prosus. The 710p per share offer makes the bid worth £4.9 billion, which represents a 20% premium on the offer from - who are set to merge with the London-listed group. Just Eat suggested the prospects with are better, but we might not have seen the end of this story. Cat Rock in an investment group that holds a stake in both Just Eat as well as The investment group claimed that Prosus would need to make a cash offer of at least 925p to make the bid worthwhile. don’t have much incentive to up their offer as Just Eat want the merger to go head, but Prosus might raise their proposal in an effort to outflank Takeway com, so it should be win-win for Just Eat.

Reckitt Benckiser lowered their full-year guidance for the second-time since July. This morning the group said it now predicts that annual like-for-like revenue will grow by 0-2%, while the previous forecast was 2-3%. Three months ago, the firm cut the guidance from 4% to 3%. ‘Tough’ trading in China as well as an underperformance in the US were cited for the revenue downgrade. It’s no secret that China’s economy is cooling, along with many other countries, so the consumer brands group could feel the pinch for some time to come.

Travis Perkins will hold-off on selling its plumbing and heating business due to ‘uncertainty’ in the business climate. Even though the company will not press ahead with the asset disposal it still maintains it will achieve its cost saving target of £20-£30 million by mid-2020. The lack of clarity in relation to Brexit has impacted businesses. The British Chambers of Commerce (BCC) has forecasted that business investment will fall by 1.5% this year. It seems sensible that Travis Perkins are refraining from the asset sale, as they would probably only receive a subpar offer. You don’t want to be the group that is forced to sell at the low.   


The Dow Jones as well as the S&P 500 are showing small gains as traders remain cautiously optimistic about the state of the US-China trading relationship. Le Yucheng, China’s vice foreign minister, said that any issues in the trade talks could be resolved as long as both parties showed respect. The positive tone of the message has given equity traders a little more hope that progress will be made. Traders shrugged off the disappointing housing data. US existing homes sales last month were 5.38 million, which undershot the 5.45 million consensus estimate. 

Biogen shares surged today after the group confirmed it will be seeking a US regulatory approval for its Alzheimer’s drug Aducanumb. Earlier this year, Biogen and it partner, Eisai, halted their research on the drug as it was believed the trials had slim chances of succeeding. More recent trials have shown signs of promise so Biogen is seeking regulatory approval. Should the drug be successful it has the potential to be extremely lucrative, but the trails were not worth continuing with earlier this year, so some traders are wondering what has changed. Biogen’s stocks is up 26%.

Verizon revealed a nice sweetener to new and existing customers as they will get one year of Disney+ for free. The move should give Disney+ millions of subscribers once it gets going, so that should help with service when it launches. The Disney streaming service will commence next month. Netflix is likely to feel the pinch as it will have a new competitor who is cheaper.     


GBP/USD is in the red as the Johnson government are considering abandoning the vote on the withdrawal agreement bill. Sterling enjoyed a major rally last week when Mr Johnson struck a deal with the EU, and there are now worries the process will be delayed, which could lead to an extension being introduced. Traders are less optimistic about this deal passing, or even going ahead, hence why the pound is in the red.

USD/CAD is higher thanks to worse-than-expected retail sales figures from Canada. The report showed that retail sales declined by 0.1% in August, while economists were expecting an increase of 0.4%. The reading which strips out auto sales showed a 0.2% fall. The update points to a more fragile consumer climate.


Gold continues to be enduring low volatility. The metal has been in a small trading range recently. Gold hit a six year high at the beginning of last month, but has been broadly pushing lower since then. While it holds below the $1,500 mark the bearish move should continue. 

Oil has rebounded from the declines yesterday as hopes have been raised in relation to the US-China trade situation. Recently the oil market has moved in tandem with global stocks, and seeing as US equity markets are a little higher, it’s no surprise that oil has gained ground too. The remarks from China's vice foreign minister have lifted sentiment in the oil market.