Aerospace outfit Meggitt subject of £6.3bn takeover offer
FTSE 100 leaps 1pc as sentiment recovers from China crackdown
HSBC first half profit doubles amid global recovery
Supply chain issues hit UK manufacturing growth
UK manufacturing production hit a slowdown in July as supply chain shortages exacerbated by staff shortages weighed on growth.
The industry recorded a growth rate of 60.4 for July, down from June's rate of 63.9 and much slower than May's record high of 65.6 on IHS Markit's closely followed Purchasing Manager's Index, where anything over 50 indicates growth.
Robust sales both domestically and abroad fuelled a robust expansion, but at a much slower pace as a shortage of workers and stretched supply chains dragged on growth.
"Although July saw UK manufacturers report a further month of solid growth, scarcities of inputs, transport and labour are stifling many businesses," IHS Markit director Rob Dobson said.
"The recent surge in global manufacturing growth has led to another month of near-record supply chain delays, exacerbated by factories and their customers building up safety stocks. Some firms also noted that post-Brexit issues were still a constraint on efforts to rebuild sales and manage supply and distribution channels to the EU."
SSE to sell Scotia Gas stake for £1.22bn
Energy giant SSE is to sell its 33.3pc stake in Scotia Gas Networks (SGN) for £1.22bn, triggering a share price rise of 1.3pc this morning.
PA has the details:
The company saw its shares lift higher after it wrapped up its major programme of disposals as part of its transformation strategy.
Gregor Alexander, finance director of SSE, said the gas operation had become a "purely financial investment" as it focuses further on its core business of low-carbon electricity.
The deal will see SSE sell its stake in the business to a consortium comprising of existing SGN shareholder Ontario Teachers' Pension Plan Board and Brookfield Super-Core Infrastructure Partners.
The sale is expected to complete later this year and is conditional on regulatory approval.
SSE initially bought a 50pc stake in SGN - which supplies gas to customers in Scotland, Northern Ireland and England - in 2005 for £505m, before selling a 16.7pc stake to a subsidiary of the Abu Dhabi Investment Authority 11 years later.
It is the final sale in SSE's major disposals programme, which it launched last June.
The company has now secured proceeds of more than £2.7bn from its non-core assets and allowed to increase investment elsewhere in the business.
Mr Alexander said: "We see significant growth opportunities in our core networks and renewables businesses in the transition to net zero and the capital we are releasing through our disposals programme will help enable us to maximise the delivery of our low-carbon electricity orientated strategy and ultimately create sustainable long-term value for customers, shareholders and society."
Axa profits soar to €4bn
French insurance giant Axa posted a huge increase in net profit for the first half of its financial year today.
The insurer, which faces a wave of Covid-19 claims, posted a €4bn (£3.42bn) net profit, nearly triple the figure for the same period a year ago, and up 71pc on the first half of 2019.
Higher payouts for natural catastrophes and Covid-related claims cost Axa €1.5bn in 2020, and in June it offered 15,000 restaurants €300m in a bid to stem a flood of legal claims that it had backed out of its contractual obligations.
Shares rose 2.95pc on the better than expected jump in profit, as the insurer said half the restaurants have approached it over a settlement.
FTSE 100 leads Europe's rise
Back to the markets, and Europe is firmly ahead this morning, buoyed by investor optimism and some strong gains in Asia overnight.
The FTSE 100 is holding onto its early jump at 7,104.85, while Germany's Dax is up 0.51pc and France's Cac 0.91pc. The Euro Stoxx 600 is pushing 0.68pc higher at the moment.
London's leading stocks this morning are Melrose, up 6.28pc, British Airways owner IAG, up 4pc, and Rolls-Royce, up 4.36pc.
Lender HSBC also rose 1.15pc after beating profit expectations in interim results released today.
Meanwhile Meggitt's 60pc surge as well a takeover approach for Sanne Group pushed the FTSE 250 1.5pc higher.
Investors grew in confidence on Monday following robust economic growth in the US and eurozone late last week. But manufacturing surveys out shortly may show a slowdown in UK production due to rising delta variant infections.
"Shares remain at risk of a short-term correction or volatility as coronavirus cases rise globally, the inflation scare continues and as we come into seasonally weaker months, but surging company profits in the US and lower bond yields are providing support," said Shane Oliver at AMP Capital.
Meggitt only the latest aerospace firm subject to US interest
This chart above shows how high Meggitt's shares have surged today, compared to their levels this past month.
The takeover offer is just the latest in a line of foreign bids for British aerospace companies.
Only last month, US-owned Cobham made a £2.6bn buyout approach for Ultra Electronics, a company that builds some of the most sensitive kit used by Britain's military.
Ultra is fighting off the bid from its Advent-owned rival, which has offered to separate US and UK boards in an attempt to ease government concerns.
Meanwhile, UK aerospace parts supplier Senior rejected a buyout offer from Tax-based Lone Star Funds last month, calling it too low.
The Government has vowed to scrutinise the Ultra takeover attempt, but waved through US private equity giant Advent's takeover of Cobham back in 2019.
Meggitt bidder Parker-Hannifin said it would offer to continue supplying the Government, and maintain existing technology and manufacturing bases in the UK. A majority of Meggitt’s board will continue to be British, it said.
FTSE leaps as China softens stance on crackdown
The FTSE 100 has jumped 1pc in early trading following last week's disappointing levels, as analysts said traders are gaining in confidence following last week's China clamp down on education and tech stocks.
London's main index opened flat but surged 72 points, or 1.03pc, within the first 25 minutes to push beyond the 7,100-point mark.
Michael Hewson, of CMC Markets, said traders are keen to make up for last week's big declines that came about as a result of a China crackdown on education companies souring wider sentiment.
"The extent of the falls appeared to prompt a partial backtrack, or softening of tone by the Chinese authorities prompting a little bit of a rebound which appears to have continued today in Asia," he said.
However, manufacturing surveys due out later this morning expected to show a slowdown in production due to the 'pingdemic' forcing workers to self-isolate.
"Input costs are also rising, raising some concern that price rises could become more persistent and act as a brake on consumer confidence," Hewson added.
Meggitt: Takeover would 'accelerate' long term strategy
Here's what Meggitt's chairman, Sir Nigel Rudd, has to say this morning:
"Meggitt is one of the world's foremost aerospace, defence and energy businesses, leading the market with a strong portfolio of technology and manufacturing capabilities, and holding a significant amount of intellectual property.
"Whilst Meggitt is currently pursuing a strong, standalone strategy which will deliver value to shareholders over the long-term, Parker's offer provides the opportunity to significantly accelerate and de-risk those plans, while continuing to deliver for shareholders."
Meggitt shares explode on $8.8bn offer
Meggitt shares have skyrocketed after it agreed to a $8.8bn (£6.3bn) takeover offer from an American rival.
Parker-Hannifin, a maker of motion control systems, made an 800p per share bid, a 71pc premium to Meggitt's closing price of 469.1p on Friday. That has sent shares surging around 60pc this morning.
The US company hopes Meggitt will allow it to build out its defence and aerospace business to compete with Airbus and Boeing, who are ramping up production in the aftermath of the pandemic.
Parker-Hannifin already has a UK presence as a hydraulics and pneumatics manufacturer and acts as a defence supplier to the Government.
“We strongly believe Parker is the right home for Meggitt,” said Parker Chief Executive Officer Tom Williams in a statement. “Together, we can better serve our customers through innovation, accelerated R&D and a complementary portfolio of aerospace and defence technologies.”
HSBC frees up bad loans provisions
A bit more on HSBC, whose profit has more than doubled for the first half of 2021 after a 30pc plunge for last year.
"We definitely feel more confident," chief financial officer Ewen Stevenson told Bloomberg. "We will keep buybacks under review" together with dividends, he added.
The bank's shares traded 2pc higher in Hong Kong following the results, with Quinn saying unwinding the cash reserves the lender had amassed to protect itself from a potential spike in unpaid loans had driven up profit.
The bank released $719m in reported expected credit losses as the economic outlook improved, boosting earnings.
But its net interest margin, a measure of lending profitability, was 1.21pc in the first half of 2021, worse than 1.43pc for the same period last year.
Still, the bank is aiming to pay out dividends at a ratio of between 40pc and 55pc of reporting earnings per share for 2021.
HSBC profits swell on world recovery
HSBC’s profits more than doubled in the first half of its financial year to beat estimates as it said it would resume dividend payments.
Reported profit before tax surged by $6.5bn (£4.7bn) to $10.8bn as it benefited from strong economic growth in the UK and Hong Kong despite political blowback over its pivot to Asia, where it makes 90pc of its profits.
The lender paid a dividend of $0.07 per share, or a total $1.4bn, after suspending payouts along with other banks during the pandemic.
Chief executive Noel Quinn, whose restructuring plan saw 35,000 jobs cut as the bank refocused on Asia and the Middle East, said: “We were profitable in every region in the first half of the year, supported by the release of expected credit loss provisions. Our lending pipeline began to translate into business growth in the second quarter and we further strengthened that pipeline during the half.”
5 things to start your day
1) Hollywood giant lines up £700m Hertfordshire movie studio: Hudson Pacific Properties has joined forces with investment giant Blackstone to build a 91-acre facility in Broxbourne, to rival Pinewood Studios
2) Remote roles spike as bosses bow to demands for flexibility: One in 10 job listings in the UK are currently for remote roles compared with just 3.5pc before the pandemic
3) Turbulence at Heathrow as third of top team exit: Three members of the executive committee quit as the airport struggles with Covid travel restrictions
4) Kent family picks buyer for orchard empire: Britain’s second biggest apple supplier over five generations has sold up for £15.7m, after harvesting pandemic losses.
5) Competition enforcer examines claims of shipping price gouging: The price of a shipping container from Asia has surged from about $2,000 last November to over $13,000
What happened overnight
Asian stocks started the week higher on Monday, even as China reported a slowdown in manufacturing activity and countries in the region continued to be hammered by the delta variant.
Tokyo's Nikkei 225 jumped 1.7pc to 27,742.28, while the Kospi in Seoul rose 0.1pc to 3,205.43. The Hang Seng in Hong Kong advanced 0.9pc to 26,189.44 after being in the red for much of the morning.
The Shanghai Composite index added 0.7pc to 3,422.64, while Australia's S&P/ASX 200 was up 1.5pc at 7,501.20. The benchmark in Malaysia rose while those in Singapore and Indonesia fell.
The gains in China follow data released on Saturday by the National Bureau of Statistics showing the country's official purchasing managers' index fell to 50.4 in July from 50.9 in June. Numbers above 50 indicate expansion on the 100-point scale.
Jack Dorsey's Silicon Valley payments company Square has agreed to pay $29bn to acquire Australian Buy Now Pay Later firm Afterpay.
Coming up today
Corporate: SBC, XP Power, Senior (Interim results)
Economics: Manufacturing PMI (UK, Europe, US, Asia); retail sales (Germany)