Downgrade to GDP
LSE deal waived through; call for Menzies break-up
Shareholders in the London Stock Exchange shrugged off Brexit worries to vote through the merger with Deutsche Boerse.
Approval for the cross-border deal may console those worried that the decision to withdraw from the EU will undermine London’s position as a global financial centre.
UK equities closed lower on Monday as investors continued to fret over the impact of the Brexit decision.
S&P Global Ratings said Britain’s decision to leave the EU had led it to downgrade economic growth forecasts for the UK and the euro-area.
The ratings agency said Brexit will cut UK GDP by 1.2% next year and 1% in 2018 as it expects investment to fall. S&P expects the EU referendum will also trim eurozone output by 0.8% over the two years.
Its forecasts came as Chancellor George Osborne said he wants to cut corporation tax to 15%, a move aimed at encouraging investment into Britain.
Sterling rose 0.17% against the dollar to $1.3289.
A report from Markit/CIPS said UK construction slowed more than expected in June and by more than economists had been expecting. It came as worries grew of higher costs of materials imported from the EU.
In commodities, oil prices reversed earlier gains as signs of slowing demand in Asia offset remarks by energy minister of Saudi Arabia Khaled Al-Faleh that global oil markets were heading towards balance.
Brent crude fell 0.47% to $50.11 per barrel and West Texas Intermediate dropped 0.36% to $48.81 per barrel.
The FTSE 100 was 55.5 points or 0.84% lower at 6,522.26.
On the corporate front, housebuilders, including Persimmon and Taylor Wimpey, also slumped after the weaker UK construction figures.
Marks & Spencer was lower as Deutsche Bank downgraded it to ‘hold’ from ‘buy’.
John Menzies is being urged by a German investor to consider breaking itself up.
The call comes from a fund advised by German company Shareholder Value Management which holds a 7% stake in Edinburgh-based Menzies, which has faced similar pressure from Swiss investor Lakestreet Capital Partners.
SVM said it “strongly urges the company to separate the aviation business from the distribution business, a move that would be immediately and significantly value accretive, and in the interest of all shareholders.”
Menzies, which is due to announce its half-year results on 20 August, said in May that advisers were looking at a possible restructuring. The call for a break-up comes despite shares in the group rising 36% in the first half of the year.
Menzies said: “We encourage an open and proactive dialogue with all our shareholders.
“In reference to today’s public statement, and as stated on 20 May 2016, the board is progressing its evaluation of the optimal structure for the group against the potential opportunities for expansion and acquisition in both divisions.”