Investors will be looking to see whether the FTSE 100 index can claw back some of the 2% it lost over the last week. After an initial drop on Monday, London’s leading shares failed to ramp up efforts to regain momentum until the final session of the week when the mining sector and a number of financial stocks rebounded. This week, miners are likely to continue Friday’s momentum after Anglo American on Sunday confirmed it has received a preliminary takeover approach from coal exporter Xstrata. Whispers of a merger had helped fuel the sector in Friday deals, but today’s confirmation is expected to attract further buyers when markets reopen on Monday.
Xstrata recently sent a written proposal to the board of platinum producer Anglo American seeking their consideration of a merger of equals of the two companies, according to a press statement released today. The Sunday Telegraph had earlier reported that Xstrata’s chief executive wrote to its target last week proposing discussions over a $35 billion merger.
Initial analyst responses appeared to be supportive of such a deal. “It would certainly make a lot of sense to both parties if they were able to come to an agreement,” a London-based analyst said on Sunday, adding “this could be a long drawn out process though.”
In other corporate news, investors’ minds will be focused on the retail sector this week as both DSG International, owner of electrical retailer Currys, and Kesa Electricals, owner of rival Comet, unveil their final results for fiscal 2009.
On Wednesday, Kesa is forecast to report a near-50% drop in full-year profits, according to consensus figures, while the spotlight will fall on DSG on Thursday, when the group is expected to say profits have slumped by around 80% before exceptional items.
Also on Wednesday, judgement day will come for many businesses that have been feeling the strain as commercial rents are due for the following quarter.
On the economic front, house price figures from Rightmove and Nationwide will attract attention. Both surveys are expected to show a month-on-month dip in June after the previous month’s May increases. “With less transactions taking place and some in the market thinking the bottom is near, there is much more volatility in the signs of changes,” Arek Ohanissian, economist at the Centre for Economics and Business Research said on Friday.
Also key in the UK will be the CBI distributive trades index, which on Wednesday is predicted to show little or no change from the previous month’s -17 reading.
Broader afield, Eurozone PMI readings will on Tuesday give an idea of how the region’s manufacturing and services sectors are faring. Consensus is for the former to increase to 42.0 in June from 40.7 in May, while the latter edges up to 45.6 from 44.8.
Across the pond, US housing market statistics will be closely watched by all. The S&P/Case-Shiller house price index is forecast on Tuesday to show prices are still falling but at a slower pace in May than in the previous month, down 0.3% after April’s 1.1% drop. The following day, durable goods orders are likely to reveal a slip in May following the previous month’s improvement, down 0.9% after a 1.9% gain in April, while Wednesday’s the Federal Open Market Committee is widely expected to keep rates unchanged at 0.25%. The Fed’s accompanying statement will be of more interest, however, as the market looks for indications on future policy. Last but not least, on Thursday the final reading of US gross domestic product for the first quarter of 2009 is expected to remain unchanged from the preliminary -5.7% reading.
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