FTSE 100 watch: Burberry share price jumps on merger talks

on Oct 21, 2016

London stocks have been on the up today as investors shrugged off weak data on Britain’s public finances. M&A activity also boosted the FTSE 100, with top performers Burberry (LON:BRBY) and British American Tobacco’s (LON:BATS) both subject of merger talks.

As of 14:03 BST, the London benchmark index had climbed 0.03 percent to stand at 7,028.95 points. The Footsie is on course to post a 0.2 percent weekly gain.
Britain’s public finances showed a bigger-than-expected deficit in September of £10 billion, up 14.5 percent from the deficit in the same month a year ago, the Office for National Statistics revealed. Economists had expected a deficit of £8.5 billion. The data comes ahead of Chancellor Philip Hammond’s Autumn Statement next month.

“September’s public finances figures set the tone for a fairly disappointing set of fiscal forecasts likely to be revealed in the Autumn Statement next month,” according to Capital Economics. “But this won’t prevent the Chancellor from scaling back the pace of austerity.”
On the corporate front, Burberry’s share price rose as much as six percent today, the biggest intraday gain since July 13, after financial blog Betaville reported Coach Inc was considering merging with the British luxury fashion group. A Burberry spokesman said the company would not comment on market rumours and speculation.

“A merger of Coach and Burberry would primarily be a merger of problems. M&A history in luxury has shown that mergers don’t obviously help in regaining brand traction and desirability,” Exane BNP Paribas analyst Luca Solca said in a note.
Another top blue-chip gainer British American Tobacco rallied around three percent, on track for their best session since September 2. The move came after the company proposed buying the stake in Reynolds American that it does not already own for $47 billion (£38 billion). If approved, the deal would create the world’s largest listed tobacco company by net turnover and operating profit.
Trading in the other direction, InterContinental Hotels Group’s (LON:IHG) shares fell almost two percent today. The owner of the Holiday Inn, Crowne Plaza and other chains posted a 1.3 percent rise in third-quarter revenue per available room, slower than the 2.1 percent rate expected by analysts.

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