Stocks were rising early Friday, as a week dominated by the US government’s flirtation with debt default was ending with some certainty, following passage of a bill to raise the debt limit by Congress.
As US President Joe Biden prepares to sign the legislation into law, attention now turns to the key US nonfarm payrolls report for May, due at 1330 BST.
The FTSE 100 index was up 49.33 points, 0.7%, at 7,539.60. However, it remains lower in the week as a whole, down 1.2% since last Friday.
The FTSE 250 was up 148.70 points, 0.8%, at 18,976.46, and the AIM All-Share was up 2.26 points, 0.3%, at 786.71.
The Cboe UK 100 was up 0.4% at 751.61, the Cboe UK 250 was up 0.8% at 16,534.48, and the Cboe Small Companies was up 0.3% at 13,610.89.
The US Senate voted to suspend the federal debt limit, capping weeks of fraught negotiations to eliminate the threat of a disastrous credit default just four days ahead of the deadline set by the Treasury.
Economists had warned the US government could run out of money to pay its bills by Monday. This left almost no room for delays in enacting the Fiscal Responsibility Act, which extends the government’s borrowing authority through 2024 while trimming federal spending.
Hammered out between Democratic President Biden and the opposition Republicans, the measure passed the Senate with a comfortable majority of 63 votes to 36 a day after it had sailed through the House of Representatives.
With progress seemingly made on the debt ceiling, investors switched their attention to interest rate expectations following dovish comments from two Federal Reserve officials.
Fed Governor Philip Jefferson and Philadelphia Fed President Patrick Harker both made the case on Wednesday for a pause in interest rates hikes at the next meeting on June 13 and 14.
Ahead of the Senate vote, stocks in New York closed higher on Thursday, with the Dow Jones Industrial Average up 0.5%, the S&P 500 up 1.0%, and the Nasdaq Composite up 1.3%.
The dollar was mostly lower early Friday in Europe.
The pound was quoted at $1.2528, higher than $1.2523 at the equities close on Thursday. The euro stood at $1.0766, higher against $1.0737.
However, against the yen, the dollar was trading at JP¥138.97, higher compared to JP¥138.88.
In the FTSE 100, NatWest was flat after it sold part of its stake in Irish lender Permanent TSB.
The overall size of the disposal by the Minister for Finance of Ireland and NatWest was 54.6 million TSB shares at €2.03 per share, representing a 10% stake in Permanent TSB. Each sold half of that and each will receive €55.2 million. NatWest now holds 90.9 million shares, a 17% stake.
CEO Alison Rose said: ‘This transaction represents further positive progress on our phased withdrawal from the Republic of Ireland.’
In the FTSE 250, Dechra Pharmaceuticals jumped 8.1%, after it agreed to a £4.5 billion takeover offer from private equity firm EQT.
The veterinary pharmaceutical company said it reached an agreement with Freya Bidco Ltd, a newly formed company indirectly owned by EQT X EUR SCSp and EQT X USD SCSp, which act through its manager EQT Fund Management and Luxinva. EQT is a Swedish global investment organisation, while Luxinva is owned by the Abu Dhabi Investment Authority, a sovereign wealth fund of the United Arab Emirates.
The offer values Dechra shares at 3,875 pence each, which is a 13% premium to the company’s closing price of 3,439.65p each on Thursday. It is 44% higher than Dechra’s share price of 2,690p of April 12, the day before the takeover talks were first announced.
However, the offer is 4.8% lower than the 4,070p potential offer floated in mid-April. Dechra said it considered the new offer ‘fair and reasonable’.
The acquisition values Dechra at £4.46 billion on a fully diluted basis, implying an enterprise value of £4.88 billion. It is around 26 times Dechra’s 2022’s earnings before interest, tax, depreciation and amortisation of £188 million.
The takeover needs approval from 75% of Dechra shareholders and requires sanctioning by a court. The notices of the court meeting and the general meeting will be posted soon, Dechra said.
‘While this offer is down from the previously indicated 4,070p offer price, the revised offer price is not surprising given the negative trading update last week,’ commented Liberum analyst Edward Thomason, adding: ‘At this level, we believe it is an attractive price and should be acceptable to shareholders. CVS and, to a lesser extent, smaller UK peers Animalcare and Eco Animal Health, should also benefit as investors seek other ways to replicate exposure to the animal health market.’
Animalcare shares were up 0.3% early Friday on AIM, but Eco Animal Health was down 2.2%.
European budget airlines, Ryanair and Wizz Air, were up 1.3% and down 0.6%, respectively.
Dublin-based Ryanair said the number of passengers carried in May rose by 10% to 17.0 million from 15.4 million a year earlier. This also was up from 16.0 million in April. Ryanair’s load factor improved to 94% in May from 92% a year before and unchanged from 94% in April.
Ryanair noted that passenger traffic in May had been hurt by French air traffic control strikes. It operated over 94,400 flights over the month, but cancelled over 300 on industrial action.
Budapest-based Wizz Air said it carried 5.0 million passengers in May, up 22% from 4.1 million a year before. This also was up from 4.9 million in April. The load factor improved to 90.2% from 84.2% a year before, and up from 90.9% in April.
On London’s AIM, Pelatro jumped 23%, after it won a ‘large’ contract for campaign management solution by an unnamed Middle East telecommunications company with operations in multiple countries.
In 2022, the London-based marketing software specialist had won a contract from one of its operations and has now expanded the relationship to three more countries. The overall contract delivers recurring revenue of about $650,000 per year.
Edenville Energy was up 10%.
It plans to change its name to Shuka Resources, saying this reflects its focus in Africa and its ‘values of environmental sustainability, community engagement and responsible mining practices’.
In Asia on Friday, the Nikkei 225 index in Tokyo closed up 1.2%. In China, the Shanghai Composite closed up 0.8%, while the Hang Seng index in Hong Kong was up 3.9%. The S&P/ASX 200 in Sydney closed up 0.5%.
In European equities on Friday, the CAC 40 index in Paris was up 0.7%, while the DAX 40 in Frankfurt was up 0.6%.
Brent oil was quoted at $75.10 a barrel early in London on Friday, down from $74.35 late Thursday.
Gold was quoted at $1,976.93 an ounce, down against $1,978.50.
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