London pre-open: Stocks to edge higher; CYBG to buy Virgin Money
London stocks were set to edge tentatively higher on Monday, with worries about a trade war and the political situation in Germany likely to keep investors cautious.
The FTSE 100 was called to open eight points higher at 7,642.
London Capital Group analyst Jasper Lawler said: "China responding in kind, on Friday, to Trump’s $50bon worth of tariffs on Chinese imports, by hitting US commodities with import pledges is unnerving investors. The tit for tat response is putting the two powers a step closer to an all-out global trade war.
"Investors will now be watching carefully for Trump’s response with further measures expected. The overriding concern here is how this is going to escalate with potential fallout being a slowdown in world trade and a drop-in business sentiment. Up until now we have seen investors escape into US tech stocks but that may be starting to run its course."
Events in Germany were also likely to be in focus, with Chancellor Angela Merkel under pressure from her coalition partners over her refugee and immigration policy.
UK housebuilders could be active after the latest Rightmove survey showed that asking prices hit a record high for the third straight month in June.
Miles Shipside, Rightmove director and housing market analyst, said: "The national average new seller asking price continues to creep upwards, setting a new record for the third consecutive month. Sales agreed by estate agents overall in May have bounced back from a slower start to the year and while still slightly below May last year they are ahead of 2016. This is a pleasingly strong flourish at the end the spring selling season given the political uncertainty and stretched buyer affordability.
"At an initial glance all of this fits with a theme of ‘steady as she goes’ as the spring market concludes. However, if you dig a bit deeper, you’ll find that the main driver is good buyer demand in the comparatively stock-starved northern half of Britain’s housing market."
In corporate news, Virgin Money has accepted a £1.7bn takeover offer from CYBG, the owner of Clydesdale Bank and Yorkshire Bank.
CYBG will pay 1.2125 of its own new shares for each Virgin Money share, which based on a closing price at the end of last week of 306p values Virgin Money shares at 371p apiece.
The Renewables Infrastructure Group has acquired an onshore wind farm in the UK, ‘Solwaybank’, in Dumfries and Galloway, Scotland. Solwaybank is in the early stages of construction, and was expected to become operational in the first quarter of 2020.
The company said that once complete, Solwaybank would comprise 15 Senvion MM100 wind turbines, each with a rated capacity of 2.0MW, amounting to 30MW. Total consideration was expected to be around £82m, of which £39m was invested at acquisition.