Melrose says GKN profits are below expectations, Meggitt offloads Precision Micro
London open
The FTSE 100 is expected to open six points higher on Tuesday, having closed up 0.42% at 7,398.87 on Monday.
Stocks to watch
Melrose said GKN's profit and cash generation were below market expectations in the first three months of the year prior to the completion of the takeover earlier this month. Nevertheless, the FTSE 250 company said it had planned for such an underperformance and remained confident it will be able to deliver promised turnaround "over the medium term".
The London Stock Exchange reported first-quarter trading broadly in line with expectations before an annual shareholder meeting that will seek to draw a line under the group’s recent troubles. Total income for the three months to the end of March increased 13% to £520m and gross profit rose 13% to £464m. Analysts on average had forecast total income of £522m and £467m gross profit.
AstraZeneca, alongside its biologics research and development arm MedImmune, announced high-level results from the Phase III ARCTIC trial in patients with locally-advanced or metastatic non-small cell lung cancer (NSCLC) on Tuesday, who had received at least two prior treatments. The FTSE 100 drugmaker said that n sub-study B, the combination of Imfinzi plus tremelimumab in patients with PD-L1 low/negative NSCLC did not meet the primary endpoints of a “statistically-significant and clinically-meaningful” improvement in progression-free survival and overall survival compared to the existing standard of care. Sub-study A was not powered for statistical significance; however, Imfinzi monotherapy reportedly showed a “clinically-meaningful reduction” in the risk of death compared to chemotherapy.
Meggitt has sold photo etching group Precision Micro for £22.5m in cash. The company, which specialises in high performance components and sub-systems for the aerospace, defence and energy markets, said the disposal is consistent with its strategy to focus on businesses of scale in attractive markets where its leading positions offer greater potential for growth and operational efficiencies.
Newspaper round-up
Google owner Alphabet shrugged off mounting concerns over privacy on Monday to report an 84% rise in profits for the last quarter. The results eased concerns that investment in new ventures beyond its core search business was undermining Alphabet’s outlook. There also were no immediate signs that rising global privacy concerns would affect profits. – Guardian
The government has dealt a blow to the Daily Mirror publisher’s £200m takeover of the Express and Star titles by signalling its intent to launch an investigation into the deal over issues including editorial independence. The culture secretary, Matt Hancock, said on Monday he was “minded to” issue a public interest intervention notice for an in-depth inquiry and would come to a final decision “shortly”. The move follows the decision by the Competition and Markets Authority (CMA) this month to open an initial investigation into the deal. – Guardian
One of Europe’s biggest investment managers is preparing to name and shame companies which behave unsustainably – and to ditch billions of pounds of investment in their shares. Legal and General Investment Management (LGIM), which manages assets worth almost £1 trillion, has stepped up efforts to push the firms in which it invests to clean up their act with a "climate change pledge". – Telegraph
British companies must set up internal reporting channels to bosses and the media under new EU laws to strengthen whistleblower protection brought forward after the "dieselgate" and Cambridge Analytica scandals. Britain has one of the most advanced systems of protection in place but the European Commission’s proposed legislation will require some businesses to take further steps. – Telegraph
US close
US stocks ended Monday’s session flat to slightly lower as bond yields set four-year highs.
The Dow Jones Industrial Average ended down 0.1% to 24,448.69, the S&P 500 was steady at 2,670.29 and the Nasdaq fell 0.3% to 7,128.60.
US bond yields resumed their push higher amid expectations that the Federal Reserve will lift interest rates, with the yield on the 10-year note trading just under 3% after hitting its highest level since January 2014 on Friday. Markets are now pricing in four interest rate hikes this year versus the three signalled by policymakers.
IG analyst Chris Beauchamp said: "The talk of the town continues to be the benchmark US ten-year, whose move towards a 3% yield seemingly has everyone captivated. While some fear that a move through this level will trigger a cataclysm, the reality is probably a tad more prosaic. Equities do look less attractive if fixed income yields keep rising, but in an environment of still-healthy global growth (which we still have as the PMIs so far today have reminded us) it is perfectly possible for both bonds and equities to keep rising."
Konstantinos Anthis, head of research at ADS Securities, said strong earnings results should underpin stocks in the short-term but as yields continue their rally higher traders "should not drop their guard".
"Even a small deterioration in sentiment could trigger a sell-off for global equities as yields threaten the upside potential," he said.