Markets greeted October with a roar of approval as shares climbed higher on the back of reassuring economic news. US manufacturing was not in as bad a state as people had feared and the Tankan surveyof Japanese business confidence was positive for the first time in three years. September couldn’t end soon enough for investors as worries of a faltering economy dragged prices lower. But by the endof the week, they had regained their sense of optimism.
Manchester United reported record profits as the company received a boost from success on the field, sponsorship deals and the sale of David Beckham to Real Madrid. Man U continues to be financially robust, in contrast to many football clubs, and with a cash pile of pounds 29m it announced a special dividend, but there was disappointment that the payout wasn’t more generous. Bid speculation continues to circulate around the club and Malcolm Glazier, the owner of American Football team Tampa Bay Buccaneers, increased his stake to 7.4 per cent. The shares finished the week at 218p, up 10.7 per cent.
Bid talks resurfaced at Canary Wharf, the property group, as chairman Paul Reichmann made his intentions known about buying the company but not at much more than the current share price. Canary Wharf already has offers from two parties, one a consortium backed by Morgan Stanley and Goldman Sachs, the other Brascan, a Canadian property company. Canary Wharf was 1.5p higher at 273.5p.
There was good news from SAB- Miller, the international brewer, as it reported higher volumes. This was driven by strong growth in Europe, Africa and Asia, but the Miller brand continues to struggle in the US. Wolverhampton & Dudley, home to Banks’s bitter and Pedigree ale, also announced good trading. SAB was up 2.4 per cent and Wolves 4.4 per cent.
Trading statements from retailers have been encouraging. HMV, Alexon, Clinton Cards, Laura Ashley and Ted Baker all looked forward to Christmas with confidence. There were takeover rumours about House of Fraser as Tom Hunter, the retail entrepreneur, raised his stake to 10.9 per cent. In January, Mr. Hunter had an 85p per share offer rejected. The shares were up 9.75p at 103.75p.
MmO2, the mobile network operator, said it was on track to meet its targets, driven by a larger customer base and a higher spend per user. BT’s former mobile arm also announced it was entering an alliance with a number of European operators. MmO2 will have access to 40 million mobile users across Europe. The shares rose 4.3 per cent.
In banking, there was talk that HSBC is buying the Brazilian operations of Lloyd TSB for more than $700m (pounds 422m). The deal makes sense for both banks. HSBC has been building its presence in Latin America while Lloyds wants to focus on the UK. HSBC was up 4.2 per cent and Lloyds 5.7 per cent.
Close Brothers, the merchant banking group, reported good results but attention drifted to Caledonia Trust, which owns 17.7 per cent of Close Brothers, as it survived an attempt by dissident shareholders to break it up.
Among other financial groups, there was positive news from Northern Rock, the mortgage provider, and Man Group, the hedge fund manager. The message from 3i, the venture capitalist, was mixed.
BP announced that profits would be boosted by the high oil price. But it said that weakness in its chemical operations and petrol retailing would offset this.
Compass, the catering group, confirmed that sales would rise by more than 6 per cent. It also said that future profit growth would depend on higher margins in its US and European operations.
Across the Atlantic, investors witnessed the biggest deal of the year. Manulife Financial, the Canadian insurer, said it was buying John Hancock, its US rival, for $10.3bn.
Despite the mixed news from companies, the market is upbeat. Tech stocks have done particularly well and there seems to be a willingness among investors to take on more risk. Wolfson Microelectronics, the semiconductor maker, is coming to the UK market next month in the largest technology flotation for almost three years. It is expected to have a market value of around pounds 200m. Simon Rubinsohn of Gerrard, the fund manager, said: “There does seem to be an appetite for these types of investments, but valuations are not dissimilar to what we saw in the bubble years. It seems entirely reasonable that companies are testing the water.”
