FTSE 100 analysis: Up on US debt ceiling vote as Dechra backs takeover

FTSE 100 rises

The FTSE 100 is trading 0.4% higher this morning.

Markets have welcomed news over the Atlantic that the Senate passed the proposal to resolve the US debt ceiling yesterday, leaving time for president Joe Biden to sign it into law before the deadline on Monday to avoid what would have been a disastrous default. This drove a positive session in Asia overnight, which is now feeding through to the UK and Europe.

Markets have also grown more confident in recent days that the Federal Reserve will pause their interest rate hikes when they meet this month following comments from several central bank members this week. However, sentiment about what will happen this month could swiftly change as markets await for non-farm payrolls data to be released later today, when economists are looking for growth to moderate to around 193,000 from the last reading of 253,000. You can prepare for today’s main economic event by reading our NFP Preview.

FTSE 100 analysis: Where next for the UK 100?

The UK 100, which tracks the performance of the FTSE 100, is testing the 200-day moving average this morning, which may prove the immediate upside barrier to break now that it has found some momentum. This puts it on course to climb toward 7,622, which has emerged as a ceiling on multiple occasions since early 2022. It can then try to recapture the floor that held throughout the first three weeks of May at 7,710.

We saw 7,450 provide some support as it emerged as a reliable floor when the index hit lows this week, making this a key level to watch as a slip below here risks opening the door to the 2023-lows.

Top UK stock news

Dechra Pharmaceuticals is up over 9% this morning at 3,680p after it said it has agreed to be acquired for 3,875p in cash per share by a newly formed company owned by Swedish private equity firm EQT. That is a 44% premium to the closing share price on April 12, being the last day before the original interest was announced, and is also significantly above the 3,439.65p closing price yesterday. However, it is below the indicated price set out in April of 4,070p. The offer values Dechra at £4.45 billion, with an enterprise value of £4.88 billion. The Dechra board has recommended the offer. ‘It is our view that accepting this proposal represents the best interests of all stakeholders and in particular represents a compelling opportunity for shareholders to realise, in cash and with certainty, Dechra's potential for future value creation,’ said chair Elizabeth Alison Platt.

NatWest is up 2.2% today after revealing it has sold a 5% stake in Permanent TSB Group Holdings through a placing conducted in tandem with the Minister for Finance of Ireland. The bank sold 27.3 million shares at EUR2.025 per share, raising gross proceeds of around EUR55.2 million. The Minister for Finance of Ireland sold an equal amount of its own stake. NatWest said the sale will have an ‘immaterial impact’ on its CET1 ratio. ‘This transaction represents further positive progress on our phased withdrawal from the Republic of Ireland,’ said NatWest CEO Alison Rose.

Rio Tinto has announced it will invest $395 million in a seawater desalination plant in the Pilbara region of Western Australia to supply water to its costal operations and local communities. Construction of the plant will begin in 2024 and is expected to be operational in 2026. It will have an initial capacity of four gigalitres per year but this could double in the future, Rio Tinto said. The mining giant is up 2.5% this morning.

Wizz Air is up 0.2% after passenger numbers grew at a faster pace than capacity in May, leading to a better load factor. The low-cost airline said it carried just over 5 million passengers in the period, up 22% from the year before. Capacity grew at a slower pace of 13.9% to over 5.5 million seats. The load factor improved to 90.2% from 84.2% the year before. The company reports results next week.

PayPoint is up 3.2% after it said annual revenue in the year to the end of March rose to around £125 million from £115.1 million the year before in a preliminary update ahead of its full year results. It said revenue growth accelerated across all three of its divisions and that pretax profit will be at the top end of expectations. PayPoint continues to integrate its new acquisition Appreciate Group, which is now known as Love2shop after being bought back in February. ‘Trading has been positive early in the first quarter of FY24, and we look forward to updating the market further at our preliminary results for the year ended 31 March 2023 on 6 July 2023,’ said PayPoint.

Amur Minerals is up 3.8% today after announcing it is considering a non-binding indicative takeover proposal outlined by Ascent Resources yesterday. Ascent said it intends to bid for Amur to form a ‘larger, well funded and more liquid, entity’ that would combine Amur’s cash with Ascent’s metals project. Importantly, Ascent made the original proposal way back in November but Amur has only recently been able to respond as it was, until recently, in the process of selling its Kun-Manie project in Russia. The all-share combination would see Amur shareholders own 28.6% of the combined business, with Ascent investors owning the other 71.4%. Ascent shares are up 0.6% in early trade.

Mitie Group has been raised to Buy from Add by Numis Securities, which has a price target of 110p on the stock. The facilities manager reports results next week. Mitie is up 2.2% today at 91.40p.

GCP Infrastructure Investments has been upgraded to Hold from Underperform by Jefferies, sending the stock 0.3% higher today.

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