London View

Bitter News for Tate & Lyle, US Inversion Legislation hits UK Pharmaceutical Shares

The S&P500 closed down by 0.8% yesterday after a drop in both existing home sales and key commodity markets weighed on the markets. Brent and WTI Crude futures fell after the Chinese Finance Minister reiterated the government’s determination not to boost economic stimulus in response to gloomy data. However, both Brent and WTI are up this morning, boosted by surprisingly positive macroeconomic data out of China this morning; the HSBC Manufacturing PMI preliminary release for September stands at 50.5 rather than the expected 50, meaning that the Manufacturing Industry is still expanding slightly. The news helped to strengthen the Shanghai Composite, with the index closing up by 0.87% this morning.

It continues to be a tough week for Tesco as the company struggles to deal with the fallout after admitting that it had overestimated profits for the first half of 2014 by around £250 million. Alan Stewart, a finance director hired by Tesco from M&S who was due to start in December, will begin his new role at the UK’s number 1 supermarket chain this week instead after an agreement between the two companies. Tesco’s share price is currently down by around 2.5% on the FTSE 100. However, the biggest loser this morning is undoubtedly Tate and Lyle on the FTSE 250, with shares currently down by around 16% after the firm issued a profit warning for the first half of 2014, apportioning part of the blame to the harsh winter conditions in the US at the beginning of the year having affected its supply chain. Back on the FTSE 100, Barclays share price is currently down by around 0.6% after the bank was fined for failing to segregate client assets from bank funds. It is the second time that Barclays has been fined for this, with the first coming back in 2011 when the FSA handing the bank a £1.1 million penalty. The FCA’s fine this time around is considerably higher, with the amount Barclays will have to pay in the region of £38 million.  

Meanwhile, the US government announced measures on Monday intended to clamp down on the policy of inversion, which has allowed US companies to move their tax base offshore through purchasing foreign businesses. US companies will from now on face further restrictions designed to prevent them avoiding US taxes by restructuring themselves abroad. UK Pharmaceutical company AstraZeneca saw shares fall this morning in response to the news, with the likelihood of Pfizer returning for another takeover attempt later this year now looking more remote. Smith & Nephew, another UK medical company recently mentioned in connection with a potential merger deal, also saw its share price fall this morning, with stock currently down by around 3%.