UK stocks are in sharp reverse in early trade on Thursday as growing tensions between the US and China, and doubts over Theresa May's government leadership because of Brexit continue to gnaw away at investor confidence.
The benchmark FTSE 100 slumps more than 80 points, or roughly 1.2%, to 7,247.66, although a swathe of companies going ex-dividend today (when new shareholders lose the right to the next payout) is also acting as a drag.
Ex-dividend stocks are led by FTSE 100 firms Morrisons (MRW) - today's biggest faller down 5.5% at 197.95p - Bunzl (BNZL) and Carnival (CCL), the cruise lines operator, plus FTSE 250 housebuilder Bellway (BWY).
ACTIVIST UPS MERLIN PRESSURE
On the corporate news front, Legoland-to-Alton Towers theme parks operator Merlin Entertainments (MERL) is being targeted activist shareholder ValueAct Capital, which has urged the company to go private.
Merlin has today responded with a fairly anodyne statement that says it is actively engaged with all shareholders, including with ValueAct, which owns a 9.3% stake in Merlin.
Investors clearly believe this could be the start of a take private process that could drive the share price substantially higher. According to ValueAct's sums, the business should be valued 20% higher than current levels.
The shares have today rallied more than 4% to 346.9p but that is significantly shy of the 530p levels of two years ago.
In an open letter, ValueAct said the theme park group is investing too much capital in long term projects that won’t generate decent returns for years. It points out that the share price is down 27% since the 2013 IPO, despite earnings per share increasing by 35.5%.
Merlin suffered the ignominy of a downgrade by HSBC analysts on Monday.
SERCO ACQUISITION SWOOP
The $225m deal, which is being financed through a mix of new shares and debt, is expected to complete in the second half and to add to earnings straight away.
TODAY'S BIGGEST RISERS AND FALLERS HERE
Testing and certification group Intertek (ITRK) reports a ‘good start to the year’ with revenues up 7.3% in the first four months thanks to organic growth of 3.3%, acquisitions and favourable currency movements.
The firm says it is well on track to deliver on its full year revenue, margin and cash targets, but the shares give up 2.2% to £50.75.
ELSEWHERE IN THE MARKET
Mitchells & Butlers (MAB) is given a lift as its share price rises 3% to 250p after reporting a 4.1% increase in first-half like-for-like sales and a return to operating profit growth. The company continues to outperform the market even amid continued uncertainty from the UK political and economic landscape.
In the last 33 weeks to 18 May - including the period since the first half - the company said that like-for-like sales were up 3.8%.
On the slide is Tate and Lyle (TATE), giving up 4% to 760p, after posting a drop in full-year pre-tax profit as higher costs and a fall in its primary products division took their toll while market conditions remained challenging.
Pre-tax profit slumped 16% to £240m in the year to 31 March while its primary products business fell 11% to £148m.
Brickmaker Ibstock (IBST) edged 0.081% higher after it reported a ‘solid’ start to the year, but also said it expected that performance would be second-half weighted, as it continues its ‘enhanced’ maintenance programme.
Shares in discount goods retailer B&M(BME) drop 4.8% even as it reported ‘strong’ results as annual pre-tax profits grew despite a 'challenging' retail backdrop amid rising costs and increasing consumer uncertainty.