With US cash equity markets closed and households across the US preparing to carve their turkeys at Thanksgiving dinners, the FTSE 100 carved out its own gains on Thursday.
Thanksgiving is traditionally a slow day for trade, but UK and European markets showed signs of life on Thursday. Broad European indices rebounded after several days of declines, and M&A action in the UK grabbed the headlines.
Aviva has made an unsolicited offer for Direct Line, which was unsurprisingly rebuffed by the company. Still, the buzz of M&A in the sector helped support peer Admiral, which rose 3%.
“After a difficult few days, European markets had a spring in their step on Thursday,” said Dan Coatsworth, investment analyst at AJ Bell.
“The FTSE 100 advanced 0.2% to 8,290, led by Admiral which jumped 3.5% on positive read-across from Aviva’s move on Direct Line.
“It’s normal to see other companies in the same sector jump when there is takeover activity as investors consider who else might be bid targets or are trading too cheaply. There is no suggestion that someone will bid for Admiral but that hasn’t stopped it having its moment in the sun.”
It wasn’t surprising that Direct Line declined Aviva’s offer, and many investors will expect Aviva to return with an improved bid soon.
“Direct Line is playing hard to get, again, as the board rejects a tentative takeover offer from Aviva on the grounds that the 250p per share on the table significantly undervalues the company,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“It’s not a clean offer; the 250p would be split half as cash and half as Aviva shares, which always makes things a little more complicated. Direct Line is no stranger to takeover offers, having rejected multiple attempts from Belgian insurer Ageas earlier in the year. There’s a case to be made that Aviva is a better suiter, given it already shares markets with Direct Line in the UK, but it’ll need to up its game – and its offer – if it wants Direct Line to take the proposal seriously.”
There was also mild optimism in the financial markets after Israel agreed on a ceasefire with Hezbollah, curtailing demand for safe-haven assets.
“Looking ahead, easing tensions in the Middle East and Eastern Europe could reduce demand for safe-haven assets, including the greenback,” said Tito Iakopa, Commercial Director at FlowCommunity.
“Despite its latest retracement, the US dollar remains near a high after a strong surge since the beginning of October. However, it could remain exposed to any changing expectations regarding US monetary policy.”