Financial market research and analysis

The recovery in oil prices continues. WTI contracts trade at $40 for the first time in more than three months. Commodities gained: copper futures traded 0.33% higher, while nickel and iron futures gained 1.93% and 3.00% respectively.

Anglo American (+1.50%), BHP (+1.20%) and Glencore (+1.17%) opened in the green after pushing the FTSE out of the red yesterday. Randgold (-1.95%) and Fresnillo (-0.60%) are in the red due to the pullback in gold prices to $1255/50 area.


Sainsbury’s has until 5pm to make an offer for Argos

The Argos offer deadline is at 5pm today. At this point, Steinhoff has the most attractive offer on the table, which is an all-cash £1.44 billion – 175p per share. In the meantime, the Home Retail price rose to 182.50p, pushing the HRG market value to slightly above £1.50bn.

It is now more likely that the bidding war between Steinhoff and Sainsbury’s will drive the bid offer to at least £1.5bn. There are talks that Sainsbury’s could even go all-cash as its competitor, after it announced to have generated £100 million more in cash than analyst estimates in the past year. Home Retail’s board will certainly be in favour of an all-cash deal.

Even though the Argos deal is not a ‘must-do’ according to Sainsbury’s CEO Coupe, it is still a good opportunity to fast-track activity on the very prosper online market. In this respect, the company has made clear that it will not hesitate to make a hostile bid. The deal could turn out to be even sweeter considering that sales in retail stores are still at risk due to prospects of smaller growth in the economy. Of course, the price is important. Neither Sainsbury’s nor Steinhoff will be willing to go too wild. Sainsbury’s Coupe said ‘There’s a price and we won’t go beyond that’, while Steinhoff is known to be on several deals, including French Darty or Australian The Good Guys.

This being said, the deal may not be sealed today. If one party comes up with a firm offer today, the other party has 53 days to respond. If both parties are not set, the HRG could ask for extension.

Berkeley Group (-1.14%) is among the biggest loser in London. Investors appear to be little convinced by Berkeley’s optimism as it said to see the current year at the top end of expectations. Berkeley said that the housing market in London remained stable in 3Q and underlying demand has stayed strong. With prospects of a longer period of low rate environment, combined with higher volatility in the financial markets and the complete lack of visibility on the money market, there is no doubt that investors continue seeing the real estate as an interesting alternative investment.

The pound rallied 450 pips against the US dollar as the Bank of England once again, repelled speculations of a potential BoE rate cut. Cable is testing the 1.45 resistance and could potential surpass this level to extend gains toward the 100-dma (1.4661). GBP-bulls should, however, keep in mind that pending Brexit risks could trigger waves of a GBP-unwind. Digging into the options market, investors are increasingly hedging against the risk of a pound depreciation moving into June 23rd Brexit referendum.