Where should you watch for market-moving news in October? In this article, I’ll focus on three FTSE 100 companies that could move the needle this month.
Takeover battle could drive price higher
The share price of London Stock Exchange Group (LSE: LSE) has risen by 35% over the last three months thanks to two audacious takeover proposals.
LSE shares jumped at the end of August when news emerged that the firm was making a $27bn bid for financial data firm Refinitiv, which was previously known as Thomson Reuters.
The logic behind the deal seemed sound and shareholders were broadly positive, despite the steep price tag. I can certainly see the attraction of controlling this big data business for LSE. I reckon it’s a natural pairing for its exchange and clearing businesses.
However, on 11 September the market was stunned when the owner of the Hong Kong stock exchange, HKEX, made a proposal to acquire LSE. The cash and shares deal was valued at £31.6bn, or 8,361p per share — but HKEX would require LSE to scrap its planned acquisition of Refinitiv.
The LSE board has rejected the HKEX offer, but this story isn’t over yet. I’d expect HKEX to increase its bid or admit defeat in October. With LSE shares trading at record highs, we could see some sharp movements up or down when further news emerges.
Heading to the US?
Plumbing and heating supplies business Ferguson (LSE: FERG) has already confirmed plans to spin out its UK business, Wolseley, into a new UK-listed company. Ferguson will be left as a pure US-focused company with a UK listing.
Some shareholders believe that makes no sense. They’d like to see Ferguson leave the FTSE 100 and move its stock market listing to the US, where it might attract a higher valuation. The appointment of a new US-based chief executive for the group has added to speculation that a change is likely.
If you’re a UK private investor holding the stock, I wouldn’t be too worried. Holding US stocks is easy enough in most big brokerage accounts. For investors who’d prefer to own UK stocks only, I would expect Ferguson to take steps to ensure an orderly market for UK sellers. In the absence of any concrete news, I would continue to hold Ferguson.
Will Lloyds surprise?
Of all the stocks due to report earnings in October, I suspect Lloyds Banking Group (LSE: LLOY) will be one of the most closely watched. The UK consumer-focused bank is due to report third-quarter earnings on 31 October, which is also expected to be Brexit day!
Although Lloyds’ headlines may be overshadowed by Brexit news, I expect City traders to be watching the bank’s numbers closely for signs of a slowdown in consumer spending or an increase in bad debt levels.
Lloyds’ large mortgage, credit card and loan businesses mean that it has a terrific insight into the financial health of UK consumers. The Lloyds share price has picked up in recent weeks but continues to trade close to book value, with a 6%+ dividend yield.
I believe the stock offers good value for long-term income buyers, even if the economy slows. But short-term reaction to bad news could provide an even better buying opportunity. Watch this space.
