Monday’s Master Investor Market Report

– The FTSE 100 fell 14.56 points to 6,790.04.
– The FTSE 250 slipped 52.86 points to 17,878.43.
– The FTSE All Share dropped 8.41 points to 3,702.69.
– The FTSE AIM All Share finished 1.62 points lower at 774.12.

Although the UK economy is expected to generate “solid economic growth” over the current fiscal year, this growth remains “relatively unbalanced and mainly driven by domestic demand and the services sector, while exports and manufacturing remain subdued”, according to Moody’s. The rating agency added that households and banks remain exposed to a continuing high level of household debt, which could pose problems once interest rates rise or if house prices fall.

On the public sector front, Moody’s expects the government to achieve a reduction in the budget deficit to just above 1% in the current parliament, which would be sufficient to bring about a reduction in the debt to GDP ratio from 2017 onwards.

Shares in Diageo (DGE) fizzed 119.5p higher to 1,880p as investors toasted rumours of bid interest over the weekend. 3G Capital, which is owned by Brazilian billionaire Jorge Paulo Lemann, is reportedly considering a takeover bid for the drinks company. Notably, Paulo also owns a controlling stake in AB InBev, and it is thought that the main appeal of a deal lies in giving InBev a foothold in Africa via Diageo’s beer assets. Coincidentally, JPMorgan Cazenove upgraded Diageo to ‘neutral’ from ‘underweight’ and raised its target price to 1,900p from 1,700p, noting that the stock is down 4% year-to-date versus the European beverages sector up 10%.

BT (BT.A) was also the subject of M&A gossip, after reports in the Sunday Telegraph that Deutsche Telekom is reportedly in advanced talks to merge its American arm, T-Mobile US, with satellite pay-TV operator Dish Networks, which the paper argued would raise the likelihood of a deal with BT. Industry executives have long dreamed of joining up their networks across boarders, but one has to wonder whether the Crown Guarantee provided by the UK Government to members of BT’s mammoth pension scheme could prove a stumbling block to a takeover. BT shares dipped 0.6p to 438.8p on the day.

WPP (WPP), the world’s largest advertising agency, has bagged a minority stake in Turkish digital agency WANDA Digital for an undisclosed amount. WANDA, whose clients include Turkcell, L’Oreal, Nestle and Unilever, is part of WPP’s drive to grow its emerging market and digital exposure at a time of great upheaval for the media sector. Last year, 36% of total revenues derived from ‘direct, digital and interactive’ business, while the Data Investment Management segment alone accounted for a fifth of revenues. WPP shares finished 1p higher at 1,487p.

Hargreaves Lansdown (HL.) slipped 8p to 1,230p on the back of a downgrade to ‘underperform’ from ‘sector perform’ at RBC Capital Markets. Although the broker conceded that Hargreaves remains a high-quality, well-managed company with an impressive ability to attract net inflows, it said it believes the stock is now expensive both historically and versus its peer group of US-listed platforms.

In other broker news, Vodafone (VOD) was upgraded to ‘neutral’ at Citigroup, which said the mobile operator’s valuation is now in line with peers. Also moved to ‘neutral’ at Citigroup was housebuilder Bellway (BWY), whose valuation the broker believes is now “up with events”. Meanwhile, SocGen noted that Standard Chartered (STAN) would stand to gain the most from a mooted review of the Bank Levy by Chancellor George Osborne.

Cloud computing specialist iomart (IOM) has acquired SystemsUp, a London-based Public Cloud consultancy, for an initial cash consideration of £9 million plus a contingent consideration of up to £3.5 million. The initial consideration will be financed out of iomart’s existing banking facilities and the acquisition is expected to be immediately earnings enhancing before acquisition costs, the company said. iomart shares finished 7.125p lower at 232p.

Shares in oil minnow Range Resources (RRL) soared to the top of the small cap leader board today, after trading was resumed in its shares following last Friday’s suspension. Trading resumed after a near six-month hiatus after the Trinidad oil and gas firm received £5.2 million from a recently agreed funding deal with Beijing Sibo Investment Management. Range shares finished the day 0.37p higher at 0.9p.

Tomorrow’s news today

Carclo, CML Microsystems, Creston, Custodian Reit , Energy Assets Group, Iomart Group, Oxford Instruments, Park Group, Picton Property Income Ltd, Private & Commercial Finance Group, Software Radio Technology and WYG are all due to report full-year results tomorrow.

On the economic front, we are expecting UK balance of trade data.