Key events
Eurozone manufacturing “going downhill, and fast”
Just in: Eurozone manufacturing remains in contraction, weighed down by Germany and France.
The latest healthcheck on the eurozone’s factory sector confirms that activity continued to contract in August.
The HCOB Eurozone Manufacturing PMI, has come in at 45.8 in August, for the third month running. Although it’s slightly higher than the ‘flash’ reading of 45.6, it shows the sector contracted again.
Dr Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, says:
“Things are going downhill, and fast. The manufacturing sector has been stuck in a rut, with business conditions worsening at the same solid pace for three straight months, pushing the recession to a gruelling 26 months and counting. New orders, both domestic and international, are slowing down even more, dashing any short-term hopes for a rebound.
Adding insult to injury, input prices have been creeping up again since June. There is a silver lining insofar as companies managed to pass some of these higher costs onto their customers in August.
France’s manufacturing PMI hit a seven-month low, while Germany’s was the lowest in five months.
FTSE 100 slides away from record high
Despite Rightmove surging by over 20%, London’s blue-chip stock index is slightly lower this morning.
The FTSE 100 has dropped by 11 points, or 0.13%, to 8366.
Last Thursday it closed at 8,380 points, its highest finishing level since 21 May.
The Footsie has recovered from its plunge in early August, and not too far from the all-time high of 8,474.41 on 15 May.
If Rightmove were taken over, it would join a list of UK companies who have recently fallen to overseas suitors.
In recent months, UK cybersecurity firm Darktrace agreed to be taken over by US private equity firm Thoma Bravo, packaging firm DS Smith is being acquired by Tennessee-based International Paper, and online investment platform Hargreaves Lansdown has agreed a £5.4bn takeover by a group of private equity companies.
Richard Hunter, head of markets at interactive investor, says the UK market is becoming a ‘hunting ground’:
Given cheap valuations on a historical basis as well as in comparison to many developed markets elsewhere, the UK has inevitably become something of a hunting ground.
The latest potential target in the premier index is Rightmove, after comments from Australia’s REA Group that it was considering making an offer having identified a “transformational opportunity” in combining the two online property websites. After a delayed start to enable price equilibrium, Rightmove shares opened up by around 24% as investors await further details of a concrete bid.
Rea Group’s interest in Rightmove could be a sign that the UK property sector is heading for brighter times.
Jessica Pok, analyst at Peel Hunt, says falling interest rates could support the housing market (meaning more business for Rightmove):
It does not come as a surprise to us today that Rightmove has become an acquisition target, given the rating has been subdued for some time due to the negative sentiment on the UK housing market and concerns over competitive threats from CoStar/OnTheMarket.
However, our belief, reflected by the takeover interest, is that the shares look attractive, given the stability of its core classifieds business and the growth opportunities in other revenue streams such as Mortgages, Commercial RE and Rental under the new CEO. On top of that, with declining rates, we believe the UK property market has scope for improvement as we move into 2025.
Pok has a price target for Rightmove of 630p, which was a healthy premium on last week’s levels around 550p – before this morning’s jump higher.
Rightmove shares jump 25%
Shares in Rightmove have surged by around 25% at the start of trading in London!
They’ve jumped as high as 696p, after REA Group revealed it was considering a takeover approach (see earlier post).
That’s their highest level since March 2022, up from 555p on Friday night.
That lifts Rightmove’s value to around £5.5bn, up from £4.34bn on Friday night, as the City tries to assess how much REA Group might need to offer to acquire it.
Anxiety over demand from China is weighing on the oil price today.
Brent crude has dropped by 0.66% to $76.43 per barrel, the lowest in over a week.
Founded in a garage in Melbourne, REA Group has become Australia’s largest property website with operations across the country as well as in India and south-east Asia, PA Media points out.
According to its website, it employs more than 2,800 people.
If REA Group succeeded with a takeover of Rightmove, it would create an online estate agent with top positions in the Australian and UK property market.
REA argues there are “clear similarities” between the two businesses – both hold leading market positions in the residential business, for example, and “highly aligned cultural values”.
Shares in REA Group have fallen by 5.5% on the Australian stock market today, as traders react to its interest in Rightmove.
Murdoch’s REA Group considers Rightmove takeover
Rupert Murdoch’s property listings company is considering a swoop on UK housing portal Rightmove.
Australia’s REA Group, which is majority-owned by News Corp, says it sees an opportunity to create a “global and diversified digital property company” by acquiring Rightmove.
It is considering a possible cash and share offer for Rightmove, the FTSE-listed company, which was valued at around £4.34bn on Friday night.
REA told the City this morning:
“REA has a long history of growth and has demonstrated a track record of building businesses over decades to create globally leading platforms that have transformed the way people experience property.
With an acquisition of Rightmove, REA would look to enhance the UK property experience for buyers, sellers and renters, supporting Rightmove’s vision “to give everyone the belief they can make their move” while positively contributing to the property market ecosystem with investment and innovation.”
Introduction: China’s manufacturers report drop in export orders
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Chinese firms have been hit by a drop in exports orders, suggesting weakening demand from overseas as the crucial Christmas goods shipment period gets underway.
The latest survey of China’s manufacturers, from Caixin, released this morning shows that export orders were “subdued” last month, falling marginally for the first time this year amid reports of deteriorating external conditions.
The survey, which tracks small and medium-sized firms, also suggests that conditions in China’s manufacturing sector improved in August.
Price pressures eased as some factories benefitted from lower raw material costs, and confidence levels rose to a three-month high.
This lifted the Caixin/S&P Global manufacturing purchasing managers’ index (PMI) up to 50.4 in August, from 49.8 in July, and above the 50-point mark showing stagnation.
Dr Wang Zhe, senior economist at Caixin Insight Group, says:
“Demand picked up as total new orders resumed growth, with stronger demand for intermediate goods. Exports declined for the first time in eight months, dragged particularly by weakening demand for consumer products, pushing the corresponding indicator to the lowest since November.
So, a mixed picture. As was China’s official PMI, released by the National Bureau of Statistics on Saturday.
It found that China’s manufacturing activity sank to a six-month low in August as factory gate prices tumbled and owners struggled for orders.
The NBS’s purchasing managers’ index slipped to 49.1 from 49.4 in July, its sixth straight decline in a row.
We’ll find out this morning how UK and eurozone factories perfomed last month.
The agenda
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9am BST: Eurozone manufacturing PMI for August
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9.30am BST: UK manufacturing PMI for August
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11am BST: Ireland’s GDP and GNP report for Q2 2024