Defensives push the FTSE slightly higher as investors digest Kim Jong Il death

<p>Defensive stock sectors such as pharmaceuticals and tobacco firms helped to push the FTSE 100 marginally higher despite opening weakness as investors reacted to the […]</p>

Defensive stock sectors such as pharmaceuticals and tobacco firms helped to push the FTSE 100 marginally higher despite opening weakness as investors reacted to the death of North Korean leader Kim Jong Il.

The death of Kim Jong Il had been long expected in truth, with rumours speculating over the deterioration of the leaders condition earlier this year. The groundwork had been long in place for his replacement, his son Kim Jong Un, and so the transitional phase of the new leader of the communist state could be less traumatic than feared. That said, tensions are high in the region with the South Korean army on alert and investors are keeping a firm eye on developments in the region which may destabilise the region.

In European trade, the passing of Kim Jong Il has seen little fundamental reaction in European equities. Traders have started to position themselves for the holiday season and expected lower volumes in the market, which can exacerbate market moves and keep a volatile edge to trading. As such, defensive stock sectors have been sought by investors, who are looking to diversify their portfolios and deleverage the amount of risky asset classes they hold.

The move by Fitch and the lack of activity from Standard & Poors’ post EU Summit regarding their ratings of European sovereign states is keeping investors somewhat cautious also. Fitch revised their outlook on their credit rating for France to negative from stable but affirmed their top notch rating. The revision in outlook means that they could downgrade their rating on French debt within a year but it also buys France time to ratify the new EU intergovernmental treaty in March.

HMV shares hit all new time low after another warning
HMV shares hit a new all time low of 3.3p this morning after the struggling retailer said that it may not survive in its current structure after posting a deeper than expected loss for the first half of the year. The retailer has net debts of £163.7m and a current market cap of just £15.1m, meaning it could be forced to sell off assets such as HMV Live.

The sharp fall from grace of the long standing UK retailer from a share price of 280p just 6 years ago to 3p today is immensely sad to see and whilst the writing had been on the wall for the firm for the last few years, the move in share price indicates investors do not believe the firm can survive in its current state and time has almost run out.

There is every possibility that a bad christmas at HMV could tip the firm too far over the edge.

Gulf Keystone shares jump on bid speculation
Shares have hit a new all time high of 225p today after weekend reports of a potential bid from Exxon Mobil of around 800p a share.

If a bid was to emerge at or around the 800p level, it would be a huge offer, given the fact that Gulf Keystone’s shares closed at 165.50p on Friday. So effectively the premium on an offer within this range would be extremely high, so much so that one cannot help eye this speculation with a bit of a pinch of salt. Whilst there could well be a potential bid brewing according to the press, an offer around the 800p mark could be viewed as either extremely generous or fanciful.

Either way, it has not stopped a shooting share price today, with the firms share prices rallying well over 20% in early trading as investors buy into this story.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.