FTSE 100 starts marginally higher – HMV relief on refinancing deal

<p>The FTSE 100 started marginally higher, tracking similar moves in European indices, with the mining and insurance sectors providing support whilst a debt restructuring for […]</p>

The FTSE 100 started marginally higher, tracking similar moves in European indices, with the mining and insurance sectors providing support whilst a debt restructuring for HMV helped to push shares higher by as much as 10% in early trading.

Both the mining sector and insurers have gained between 0.8% and 1% in early trade, helping to give the FTSE 100 a platform to build gains upon. However, with economic data starting to cloud traders’ diaries for much of the week, starting with eurozone retail sales and German manufacturing orders, this may hamper buying activity throughout the morning session somewhat. Though with no real key US data due out until later in the week, where fragile data last week increased fears of a US slowdown, there is a chance that traders may be more willing to take economic data in their stride.

Burberry lifted by PPR sector bid talk
Burberry shares rallied straight to the top of the FTSE 100 in early trade after reports in the French press that PPR is in talks to make a large acquisition in the luxury goods sector. Speculation varies in the market as to who the target could be with names ranging from Burberry to Hugo Boss, though the paper speculates that Prada, on the verge of launching an IPO in Hong Kong, could be the actual target. The news is helping to entice speculative traders into the luxury goods sector today, giving lift to Burberry’s share price.

HMV shares lifted by refinance
Shares in the troubled retailer HMV were lifted by as much as 10% before retracing to smaller gains of 4% in early trade on news that the firm has reached a refinancing deal with lenders. The firm agreed a £220 million refinancing deal with lenders led by Lloyds Banking Group and Royal Bank of Scotland, with a maturity date on the deal of September 30, 2013. The refinancing buys HMV more time to focus on turning around the downward spiral to which operations have been on for the last few years, seeing the firm’s share price fall by nearly 95% in the last two years.

The refinancing deal keeps the life support machine switched firmly on for now for the troubled retailer and shareholders will hope that this gives the board breathing space to focus on turning around the business.

Though with the company facing severe headwinds in the UK retail market place where consumers are looking increasingly online to satisfy their entertainment habits, naturally questions still surround the viability of a successful turnaround here.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (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.