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FTSE dips on global market contagion

by LLB Reporter
12th Jul 22 12:02 pm

The FTSE 100 dipped at the open after weak trading in the US and Asia as investors continue to weigh the risks associated with war in Ukraine, stubborn inflationary pressures and Chinese lockdowns,

This cocktail of worries is preventing the markets from making any tangible progress. Dire retail sales data for June raises the spectre of recession in the UK as cost of living pressures continue to bear down on household finances.

Russia’s renewed threat to turn off the gas to Europe has sent the euro tumbling to a 20-year low against the dollar, near parity with its US counterpart, and will only increase the importance of European producers.

 AJ Bell Financial Analyst Danni Hewson said: “Kistos Energy is looking to consolidate its position in European gas through a merger with its larger rival Serica.

“For now Kistos has been rebuffed, with a counter offer from Serica dismissed by Kistos itself, but the strategic merits of the deal may begin to add up for shareholders now the negotiations have been made public.

“It’s certainly the case that the scale of the combined entity would make it a very serious player in this market.

“Kistos, which has assets in the Netherlands and the UK, continues to persist. Although it may need to improve the terms of the deal to get it over the line since the premium on offer to Serica shareholders doesn’t look massively enticing.

“Another deal in the natural resources space will see Anglo Pacific acquire royalties over advanced copper and nickel developments from South32.

“The deal looks a good fit for Anglo Pacific’s model of providing cash to natural resource companies in exchange for a royalty on future production.

“Elsewhere in the mining sector the game looks to be up for Petropavlovsk, which is set for an ignominious end brought about by the Ukrainian conflict.

“The Russian gold miner has been under acute financial pressure linked to sanctions, unable to sell its gold or pay its debts, and a company which once had a place in the FTSE 100 looks set to leave shareholders with nothing.

“This is a reminder of the risks of investing in resources firms with assets in questionable jurisdictions, particularly if they only operate in one territory.”

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