London open: Stocks gain as miners boosted by merger news

(Sharecast News) - London stocks ticked higher in early trade on Tuesday as a big merger in the mining sector helped to boost the mood, with French politics still in focus after Prime Minister Francois Bayrou lost a confidence vote. At 0825 BST, the FTSE 100 was 0.2% firmer at 9,239.79.

Tickmill Group's Patrick Munnelly said: "President Macron has announced his intention to appoint a new Prime Minister to replace Bayrou in the coming days, signalling he is not considering the snap election route despite the government losing a confidence vote last night. However, given the current parliamentary deadlock, it remains uncertain how a new Prime Minister could secure approval for the 2026 budget.

"While the euro showed no adverse reaction to the vote outcome, market expectations for a swift resolution to France's political and fiscal challenges remain subdued. This uncertainty keeps the potential for yield spread volatility elevated - not only for France but also for other nations perceived by markets as fiscally vulnerable.

"The UK finds itself in a similar scenario ahead of the Budget announcement on 26 November. Ultimately, government policy decisions will likely play a significant role in driving cross-market gilt yield spreads. In the meantime, heightened focus on France raises the risk that UK gilts may be grouped with bonds from other fiscally constrained nations, leading to stronger correlations within this cohort.

"This trend, already evident, reflects a modern and less extreme version of the 'core versus periphery' dynamic seen in the 2010s - though Italy occupies a markedly different position this time around. In short, if political uncertainty in France escalates in the coming weeks, UK gilts are unlikely to escape pressure stemming from volatility in French bonds."

Investors were also digesting the latest figures from the British Retail Consortium, which showed that retail sales grew at a solid pace in August, capping off a strong summer for retailers with activity receiving a boost from warm weather and an interest-rate cut.

Total retail sales increased by 3.1% compared with last year, the BRC-KPMG retail sales monitor showed.

That followed a 2.5% annual increase in July and a 3.1% gain in June, and was comfortably ahead of the 12-month average growth rate of 2%.

Food sales were up 4.7% on last year, accelerating from the 3.9% gain in July, though this was largely down to inflation, with food prices up 4% in August. Non-food sales growth also picked up to 1.8% from 1.4%, the BRC said.

Meanwhile, in-store non-food sales were 1.3% higher, while online non-food sales gained 2.7%.

""Sunny weather and an interest rate cut helped August round off a solid summer of sales," said BRC chief executive Helen Dickinson.

"Computing performed well as parents readied children for the new academic year, and gaming continued to show strong sales. Furniture also did better for the second month in a row, following several months of falling sales. New school clothing and footwear did not sell as well as expected, as some families opted for second-hand purchases."

Despite the strong summer, Dickinson said retailers were cautious heading into the key autumn-winter selling period, calling on the government to help improve consumer and business confidence.

"With the later-than-expected Budget falling just days before Black Friday, many are uneasy about how consumer confidence and spending could be impacted by tax rise speculation in the run-up to Christmas," she said.

In equity markets, Anglo American shot up as it said that it and Canada's Teck Resources have agreed a merger "of equals" to form the Anglo Teck group headquartered in Canada and expected to offer investors more than 70% exposure to copper.

In a joint statement, the two miners said the deal was expected to produce annual synergy savings of $800m.

The news lifted the mining sector, with Glencore and Antofagasta also sharply higher.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: "Anglo American's merger with Teck is its latest strategic pivot that cements copper at the heart of its portfolio. With over 70% copper exposure and a top-five global position, the combined group is positioned to ride the structural demand story tied to electrification and energy transition. The $800m in annual cost synergies and $1.4bn EBITDA uplift from Chilean asset integration are compelling. But the real prize is growth optionality, leveraging a pipeline of brownfield and greenfield projects across the Americas.

"For Anglo investors, the $4.5bn special dividend sweetens the near-term picture, while the long-term upside hinges on execution and a green light from the regulator. Back-of-the-hand maths suggests Teck holders are getting a healthy premium from the deal, and shares of the Canadian miner have soared in after-hours trading."

Elsewhere, Computacenter rallied as it posted a dip in first-half pre-tax profit but struck an upbeat note on the outlook and said it expects some recovery in public sector activity in Germany.

Segro was boosted by an upgrade to 'buy' at Goldman Sachs.

On the downside, homeware retailer Dunelm slumped as it said in its full-year results that it was pleased with early trading in the new financial year, but has yet to see signs of a sustained consumer recovery.