FT : Reshuffle on the cards for FTSE 100 shows 2016’s rough hand

Reshuffle on the cards for FTSE 100 shows 2016’s rough hand
One of the potential winners shows how the right tactics can win in difficult times

The last reshuffle of 2016 for London’s main stock indices takes place on Wednesday, and some of the changes on the cards are very revealing about the hand dealt to investors in the final quarter of the year.

One of the stocks most likely to drop off the FTSE 100 and into the FTSE 250 — precious metals miner Polymetal International — has been hit hard by sliding gold prices since Donald Trump won the US presidential election. The return to risk across global markets has eroded gold prices, and hit shares in Polymetal accordingly.

Brexit, the other great political surprise, is also making its presence felt in the relegation zone. Other candidates for the drop include Travis Perkins, the builders merchant and exposed to the domestic UK economy while Intu Properties, the shopping centre owner, also has much to fear from the outlook for constrained consumer spending in the wake of the vote to leave the EU.

The story behind one of the main candidates for promotion shows how careful tactics can win, even if a company is dealt a bad hand.

Smurfit Kappa, the international packaging company, generates significant revenue in two of the worst-performing currencies — sterling and the Mexican peso. But it has been able to offset the impact with what Credit Suisse analysis calls a “higher share of value added packaging sales, cost take-out, [and] quick win capex.’’

The reshuffle will be based on Tuesday’s closing prices.

>>> ECB's Draghi: Reiterates that Euro Area economy is proving resilient this ye

ECB's Draghi: Reiterates that Euro Area economy is proving resilient this year; expands at moderate pace - comments in EU Parliament 
- Difficult to predict the precise economic implications of the United Kingdom withdrawing from the EU. 
- The euro area economy continues to expand at a moderate but steady pace, despite the adverse effects of global economic and political uncertainty. This gradual upward trend is expected to continue, not least owing to our monetary policy measures.
- One important lesson from the crisis is that a half-built house is not stable, it is fragile. Progress is thus needed in all the unions identified in the Five Presidents Report.

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:
  • BOSC -14.2%, SFUN -8.2%
Select financial related names showing weakness:
  • DB -2.2%, CS -1.9%, LYG -1.7%, HSBC -1.3%, BAC -0.7%
Select metal producers trading lower:
  • MT -1.4%, BHP -1%, FCX -0.9%, RIO -0.9%, CLF -0.7%
Other news:
  • BCS -1% (announces further Non-Core disposals; sale of Wealth and Investment Management business in Singapore and Hong Kong to Bank of Singapore completes)
  • UL -0.9% (provided update last week on Tax Case in Brazil; judicial review to be heard in a higher court in Q)
Analyst comments:
  • PNRA -1% (downgraded to Neutral from Outperform at Wedbush)
  • C -1% (downgraded to Hold from Buy at Jefferies)
  • QCOM -0.8% (removed from US 1 List at BofA/Merrill)
  • WFC -0.6% (downgraded to Hold from Buy at Jefferies)

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance:
  • MDGS +8.2%
M&A news:
  • TIME +11.6% (NYPost report that the company has rejected an $18.00/share takeover bid from Edgar Bronfman Jr)
Select metals/mining stocks trading higher:
  • AU +3.7%, HMY +3.1%, AG +2.3%, GGB +1.7%, ABX +1.4%, SLW +1.3%, GDX +1.3%, GOLD +1.3%, SLV +1%, VALE+1%
Other news:
  • HTBX +20.1% (continued strength being attributed to run up ahead of 11/30 presentation)
  • IDRA +12.6% (Idera Pharma and Vivelix Pharmaceuticals enter into exclusive license and collaboration agreement granting Vivelix worldwide rights to develop and market IMO-9200)
Analyst comments:
  • FCAU +1.6% (upgraded to Buy at Evercore ISI)
  • COP +1.1% (upgraded to Buy from Neutral at Goldman)