Must read: FTSE 100, oil, gold, Alibaba, Brazil, Vodafone, AstraZeneca, UK energy

With the FTSE 100 having hit a three-year high on Friday, our head of investment examines markets and the big news this morning.

GLOBAL MARKETS

The FTSE 100 is extending gains this morning having hit a three-year high on Friday. Miners such as Antofagasta (LSE:ANTO), Glencore (LSE:GLEN) and Anglo American (LSE:AAL) are outperforming, thanks to a rally in China overnight as Beijing continues to ease its Covid-era restrictions. European currencies are also strengthening on the back of a weaker US dollar thanks to a pickup in sentiment towards the US economy. Friday’s December US jobs report outpaced analysts’ expectations while wage growth was below forecasts, sparking a rally on Wall Street, lifting the major averages by more than 2% each with US futures pointing to a higher open at lunchtime.

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In Asia, markets staged gains with the Shanghai Composite and the Hang Seng closing higher after China reopened its borders with Hong Kong. Alibaba (NYSE:BABA) shares outperformed after Ant Group founder Jack Ma quit control of the tech giant reducing his stake to just over 6% from more than 50%.

Markets in Brazil fell after supporters of former Brazilian president Jair Bolsonaro stormed the National Congress in Brasilia, sparking comparisons to the US Capitol riots in Washington in January 2021.

Oil prices are staging gains with WTI and Brent crude both higher by more than 2%, while gold hit an eight-month high, buoyed by hopes of less aggressive US rate hikes and a weakening US dollar.

VODAFONE

Vodafone Group (LSE:VOD) has confirmed it is selling its Hungarian unit for a total cash consideration of HUF 660 billion of 1.7 billion euros. 49% of the business will go to the Hungarian government while 4IG’s Antenna Hungaria, the provider of national digital terrestrial television and radio in Hungary, will receive a 51% stake. Hungary’s economy minister says the purchase will strengthen Hungarian national ownership in a sector with the deal expected to close at the end of the month subject to customary conditions. Vodafone originally announced the deal in August.

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Viktor Orban, Hungary’s prime minister,  has been solidifying his grip over strategic corporate sectors since taking office in 2010. Meanwhile, Vodafone continues to pursue consolidation in Europe. As part of this, in October, it confirmed talks with Hutchison’s Three over a merger in Britain to create a UK market telecoms leader which would surpass EE and Virgin Media O2 in terms of mobile customer numbers.

Shares in Vodafone have been in long-term decline, shedding more than 60% over a five-year period and around 30% over the past six months. A difficult macroeconomic backdrop of rising costs and weakening performances across Europe meant the telecoms giant was forced to cut its full-year earnings forecast in November. To offset the inflationary pressures from rising energy bills, Vodafone has been increasing prices in most of its markets. It has also been facing uncertainty in the C-suite after former CEO Nick Read stepped down, replaced on an interim basis by Margherita Della Valle. The company is currently on the hunt for Read’s successor with former EE chief executive Olaf Swantee understood to be the frontrunner.

ASTRAZENECA

AstraZeneca (LSE:AZN) has agreed to buy CinCor Pharma for around $1.8 billion, paying $26 per share in cash as it looks to grow its offering of potential heart and kidney drugs. The deal represents a 121% premium to CinCor’s share price at the close on Friday. Shares in CinCor fell sharply in November and are down over 40% over the last six months after one of its blood pressure drugs failed a phase 2 trial.

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There is growing optimism towards pharma dealmaking this year after biotech companies suffered sharp valuation slides last year, prompting the opportunity for potential buyers to pounce on M&A targets with discounted price tags. Plus, with the IMF forecasting a third of the global economy will be in a recession in 2023, investors are more risk averse, looking towards defensive sectors such as pharmaceuticals to weather the downturn. Shares in AstraZeneca are trading modestly lower but are still up 40% over a one-year period.

UK ENERGY SUPPORT PACKAGE 

The UK government is expected to reduce its energy support for businesses over the next financial year by 85% according to the Telegraph, lowering the cost of the package to £5 billion which will reportedly last for one year, in order to reduce the level of government expenditure. The plan is expected to be outlined by Rishi Sunak this week and will cut the cost of the current government support from £18 billion when the scheme ends in March.

Instead of a fixed wholesale gas and electricity price for businesses, companies will reportedly be given a discount on a defined number of pounds per megawatt hour under the new plan. However, critics argue that businesses could struggle with the price cap, with the potential for some companies to go bust. After the war in Ukraine sent UK and European wholesale gas prices sharply higher, the energy market has cooled lately thanks to reduced heating demand amid the milder weather and improved gas storage facilities in Europe, pushing prices below levels seen at the start of the war.