Europe close: Shares rebound as Universal Music sounds right note
By Frank Prenesti
Date: Tuesday 21 Sep 2021
(Sharecast News) - European shares closed higher on Tuesday, rebounding strongly after a sharp fall in the previous session sparked by the China Evergrande debt crisis with Universal Music Group striking the right chord on market debut with investors.
The pan-European Stoxx 600 index finished the session 1% higher after falling 1.67% on Monday. All major regional bourses made gains with Germany's DAX rebounding to rise 1.43%.
In Britain, new data from the Office for National Statistics showed the UK's public sector borrowing had seen its second highest August on record.
Public sector net borrowing was estimated to have been £20.5bn in August, £5.5bn less year on year. Central government receipts were estimated to have risen by £5.3bn to £61.2bn. The UK's FTSE 100 index rose 1.12%.
Hong Kong shares fell slightly overnight as China Evergrande chairman Hui Ka Yuan tried to reassure investors that the debt-saddled company would "walk out of its darkest moment".
The real-estate developer has debts of more than $300bn and is in a race to raise the cash so it can pay lenders and suppliers with market observers already invoking the spectre of the collapse of US bank Lehman Brothers, which sparked the financial crash of 2008.
CMC Markets analyst Michael Hewson said concerns over Evergrande's fate had shifted to this week's bond payments, "and whether Chinese authorities will be able to manage any resulting fallout once the deadline has passed".
"There appears to be an acceptance that an Evergrande failure is more a matter of when and not if, and the real question is how any fallout is managed," he said.
In equity news, sports betting Entain, which owns Coral and Ladbrokes in the UK, surged to the top of the Stoxx with a rise of 18% on news that US sports betting business DraftKings has made a $20bn bid for the business.
The news sparked a 6.36% rise in rival 888 Holdings and 3.46% in Flutter Entertainments.
"It certainly seems an odd proposition given that Entain has a joint venture with MGM Resorts, which could prompt a counter proposal, however it is clear that DraftKings recognises Entain's strong brand in the UK as well as its other 27 markets," said Hewson.
Investors are also eyeing central bank policy meetings this week, including the US Federal Reserve and Bank of England for any indication of a slowdown in fiscal stimulus.
Fed chair Jerome Powell will hold a news conference on Wednesday at the conclusion of the two-day meeting with investors looking out for any indications about the tapering of its easy monetary policy. Powell has said the tapering could occur this year but investors are waiting for more specifics, particularly after mixed economic data released since his last comments.
In equity news, British Airways, Aer Lingus and Iberia owner IAG continued to make gains on news the US was looking at opening up to double-vaccinated European travellers in November. Swiss-based travel retailer Dufry also benefited.
Shares in UK passenger transport operator National Express jumped 7.6% after rival Stagecoach said it was in talks about a possible all-share merger. Stagecoach shares surged 21%.
Shell advanced after announcing late on Monday that it was selling the entirety of its Permian Basin assets to ConocoPhillips for $9.5bn in cash.
Universal Music Group, which has Lady Gaga, Taylor Swift and The Weeknd in its stable, soared 38.1% in its first day of trading. The company was valued at around €33.5bn ahead of its debut. Shares in parent Vivendi slumped 19%.
UMG has spent hundreds of millions of dollars investing in talent, including the $300m acquisition of Bob Dylan's publishing catalogue.
Anglo-French DIY group Kingfisher fell 4.92% as it reported a surge in interim profits but said third quarter sales were down 0.6% and noted a slowdown in the second quarter. However, it also raised second-half sales forecasts.
Sweden's gardening power tools group Husqvarna tumbled almost 7% after warning it could potentially lose top line sales of up to around SEK2 billion (£169m - $230m) due to a supplier dispute.
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