FTSE 100 ticks higher as gold reaches new highs, Flutter Entertainment bets on Brazil, Vodafone and Three merger in doubt as CMA demands remedies

“The FTSE 100 ticked higher on Friday, putting the index on course for a solid if unspectacular week of gains,” says AJ Bell investment director, Russ Mould.

“Precious metals miners led the way as gold reached new heights, while bargain hunters seemingly took advantage of the recent sell-offs at Burberry and Rentokil.

“Flutter Entertainment’s bet on Brazil, buying a large stake in a Brazilian operator, makes sense when you consider this is a rapidly regulating and potentially very sizable market. It may also have a positive read across for rival Entain, which has its own large Brazilian operation.”

Gold

“Gold prices are once again at record levels as the dollar weakens ahead of an anticipated interest rate cut from the US Federal Reserve next week.

“A weaker dollar is typically supportive to gold because it is denominated in the US currency. Lower rates are also a driver for the precious metal as it increases its attractiveness versus assets like cash and bonds, where the level of income is likely to be lower.

“Other factors which have helped drive gold to all-time highs are buying by central banks and its traditional safe haven qualities, which have been in demand amid the ongoing conflicts in Ukraine and the Middle East, as well as the uncertainty created by the looming US presidential election.”

Vodafone/Three

“The portents for the merger between Vodafone and Three being able to clear regulatory hurdles were never that great given in 2016 the competition authorities nixed the latter’s takeover of O2.

“So, it shouldn’t come as a major surprise that the CMA has said it is considering forcing the companies to give up some assets or spectrum. Losing the latter in particular could be enough to derail the deal.

“Vodafone and Three’s pitch is that they need to combine to compete more effectively with larger rivals Virgin Media, O2 and EE and they have also pledged significant infrastructure investment.

“However, the CMA think customers are going to face worse outcomes and this is an understandable position given the number of big network operators in the UK would be reduced by 25% at a stroke if the deal goes through.

“Vodafone and Three have said they will work with the regulator and it may be that a solution can be reached – after all, Vodafone could really do with something to revive a business and a share price which has been listing badly for years. However, if the trade-offs become too large then Vodafone and Three walking away from a tie-up can’t be ruled out.”

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