Vodafone's UK Merger Seen as a Hard Sale for -2-

1149 GMT - Aston Martin Lagonda Global Holdings shares rise 5% to 292 pence after Jefferies upgraded the iconic sports-car maker to hold from under-perform. It also raises its price target on the stock to 300 pence from 160 pence. Last month, Aston Martin said China's Geely Holding was increasing its stake in the company to about 17%. "AML has finally broken a cycle of discounted rights issues and is firmly in M&A territory," Jefferies analyst Philippe Houchois writes. "The valuation implied by Geely paying 335 pence per share is quite generous for a company with much to prove operationally and a long succession of wealthy shareholders. However, the deal also provides support and possibly a floor for future transactions, be it another capital raise, a higher stake, or a full takeover." ([e-mail])

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Vodafone Gains After News of Three UK Tie-Up

1128 GMT - Vodafone shares are among the biggest FTSE 100 risers, up 3% after the mobile-phone operator and CK Hutchison Group Telecom Holdings, a subsidiary of CK Hutchison Holdings Ltd., announced a deal to merge their U.K. businesses. The tie-up between Vodafone UK and Three UK would create Britain's largest telecommunications operator with 27 million customers, knocking BT-owned EE off the top spot, Interactive Investor says. "Investors have fallen out of favor with Vodafone lately, with shares down 40% over the past 12 months even after today's jump," Interactive's head of investment Victoria Scholar writes. "Perhaps this deal could reinvigorate Vodafone's bull case amid hopes that the combined entity will benefit from its increased force in the sector." ([e-mail])

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Shell's Focus on Capital Discipline Is Positive

1110 GMT - Shell's lower capital expenditure is a positive surprise as it points to stronger free cash-flow generation and the potential for higher returns in coming years, Berenberg analysts write in a research note. The lower capital expenditure guidance range for 2024-25 and the additional cost-saving target highlights the focus on efficiency and discipline under the new CEO Wael Sawan, the analysts say. "We view this focus on capital discipline positively, and think that this is one of the key areas where the new CEO is changing the strategy," they say. A higher hurdle rate for all investments could drive better returns across the company's portfolio, they add. Berenberg keeps a buy rating on the stock with a price target of 2,850.00 pence. Shares are up 1.5% at 2.330,00 pence. ([e-mail])

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Gap Between UK Short and Long-Dated Gilt Yields Could Widen

1104 GMT - The gap between the U.K.'s short and long-dated gilt yields could widen in coming months as the supply of long-maturity gilts increases considerably in the summer, causing prices to fall and yields to rise faster than short-dated peers, UBS Research economist Anna Titareva and strategist Emmanouil Karimalis say in a note. "Record summer supply, which is likely to dominate the summer illiquidity, and demand-supply imbalances with large gilt buyers absent from the market, could give rise to U.K. long-end steepeners," they say. ([e-mail])

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Shell's Cut to Capex Could Sparks Fears Given Upstream Commitment

1055 GMT - Shell's capital expenditure cut for 2024-25 was unexpected, and could prompt fears of upside risk to the new range given commitment to stabilize upstream volumes, RBC Capital Markets analyst Biraj Borkhataria writes in a research note. The energy major lowered its capital expenditure guidance for 2024-25 to $22 billion-$25 billion, with the company noting that the range doesn't includes inorganic activity. At the same time, Shell plans to stabilize liquid production in its Upstream business, which includes oil. "We believe the market did not expect this, with some fears actually around upside risk to the capital expenditure range alongside the message around upstream volumes," Borkhataria says. RBC keeps an outperform rating on the stock. Shares are up 1.2% at 2.323,00 pence.([e-mail])

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Sterling Could Fall if Expected UK Rate Rises Prompt Recession Fears

1035 GMT - Sterling could weaken as the prospect of further interest rate rises by the Bank of England might raise recession concerns, Rabobank says. The U.K.'s fundamental backdrop remains characterised by weak growth, high inflation, high debt, low investment growth, weak productivity growth and a current account deficit, Rabobank forex strategist Jane Foley says in a note. Higher rates inevitably raise the risk of increased debt distress, she says. "If the market begins to assess that the Bank may have to push the economy into recession into order to push CPI inflation back to 2%, GBP could begin to falter despite the higher rate environment." EUR/GBP could rise to 0.90 in 12 months from 0.8548 currently, Foley says. ([e-mail])

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Shell's Commitment to Oil, Shareholder Return Bump Should Be Welcomed

1035 GMT - Shell's move to keep pumping oil at current levels, which will underpin a higher dividend yield, will likely be welcomed by shareholders as it puts the energy major more in line with its U.S. peers, AJ Bell investment director Russ Mould says in a market comment. "[Shell CEO Wael Sawan] is signaling that renewables and clean energy projects are all well and good but they must pay their own way and if the returns projected are too weak, they won't make the cut," Mould says. Although its good business, Shell could face ramped-up political and regulatory pressures as the effects of climate change become more obvious, he says. Shares are up 1.0% at 2.319,50 pence. ([e-mail])

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Shell's $5 Billion Buyback Sets a Helpful Floor Given Macroenvironment

1029 GMT - Shell could raise dividends a further 10% before year-end, Jefferies analysts Giacomo Romeo and Alexatrini Tsiknia write in a research note. The energy major increased its quarterly dividend per share by 15%, in the lower end of expectations, but given it doesn't include the annual policy increases and the offset for buyback share accretion, a further 10% lift before year-end is likely, the analysts say. "The $5 billion buyback in the second half-year is below Visible Alpha consensus of around $6 billion, but sets a helpful floor given macro uncertainties," they say. Jefferies keeps a buy rating on the stock. Shares are up 0.6% at 2.309,00 pence. ([e-mail])

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(END) Dow Jones Newswires

06-14-23 0903ET