London close: Stocks mixed amid Sainsbury’s suitor buzz

by | Aug 23, 2021

London stocks finished in a mixed state on Monday, as investors digested a slew of UK data releases, with Sainsbury’s lifted by takeover speculation.
The FTSE 100 ended the session up 0.3% at 7,109.02, while the FTSE 250 was 0.04% weaker at 23,740.49.

Sterling was in the green, last rising 0.69% on the dollar to trade at $1.3717, and advancing 0.4% against the euro to change hands at €1.1691.

“European markets have got off to a fairly positive start to the week, helped by a decent hand off from Asia, as a weaker US dollar and firmer commodity prices help to push energy and basic resource stocks off their recent lows, with BP, Royal Dutch Shell and Glencore outperforming, along with Tesco,” said CMC Markets chief market analyst Michael Hewson.

“The FTSE 250 even managed to eke out a new record high, however as the day has progressed a lack of momentum has seen stocks slip back from their intraday peaks.

“We’ve also seen a positive day for the FTSE 100, which has been helped by further M&A chatter, this time for the UK’s number two supermarket, Sainsbury, which has seen its share price retest its 2018 peaks at 341.80p.”

On the economic front, the UK recovery lost momentum in August amid shortages of staff and materials, with the flash IHS Markit/CIPS composite purchasing managers’ index – which measures activity in the services and manufacturing sectors – fell to 55.3 from 59.2 in July.

That was its lowest level since February, and below expectations for a reading of 58.4.

The PMI declined for the third month in a row and signalled the slowest expansion of output since the UK returned to growth in March.

Still, it was above the 50.0 mark that separates contraction from expansion.

The services business activity index printed at 55.5 in August, down from 59.6 the month before, while the manufacturing output index came in at 54.1 versus 57.1, and the manufacturing PMI ticked down to 60.1 from 60.4.

“Although the PMI indicates that the economy continues to expand at a pace slightly above the pre-pandemic average, there are clear signs of the recovery losing momentum in the third quarter after a buoyant second quarter,” said Chris Williamson, chief business economist at IHS Markit.

“Despite Covid-19 containment measures easing to the lowest since the pandemic began, rising virus case numbers are deterring many forms of spending, notably by consumers, and have hit growth via worsening staff and supply shortages.”

UK manufacturers, meanwhile, saw the worst stock shortages on record in August, while manufacturing output growth eased, with the CBI index for stock adequacy declined to -14 from -11 in July, coming at its weakest level since records began in 1977 and marking the third month in a row in which a new record-low outturn was set.

The weakness was driven by the electronic engineering and plastic products sub-sectors.

Meanwhile, the CBI’s index for industrial output growth in August fell from a record high of +37 in July to +22. The index for total order books ticked up to +18 from +17.

“Manufacturing activity remained strong this month, with total order books remaining firm and most sub-sectors reporting rising output,” said CBI lead economist Alpesh Paleja.

“However, early signs from the data suggest that growth in activity may have peaked.”

Paleja said it was “notable” that stock adequacy deteriorated to a new record low for the third consecutive month.

“Many firms are feeling the pinch from ongoing supply chain disruption, which also partly explains the continued strength in pricing pressures.”

Finally, on the retail front, wet weather saw visits to shops fall 1.7% across the UK last week, with all but one part of the country seeing declines.

According to data from retail analysis outfit Springboard, high streets saw visits drop 2.2% week-on-week, while shopping centres saw more modest declines of 1.3%, and retail parks slipped just 1%.

Last week, footfall declined in all but one area, with week-on-week drops ranging from 0.6% in the South East to 3.3% in the North and Yorkshire.

The only increase was in Greater London, where footfall rose marginally, by 0.2%.

In equity markets, J Sainsbury rocketed 15.37% following a report that US private equity firm Apollo is considering a bid for the UK supermarket chain.

According to The Sunday Times, Apollo is circling Sainsbury’s with a view to possibly launching bids of more than £7bn, after scouring the industry for takeover targets.

WPP managed gains of 0.23% after saying it had bought Satalia, a technology company offering artificial intelligence solutions for clients, for an undisclosed sum.

Mitie was also trading up, rising 2.53% after agreeing to sell its document management business to Swiss Post Solutions for £40m.

Budget airline easyJet ascended 0.23% after appointing former RBS CEO Stephen Hester as its new chairman.

Shaftesbury nudged up 1.13% as the West End property owner reported a recovery in rent collection and said footfall was also showing signs of improvement as shoppers returned after the easing of Covid restrictions.

In broker note action, education publisher Pearson was boosted 1.98% by an upgrade to ‘overweight’ from ‘neutral’ at JPMorgan, while Pennon was hit 3.35% by a downgrade to ‘underperform’ from ‘neutral’ at Credit Suisse.

Joining Pennon on the downside, BT Group fell 3.03% after it emerged that CityFibre, a challenger to its Openreach network, was set to secure a £500m investment from a consortium including Abu Dhabi’s sovereign wealth fund to help drive its ultra-fast broadband roll-out.

According to the Wall Street Journal, the fund is close to buying a minority stake in CityFibre in a deal that would value it at more than $2.7bn.

The Journal said the investment would be from Abu Dhabi’s Mubadala Investment Co. and the investment arm linked to the family behind IKEA.

Market Movers

FTSE 100 (UKX) 7,109.02 0.30%
FTSE 250 (MCX) 23,740.49 -0.04%
techMARK (TASX) 4,812.03 -0.46%

FTSE 100 – Risers

Sainsbury (J) (SBRY) 340.00p 15.37%
Burberry Group (BRBY) 1,885.50p 3.32%
Rolls-Royce Holdings (RR.) 113.74p 3.25%
Evraz (EVR) 561.80p 3.23%
Prudential (PRU) 1,495.00p 2.78%
Glencore (GLEN) 317.50p 2.55%
BP (BP.) 295.00p 2.48%
Royal Dutch Shell ‘A’ (RDSA) 1,422.20p 2.14%
B&M European Value Retail S.A. (DI) (BME) 580.20p 2.04%
Tesco (TSCO) 251.50p 2.03%

FTSE 100 – Fallers

BT Group (BT.A) 168.15p -3.03%
SSE (SSE) 1,635.00p -1.89%
Pershing Square Holdings Ltd NPV (PSH) 2,495.00p -1.77%
Smith & Nephew (SN.) 1,407.00p -1.26%
AstraZeneca (AZN) 8,624.00p -1.23%
Berkeley Group Holdings (The) (BKG) 4,811.00p -1.21%
Persimmon (PSN) 2,812.00p -1.19%
National Grid (NG.) 968.00p -1.12%
Taylor Wimpey (TW.) 173.50p -1.08%
Associated British Foods (ABF) 1,993.50p -1.07%

FTSE 250 – Risers

Harbour Energy (HBR) 343.40p 8.33%
Hochschild Mining (HOC) 155.60p 7.02%
Auction Technology Group (ATG) 1,486.00p 4.21%
Ferrexpo (FXPO) 367.80p 4.02%
Tullow Oil (TLW) 43.02p 3.89%
Wood Group (John) (WG.) 233.60p 3.13%
Premier Foods (PFD) 116.40p 3.01%
Helios Towers (HTWS) 166.60p 2.97%
Energean (ENOG) 642.50p 2.55%
Mitie Group (MTO) 73.00p 2.53%

FTSE 250 – Fallers

Workspace Group (WKP) 923.50p -4.89%
Morgan Sindall Group (MGNS) 2,450.00p -3.54%
Pennon Group (PNN) 1,268.00p -3.35%
Tyman (TYMN) 406.00p -2.87%
Grafton Group Ut (CDI) (GFTU) 1,304.00p -2.83%
C&C Group (CDI) (CCR) 237.80p -2.78%
TP Icap Group (TCAP) 193.48p -2.58%
Vietnam Enterprise Investments (DI) (VEIL) 658.00p -2.52%
Hill & Smith Holdings (HILS) 1,788.00p -2.51%
Trainline (TRN) 333.00p -2.29%

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