London midday: Stocks gain as supermarkets rally on Morrisons bid news

London stocks had gained ground by midday on Monday, helped along by a strong showing from the supermarket sector as the prospect of a bidding war for Morrisons boosted sentiment.
The FTSE 100 was up 0.3% 7,117.11, with Prime Minister Boris Johnson due to set out the final steps of lockdown easing at a press conference later in the day.

A survey out earlier showed the recovery in the UK services sector continued at pace in June but cost pressures mounted as providers battled staff shortages and higher raw material prices.

The IHS Markit/CIPS UK services PMI business activity index was 62.4 in June, revised upwards from the flash estimate of 61.7 and the second-highest reading since October 2013. It was, however, marginally below May’s figure of 62.9.

The index has now posted above 50.0 for four consecutive months, with the average reading for the second quarter – 62.1 -the highest for any quarter in the past 24 years. A reading above 50.0 indicates growth, while a reading below 50.0 indicates contraction.

Earlier, data out of China showed that growth in the services sector slowed more than expected in June. Caixin’s services purchasing managers’ index fell to 50.3 from 55.1 in May, coming in well below consensus expectations for a reading of 54.9.

In equity markets, Morrisons shares surged to the top of the FTSE 250 after US buyout firm Apollo Global Management said it was considering entering the race for the supermarket chain after rival Fortress tabled a £6.3bn recommended bid on the weekend.

Apollo confirmed weekend reports that it was “in the preliminary stages of evaluating a possible offer for Morrisons”.

“No approach has been made to the board of Morrisons,” Apollo said. “There can be no certainty that any offer will be made, nor as to the terms on which any such offer might be made,” it added.

Morrisons confirmed on Monday that it had recommended the offer from US investment fund Fortress, the owner of Majestic Wine. Morrisons has already rejected a bid from yet another US buyout firm Clayton, Dubilier & Rice. Rivals Sainsbury, Tesco and Marks & Spencer also gained.

Sophie Griffiths, market analyst at Oanda, said: “The FTSE is outperforming its European peers, boosted by the supermarkets after Morrisons accepted a bid from US fund Fortress, although other interested parties are still circling.

“Under the UK market rules, potential bidders have until 17 July to make an approach. With at least two other parties interested, the chances of this turning into a bidding war have risen sharply.”

British Airways and Iberia parent IAG was the standout gainer on the FTSE 100, while Ladbrokes owner Entain was lifted by an upgrade to ‘buy’ from ‘hold’ at Deutsche Bank.

Elsewhere, GCP Student Living also rallied after saying late on Friday that it had received a series of non-binding proposals from a consortium of Scape Living and iQSA Holdco, and is currently in discussions with them.

Market Movers

FTSE 100 (UKX) 7,141.54 0.26%
FTSE 250 (MCX) 22,895.66 0.65%
techMARK (TASX) 4,484.82 0.16%

FTSE 100 – Risers

International Consolidated Airlines Group SA (CDI) (IAG) 187.74p 4.23%
Barclays (BARC) 176.36p 2.32%
Entain (ENT) 1,832.00p 1.92%
Sainsbury (J) (SBRY) 277.20p 1.91%
Tesco (TSCO) 228.50p 1.74%
Glencore (GLEN) 320.30p 1.63%
Anglo American (AAL) 2,992.00p 1.53%
St James’s Place (STJ) 1,531.00p 1.49%
Aviva (AV.) 413.60p 1.47%
Lloyds Banking Group (LLOY) 47.50p 1.44%

FTSE 100 – Fallers

Pershing Square Holdings Ltd NPV (PSH) 2,670.00p -1.48%
Polymetal International (POLY) 1,576.50p -1.44%
Informa (INF) 521.40p -1.44%
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,612.00p -1.39%
Aveva Group (AVV) 3,844.00p -1.28%
WPP (WPP) 990.80p -1.07%
AstraZeneca (AZN) 8,697.00p -0.93%
ITV (ITV) 128.90p -0.77%
Hikma Pharmaceuticals (HIK) 2,525.00p -0.71%
Unilever (ULVR) 4,241.50p -0.67%

FTSE 250 – Risers

Morrison (Wm) Supermarkets (MRW) 266.80p 11.26%
GCP Student Living (DIGS) 186.60p 10.28%
SSP Group (SSPG) 300.50p 5.81%
FirstGroup (FGP) 88.45p 3.57%
Airtel Africa (AAF) 81.95p 3.41%
Wetherspoon (J.D.) (JDW) 1,274.00p 3.24%
Liontrust Asset Management (LIO) 1,924.00p 3.22%
Herald Investment Trust (HRI) 2,415.00p 3.21%
National Express Group (NEX) 280.20p 3.01%
Mitchells & Butlers (MAB) 298.40p 2.90%

FTSE 250 – Fallers

Pennon Group (PNN) 1,180.40p -30.39%
Fidelity China Special Situations (FCSS) 406.50p -2.05%
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,612.00p -1.39%
Watches of Switzerland Group (WOSG) 871.00p -1.25%
Helios Towers (HTWS) 164.20p -1.20%
Drax Group (DRX) 419.60p -1.04%
JPMorgan Emerging Markets Inv Trust (JMG) 133.60p -1.04%
Homeserve (HSV) 957.00p -1.03%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 483.00p -1.02%
BMO Global Smaller Companies (BGSC) 162.40p -0.98%

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