London open: Stocks edge lower but Morrisons surges on £5.5bn bid

London stocks edged lower in early trade on Monday amid concerns about inflation, but supermarket chains rallied after Morrisons rejected a £5.5bn bid.

At 0855 BST, the FTSE 100 was down 0.3% at 6,994.25.

Neil Wilson, chief market analyst at Markets.com, said the reverberations from the US Federal Reserve’s policy meeting last week continue to be felt across global markets.

"Stocks have fallen, bond yields too, amid a sharp repricing of the risks of the Fed raising rates. Asian shares fell as global markets continue to react to the Fed’s willingness to raise rates in the face of higher inflation and its admission that members are talking about talking about tapering," he said.

"European markets followed suit with a broad sell-off in early trade Monday. US 10-year yields have fallen below 1.4%, whilst the dollar is surging. The funny thing about all this is that given the data coming out of the US the Fed didn’t do anything terribly surprising, it just seems to have caught some by surprise by saying it wasn’t going to keep things super easy forever. Let’s be clear - this is not a shift away from average inflation targeting or somehow the Fed abandoning its employment-first approach: only a realisation that two and a half years from now the economy should be pretty well recovered, and inflation will have been running above 2% for a good amount of months, so some tightening would be warranted."

Wilson said yields declining after a ‘hawkish’ Fed is “frankly odd” and suggests the market thinks the stance is appropriate to keep a lid on inflation.

In equity markets, miner Rio Tinto was knocked lower by a downgrade to ‘sell’ at UBS. Miners more generally were under the cosh as iron ore and copper prices fell, with Glencore, Antofagasta, BHP and Anglo American all down.

On the upside, supermarket chain Morrisons surged more than 30% after saying it had rebuffed an unsolicited £5.5bn bid over the weekend from the US private equity firm Clayton, Dubilier & Rice, which had offered to pay 230p a share in cash.

Other supermarkets followed suit, with FTSE 100 peers Sainsbury’s and Tesco both sharply higher. B&M and Marks & Spencer also gained.

Outsourcer Capita was trading up after saying it was on track to post revenue growth for the first time in six years as trading in the first half of 2021 improved. It also announced the sale of its 51% stake in Axelos, a joint venture with the British government’s Cabinet Office, to PeopleCert International for £183.6m in cash.

Online supermarket Ocado was boosted by an upgrade to ‘overweight’ at Morgan Stanley, while Airtel Africa was lifted by an upgrade to ‘overweight’ at Barclays.

Market Movers

FTSE 100 (UKX) 6,994.25 -0.33%
FTSE 250 (MCX) 22,291.26 -0.15%
techMARK (TASX) 4,426.05 -0.58%

FTSE 100 - Risers

Sainsbury (J) (SBRY) 270.40p 3.96%
Tesco (TSCO) 226.95p 2.34%
Ocado Group (OCDO) 1,925.00p 2.34%
Reckitt Benckiser Group (RKT) 6,504.00p 1.39%
B&M European Value Retail S.A. (DI) (BME) 545.80p 1.37%
United Utilities Group (UU.) 1,033.50p 1.03%
Rentokil Initial (RTO) 491.60p 1.01%
Polymetal International (POLY) 1,597.00p 0.85%
Severn Trent (SVT) 2,520.00p 0.84%
Unilever (ULVR) 4,341.00p 0.79%

FTSE 100 - Fallers

Rio Tinto (RIO) 5,633.00p -3.03%
International Consolidated Airlines Group SA (CDI) (IAG) 193.54p -2.61%
Glencore (GLEN) 291.60p -2.00%
Rolls-Royce Holdings (RR.) 105.42p -1.95%
BT Group (BT.A) 196.85p -1.55%
Antofagasta (ANTO) 1,374.00p -1.47%
Barclays (BARC) 169.38p -1.44%
BAE Systems (BA.) 528.80p -1.34%
Melrose Industries (MRO) 154.30p -1.31%
Mondi (MNDI) 1,821.50p -1.22%

FTSE 250 - Risers

Morrison (Wm) Supermarkets (MRW) 235.00p 31.69%
Capita (CPI) 39.14p 3.99%
Energean (ENOG) 754.50p 1.96%
Safestore Holdings (SAFE) 957.00p 1.65%
Airtel Africa (AAF) 81.55p 1.56%
Schroder Oriental Income Fund Ltd. (SOI) 281.50p 1.44%
Hilton Food Group (HFG) 1,082.00p 1.31%
FDM Group (Holdings) (FDM) 1,020.00p 1.19%
Howden Joinery Group (HWDN) 789.40p 1.08%
Future (FUTR) 3,012.00p 1.01%

FTSE 250 - Fallers

XP Power Ltd. (DI) (XPP) 5,100.00p -3.77%
Genus (GNS) 4,916.00p -3.23%
easyJet (EZJ) 938.00p -3.10%
Wood Group (John) (WG.) 222.40p -2.67%
PureTech Health (PRTC) 350.00p -2.64%
Ferrexpo (FXPO) 406.40p -2.45%
Tullow Oil (TLW) 59.10p -2.28%
OSB Group (OSB) 451.00p -2.25%
Ultra Electronics Holdings (ULE) 2,172.00p -2.25%
Investec (INVP) 289.70p -2.23%