London open: Stocks muted after China services PMI; Morrisons surges

London stocks were little changed in early trade on Monday as investors weighed up the latest deal news against disappointing Chinese services data.

At 0835 BST, the FTSE 100 was down 0.1% at 7,117.11, with the session likely to be quieter than usual as US markets will be closed for the Independence Day holiday.

Investors were digesting the latest data out of China, which 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.

Pantheon Macroeconomics said:"Consensus looked high to us, especially given the drop in the official services PMI, and signals from the near-real time data. But the extent of the June drop is surprising, leaving the PMI below the lows during the outbreak that started in Hubei early this year, though still in a totally different ballpark from the cratering in Q1 last year.

"The index should soon improve as confidence is boosted by vaccination. For now, though, the new orders index was at its lowest in 14 months, though still above 50."

On home shores, Prime Minister Boris Johnson was due to set out the final steps of lockdown easing at a press conference later in the day.

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. It has already rejected a bid from yet another US buyout firm Clayton, Dubilier & Rice. Rivals Sainsbury and Tesco were the best performers on the FTSE 100.

Richard Hunter, head of markets at Interactive Investor, said: "This could lead to a three-way bidding war, with some speculation that following on from its business relationship with Morrisons, Amazon could even emerge from left field as a surprise last minute entrant.

"The news could add froth to the FTSE250, which is currently ahead by 11% in the year to date, and even the FTSE 100 by association. The premier index has added 10.5% this year and has been the focus of international investing interest over the last few months."

GCP Student Living also rallied after it confirmed 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) 7,117.11 -0.09%
FTSE 250 (MCX) 22,796.18 0.22%
techMARK (TASX) 4,473.52 -0.09%

FTSE 100 - Risers

Sainsbury (J) (SBRY) 276.60p 1.69%
Tesco (TSCO) 227.10p 1.11%
Antofagasta (ANTO) 1,461.00p 1.00%
Fresnillo (FRES) 813.00p 0.94%
Barclays (BARC) 173.74p 0.80%
Rio Tinto (RIO) 6,003.00p 0.79%
Land Securities Group (LAND) 704.80p 0.77%
British Land Company (BLND) 518.40p 0.74%
International Consolidated Airlines Group SA (CDI) (IAG) 181.44p 0.73%
Glencore (GLEN) 317.25p 0.67%

FTSE 100 - Fallers

Informa (INF) 521.80p -1.36%
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,620.00p -1.27%
JD Sports Fashion (JD.) 974.80p -1.04%
Polymetal International (POLY) 1,583.50p -1.00%
Rolls-Royce Holdings (RR.) 101.64p -0.92%
WPP (WPP) 993.00p -0.85%
InterContinental Hotels Group (IHG) 4,877.00p -0.81%
Unilever (ULVR) 4,240.00p -0.70%
Associated British Foods (ABF) 2,312.00p -0.69%
Barratt Developments (BDEV) 708.40p -0.67%

FTSE 250 - Risers

Morrison (Wm) Supermarkets (MRW) 266.70p 11.22%
GCP Student Living (DIGS) 180.80p 6.86%
Edinburgh Worldwide Inv Trust (EWI) 361.00p 2.27%
Marks & Spencer Group (MKS) 155.95p 2.16%
Mitchells & Butlers (MAB) 296.20p 2.14%
888 Holdings (888) 413.40p 2.07%
CLS Holdings (CLI) 249.00p 1.84%
Babcock International Group (BAB) 298.50p 1.77%
Wetherspoon (J.D.) (JDW) 1,255.00p 1.70%
Ultra Electronics Holdings (ULE) 2,338.00p 1.56%

FTSE 250 - Fallers

Pennon Group (PNN) 1,133.00p -33.19%
IMI (IMI) 1,707.00p -2.35%
BlackRock Smaller Companies Trust (BRSC) 1,972.00p -1.65%
RIT Capital Partners (RCP) 2,455.00p -1.60%
Micro Focus International (MCRO) 435.20p -1.34%
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,620.00p -1.27%
C&C Group (CDI) (CCR) 247.40p -1.04%
Fidelity China Special Situations (FCSS) 411.00p -0.96%
Tullow Oil (TLW) 59.60p -0.96%
Dunelm Group (DNLM) 1,454.00p -0.82%