London close: Grocers lead stocks higher as Apollo mulls Morrisons

The FTSE 100 ended the session up 0.58% at 7,164.91, and the FTSE 250 was 1.21% firmer at 23,022.40.

Sterling was stronger as well, last rising 0.22% on the dollar to trade at $1.3855, and gaining 0.14% against the euro to change hands at €1.1675.

“US traders might be on holiday but that hasn’t stopped European markets from advancing, and the FTSE 100 in particular has enjoyed a good, solid day of trading that has seen it add 40 points to the score,” said IG chief market analyst Chris Beauchamp.

“Positive noises about ‘freedom day’ on 19 July and an end to many of the restrictions of the past year has lent an air of ‘cyclical rebound’ to today’s trading; names like IAG, Barclays and Antofagasta populate the top end of the leaderboard, on hopes that a return to normality will be the dominant theme from the second half of July as the UK puts the worst behind it.”

Beauchamp said many of those plays had struggled to make much headway in share price terms since the early part of the year, looking for a new catalyst to drive them higher.

“Hopefully the different outlook prevailing in a couple of weeks’ time will give renewed confidence that these ‘reopening stocks’ will continue to do well.”

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 had 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.

“The service sector recovery remained in full swing during June, as looser pandemic restrictions released pent-up demand for business and consumer services,” said Tim Moore, economics director at IHS Markit.

“Difficulties in filling staff vacancies were reported by survey respondents in all parts of the service economy during June, with hospitality and leisure experiencing the greatest squeeze.”

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, Wm Morrison shares surged 11.55% 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.”

Morrisons confirmed on Monday that it had recommended the offer from US investment fund Fortress, the owner of Majestic Wine, having already rejected a bid from yet another US buyout firm, Clayton, Dubilier & Rice.

Rivals were on the front foot as well, with J Sainsbury up 2.28%, Tesco rising 3.07%, and Marks and Spencer 2.92% firmer.

“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,” said Sophie Griffiths, market analyst at Oanda.

“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 ascended 4.92%, while Ladbrokes owner Entain was lifted 3.23% by an upgrade to ‘buy’ from ‘hold’ at Deutsche Bank.

Elsewhere, GCP Student Living rallied 14.3% 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 was currently in discussions with them.

Market Movers

FTSE 100 (UKX) 7,164.91 0.58%
FTSE 250 (MCX) 23,022.40 1.21%
techMARK (TASX) 4,494.18 0.37%

FTSE 100 - Risers

International Consolidated Airlines Group SA (CDI) (IAG) 189.00p 4.92%
Entain (ENT) 1,855.50p 3.23%
Barclays (BARC) 177.80p 3.10%
Tesco (TSCO) 231.30p 3.07%
Rolls-Royce Holdings (RR.) 104.98p 2.34%
Sainsbury (J) (SBRY) 278.20p 2.28%
NATWEST GROUP PLC ORD 100P (NWG) 206.90p 2.22%
St James's Place (STJ) 1,541.00p 2.15%
Aviva (AV.) 416.00p 2.06%
Lloyds Banking Group (LLOY) 47.71p 1.89%

FTSE 100 - Fallers

Aveva Group (AVV) 3,835.00p -1.52%
AstraZeneca (AZN) 8,678.00p -1.15%
Polymetal International (POLY) 1,581.50p -1.13%
Informa (INF) 523.60p -1.06%
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,627.00p -1.00%
Pershing Square Holdings Ltd NPV (PSH) 2,685.00p -0.92%
JD Sports Fashion (JD.) 977.60p -0.75%
ITV (ITV) 129.05p -0.73%
WPP (WPP) 991.80p -0.71%
Experian (EXPN) 2,845.00p -0.56%

FTSE 250 - Risers

GCP Student Living (DIGS) 193.00p 14.30%
Morrison (Wm) Supermarkets (MRW) 267.10p 11.55%
SSP Group (SSPG) 298.20p 5.00%
Cineworld Group (CINE) 87.48p 4.34%
Herald Investment Trust (HRI) 2,425.00p 4.27%
Airtel Africa (AAF) 82.40p 4.23%
Volution Group (FAN) 439.50p 4.14%
National Express Group (NEX) 281.60p 3.97%
Vivo Energy (VVO) 101.60p 3.67%
Morgan Sindall Group (MGNS) 2,275.00p 3.67%

FTSE 250 - Fallers

Pennon Group (PNN) 1,178.00p -30.53%
Spire Healthcare Group (SPI) 240.50p -2.83%
Fidelity China Special Situations (FCSS) 406.00p -1.93%
Chrysalis Investments Limited NPV (CHRY) 245.00p -1.61%
Telecom Plus (TEP) 1,158.00p -1.36%
Plus500 Ltd (DI) (PLUS) 1,365.50p -1.30%
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,627.00p -1.00%
Helios Towers (HTWS) 164.60p -0.96%
NCC Group (NCC) 310.00p -0.96%
Schroder Oriental Income Fund Ltd. (SOI) 274.50p -0.90%