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FTSE 100 closes up, but off earlier highs, as Sainsbury-Asda merger news boosts supermarket takeover rumour mill

The pound reverses earlier losses against the euro as the spotlight remains on the Sainsbury-Asda merger

Sainsbury
Sainsbury shares close up nearly 15% as the rumour mill starts on further mergers in the industry
  • FTSE 100 close up 7.09 points

  • Sainsbury-Asda merger deal puts spotlight on supermarkets

  • Tesco shares decline as Morrisons rise

  • Pound turns around and strengthens against the euro 

  • Sajid Javid replaces Amber Rudd as Home Secretary

CLOSE

Shares closed barely in positive territory on Monday, shaving off earlier gains as the pound clawed back some ground against the greenback and rose against the euro.

The J Sainsbury and Walmart's Asda news helped to boost sentiment in the retail sector, with the rumour mill on further takeover talks in the industry on full throttle.

 

 

The FTSE 100 rose 0.09%, or up 7.09 to end the month at 7,509.30.

The sterling gained 0.2% versus the euro at 1.1390 and was down 0.2% against the greenback at 1.3754, halving its earlier losses. 

Sainsbury (LON:SBRY), not surprisingly, closed 14.79%, up 39.20p at 309.00p. Tesco PLC (LON:TSCO) and Marks and Spencer Group PLC (LON:MKS) shares were mixed with Tesco sliding 0.92%, down 2.20p at 235.95p while M&S rose 0.38%, up 1.10p at 287.70p.

Unsubstantiated rumours made its rounds that WM Morrison Supermarkets PLC (LON:MRW) could also find itself in the M&A crosshairs, with Whole Foods acquirer Amazon a suggested buyer.

Morrison shares gained 3.10p or 1.29% to close at 243.10p.                     

Connor Campbell from Spreadex said: "Obviuously regulators are going to have a LOT to say about such a landscape-shifting deal, meaning there's a long way to go before this bonkers but potentially brilliant marriage becomes a reality.

"Investors are already signalling how they feel about the merger, however Sainsbury's rocketed as much as 20% higher after the bell, sitting between £3.15 and £3.20 for the first time in a few months shy of four years."

WPP closed up 8.46%, gaining 6.68p at 85.61p after its firsr quarter numbers and talk that it could spin off assets while Rank Group PLC rose on news of the appointment of former Ladbrokes executive John O'Reilly as its chief executive.

3:30pm: FTSE 100 lead narrows, retail takeover talk continues to swirl after Sainsbury-Asda deal

As takeover talk swirls around London’s grocers and supermarket group’s speculators are looking at what may come next.

Naturally, Sainsbury was the day’s biggest winner with the shares rising 15% to 310.4p.  Tesco Plc (LON:TSCO) and Marks and Spencer Group Plc (LON:MKS) shares were both on the downside, sliding 0.96% and 0.24% respectively.

Rumours (unsubstantiated) surfaced suggesting WM Morrison Supermarkets Plc (LON:MRW) could also find itself in the M&A crosshairs, with Whole Foods acquirer Amazon a suggested buyer.

Morrison shares gained 3p or 1.25% to trade at 243p.                      

The FTSE 100’s lead had narrowed as the session gained and could finish the day close to flat.

At 7,507, the benchmark was up 5 points or 0.076%.

3:00pm: Bitcoin price drops back, even if crypto-mining heads to stratosphere

Get your space suits ready, cryptocurrency is evidently going to space – literally, stratospheric.

In a supposedly symbolic stunt, a bitcoin ‘miner’ is today sending cryptocurrency generating equipment into the sky via a high-altitude balloon.

By making digital money above 35,000 feet, in the upper stratosphere, Miner One intends to highlight a symbol of bitcoin’s potential in 2018.

Without being overly dismissive, one would have to presume the group won’t want the symbolism to carry too far - high-altitude (aka weather) balloons obviously don’t stay in orbit, they inevitably fall back to earth, fly without control and go wherever the wind takes them.

Elsewhere, the price of Bitcoin was down US$117 or 1.25% changing hands at US$9,275.

2:15pm: FTSE 100 stays positive, though lead lessens ahead of US open

The FTSE 100 was still higher ahead of the New York open, albeit the lead has been trimmed somewhat from this morning.

At 7,518 the blue-chip benchmark was up 16 points or 0.22%.

Mike van Dulken, analyst at Accendo Markets, highlighted the fresh weakness for the pound (which aids the FTSE 100’s largely multinational dollar-earning companies).

“This is derived from political uncertainty, both from a shift in Brexit influence within Theresa May's Cabinet (replacement Home Secretary Sajid Javid being pro-Breixit while Amber Rudd, who resigned following an immigration scandal, is anti) and continued difficulties with the North Irish border,” he said in a note.

“Helping further is a flurry of M&A and Miners (most) welcoming solid China PMI data.”

12:30pm: FTSE 100 stays positive as Wall Street futures point higher

The FTSE 100 held positive by lunch in London as Wall Street futures point to a stronger start.

Trading at 7,530 the blue-chip benchmark was up 26 points or 0.36%.

The Dow Jones is expected to open around 105 points higher, to 24,388, meanwhile the S&P 500 and Nasdaq are also both seen rising.

“Positive Asia-Pacific closes and European and US early trade point to a more sure-footed Wall Street session than those seen of late,” said Ken Odeluga ,City Index market analyst.

“Plus, with almost 80% of S&P 500 companies that have reported earnings so far (about half) beating forecasts, investors had further reason to put aside misgivings and hunt out potential value among stock markets still below earlier-2018 peaks.”

He added: “On the US earnings front, Apple, which reports earnings on Tuesday, will be a key pivot, providing further upside momentum if it confounds expectations of ebbing iPhone demand and slowing profit and revenue growth.”

Odeluga also highlighted that equity market has remained in the shadow of dollar strength.

“The greenback and hence dollar-denominated yields continue to keep appetite for shares in check even as encouraging events in the Korean peninsula and a persistent strain of solid earnings keep buyers close by,” he said.

11:15am: FTSE 100 extends mornings gains, pound weakens while oil and metal prices also ease

The FTSE 100 extended the morning’s earlier gains, up 40 points or 0.55% at 7,542.

Oil is set to end April with a healthy gain on the preceding month, albeit the price of Brent was 1% lower at the start of the week - changing hands at around US$73.85 per barrel.

Metal prices were also seen weaker, as the relative dollar price strengthened.

Domestically, the pound was lower - down 0.36% to US$1.3733 - in the wake of Amber Rudd’s resignation from her position as the UK Home Secretary. Sajid Javid was today named as the replacement at the head of the Home Office.

There was yet more volatility in the cryptocurrency market, where the Bitcoin price was down almost 2% at US$9,208.

10:20am: FTSE 100 stays positive as CMA confirms its likely to review Sainsbury-Asda merger

Investors were evidently happy shoppers as the FTSE 100 held positive territory partially thanks to the proposed merger between Sainsbury and Walmart-owned Asda.

Changing hands at 7,532 the FTSE 100 was up 29 points or 0.39%.

Sainsbury shares were up 40 points or 14.86% trading at 309.9p.

READ: Asda deal sends Sainsbury shares higher, disappointment sees Chariot swing lower

Over at Tesco, meanwhile, traders appear less keen – albeit, shares in Britain’s incumbent ‘biggest’ supermarket had closed the morning’s larger early losses. At 235p, Tesco was down 2.8p or 1.18%.

The Competition and Markets Authority has confirmed the proposed merger will likely be subject to review.

And Laith Khalaf, analyst at Hargreaves Lansdown, has said that the regulatory check will be critical to the viability of the deal.

“The recent approval of Tesco’s takeover of Booker Group may give some cause for confidence, though that deal was a vertical rather than a horizontal integration, with neither company competing directly in their key markets,” Khalaf said in a note.

“That’s not the case for Sainsbury’s and Asda, though the fact that they have complementary regional footprints will mitigate in their favour.

“The competition authorities will also note that the combined supermarket will still only have around the market share of the industry leader, Tesco, in a sector where dominance has been brutally eroded by Aldi and Lidl.

“If Sainsbury’s can demonstrate the merger will create lower prices for customers, that will help too.”

8:35am: FTSE 100 - Grocers in focus as Sainsbury and Asda confirm £14bn marriage plans 

The FTSE 100 picked up from Friday’s two-month high to add 14.5 points at the open to trade at 7,516.70.

The week got underway with a bang, although the rumblings started on Saturday, as J Sainsbury confirmed its putative tie-up with Wal-Mart-owned Asda.

The transaction, which is bound to attract regulatory scrutiny, would leap-frog the combined entity over Tesco to number-one in the UK grocery charts.

The City gave its approval of a deal, which will see Sainsbury acquire Asda for £7.3bn in cash and shares by marking shares in the former almost 20% higher.

Tesco hit

Tesco gave up almost 4% of its value with competition expected to get far tougher if the Asda-Sainsbury alliance is given the green light.

Bradford-based Morrisons fell 3%, while Marks & Spencer was off 1%.

Advertising and marketing giant WPP, which has suffered of late following the departure of boss Sir Martin Sorrell, saw its shares advance 5.8% following the release of it first-quarter trading figures.

Proactive news headlines:

There are early signs that comprehensive changes made to the business by the new management are paying off, Telit Communications Plc said.

Hummingbird Resources PLC (LON:HUM) reiterated its full year production guidance as it confirmed it had completed the ramp-up phase at the Yanfolila gold mine in Mali. In a quarterly update the company also unveiled the appointment of two new independent directors with impressive industry and capital markets track records.

Aura Energy Limited (LON:AURA) (ASX:AEE) has successfully completed a resource upgrade for the Tiris Uranium Project in Mauritania. The results exceeded expectations with an increase in the overall resource to 52 million pounds of triuranium octoxide (U3O8), a compound of uranium.

Anglo-Aussie junior 88 Energy Limited (LON:88E, ASX:88E) has unveiled plans to raise up to A$17mln that will be used to fund the ongoing evaluation of conventional and unconventional oil targets on Alaska’s North Slope. Brokers in the UK and Australia expect to raise at least A$12mln via a placing of stock at 3.7 cents a share, which represents an 11% discount to the average ASX price over the last month.

Chariot Oil & Gas Limited (LON:CHAR) has told investors that the Rabat Deep exploration well, offshore Morocco, has failed to find a hydrocarbon accumulation. The well was drilled safely to a depth of 3,180 metres, it said, and whilst it didn’t encounter oil or gas it did penetrate a thick top seal and tight, fractured carbonates in the primary Jurassic target.

Echo Energy Plc (LON:ECHO) told investors it soon expects a four-well exploration drilling campaign will get underway in the Fracción C area, in Argentina. The Petreven H-205 rig is due to mobilise to the first well site, ELM 1004, imminently and it is expected to be on site in early May.

Iodine extraction specialist Iofina plc (LON:IOF) overcame terrible winter conditions to keep output roughly stable, year-on-year, in the first quarter.

Directa Plus Plc (LON:DCTA) is to work on development of a range of graphene-enhanced luxury accessories as part an exclusive contract with an existing customer. Giulio Cesareo, Directa’s chief executive, said the contract highlighted the traction now being seen both by graphene and its G+ product.

Challenger Acquisitions Limited (LON:CHAL) has refocused its efforts on observation wheel projects in both Texas and New York as the company announced it had streamlined its corporate profile in full-year results.

Diversified Gas & Oil plc (LON:DGOC) chief executive Rusty Hutson has highlighted the company’s “remarkable success” in its first year as a public company. “We delivered everything we said we would do at the time of our admission to AIM in terms of growing production through acquisition and subsequently provided the company with robust production and increasing cashflow that enables us to return cash to our shareholders as a reliable source of income through our dividend policy,” Hutson said in the financial results statement, for the twelve months ended December 31.

Ironridge Resources Ltd (LON:IRR) has commenced a 7,000 metre drill programme at its Ewoyaa lithium project in Ghana. A wider programme of soil sampling across Ironridge's entire African lithium portfolio is already underway.

Rainbow Rare Earths Ltd (LON:RBW) has hit multiple intersections of mineralisation up to two metres thick in ongoing drilling at the Kiyenzi target on the Gakara rare earths project in Burundi. Initial testing has confirmed the presence of high grade rare earth elements.

Thor Mining PLC (LON:THR) (ASX:THR) has highlighted a ‘very productive’ first quarter of 2018, with all three of its core projects continuing to make a good progress. In the AIM-listed miner's latest quarterly report, Mick Billing, Thor's executive chairman said:  "In particular, the acquisition of the interest in the tungsten and copper deposits at Bonya has the potential to be a game changer for Molyhil”.

Wolf Minerals PLC's (LON:WLFE) recovery was interrupted in March by the Beast from the East, which disrupted operations at the Hemerdon tungsten mine in Devon. The exceptionally cold weather restricted road access and generated potential safety risks, hampering work at the mine.

Berkeley Energia Limited (LON:BKY, ASX:BKY) said it is in a strong cash position to push forward with its flagship Salamanca project as well as seeing an expansion of exploration activities in the first quarter of the year. The AIM-listed uranium miner said it currently holds US$100mln in cash, while also currently holding 2.75mln pounds of triuranium octoxide (U3O8) concentrate under long term contracts over the first six years of production, with potential to increase annual contracted volumes further as well as extend the contracts by a total of 1.25mln pounds.

Ferrum Crescent Limited (LON:FCR) (ASX:FCR) is looking to pressing ahead with its planned campaign of work under its new name in 2018.

Pembridge Resources PLC (LON:PERE) ended the full year to December 2017 with US$2mln in cash. Post period end the company entered into an agreement to acquire the Minto copper mine in the Yukon.

6:40am: Positive start predicted 

The FTSE 100 is expected to make a positive start to the new trading week after closing Friday at a two-month high.

The index of blue-chip shares is predicted by the spread-betting companies to open 15 points to the good 7,517.21, taking its cue from a fairly upbeat session in Asia.

There’s no doubting the big news of the day – the week for that matter. It’s the putative marriage of Asda, owned by Wal-Mart Stores Inc (NYSE:WMT), and UK-listed J Sainsbury (LON:SBRY) to create a £15bn giant of  Britain’s retail parks.

Competition concerns

“[The merger] is sure to prompt calls for the Competition and Markets Authority to scrutinise the deal over concerns about the pricing power this new tie up might create,” pointed out Michael Hewson, analyst at CMC Markets.

“A successful deal would see the combined company overtake Tesco as the number one UK food retailer.”

Away from the grocery sector, the US Federal Reserve is likely to keep interest rates in check when it delivers the result of its monthly ruminations on Wednesday.

And we finish the week with American payroll figures, which will provide us some insight as to the health of the world’s biggest economy.

Busy week

The coming week is a busy one for scheduled corporate news with Asia-focused Standard Chartered and HSBC providing the last updates from the banking sector.

Alongside this we have updates from Sainsbury, Next, WPP and British Airways owner IAG.

Around the markets:

  • Pound worth US$1.3784
  • Brent crude worth US$74.19 a barrel, down 45 cents
  • Gold worth US$1,322.70 an ounce, down 70 cents

City Headlines: 

  • Financial Times
  • Saudi Aramco hires new board members as it prepares for IPO
  • Chinese search engine Baidu is to spin out its financial services arm
  • Times
  • Large London-based hedge funds such as Odey Asset Management, GLG and Marshall Wace have short positions in Sainsbury’s as they face a nervous wait to gauge the market’s reaction to the proposed £12 billion merger of Sainsbury’s and Asda.
  • The merger of Sainsbury’s and Asda may result into City investment banks, lawyers and other professional services sharing more than £100mln in fee bonanza.
  • T-Mobile US and Sprint Corp agreed a $26.5bn tie-up that will create a company with 70mln subscribers.
  • Daily Telegraph
  • European steelmakers are bracing for a fresh crisis in the industry unless the US backs down from its protectionist stance and extends an exemption on import tariffs.

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