London close: Grocers lead stocks higher amid reopening optimism

(Sharecast News) - London stocks closed in positive territory on Monday, despite worries about inflation, as Morrisons led supermarkets higher after rejecting a £5.5bn takeover offer.
The FTSE 100 ended the session up 0.64% at 7,062.29, and the FTSE 250 was 0.6% firmer at 22,457.08.

Sterling was stronger as well, last trading 0.77% higher against the dollar at $1.3916, and gaining 0.46% on the euro to €1.1685.

"Markets have regained some of their equilibrium after the Bank of Japan was reported to be buying Japanese equity exchange-traded funds for the first time since early April, a move that appears to have prompted a decent amount of bargain hunting, as well as a reassessment of where we are with respect to the timeline for the withdrawal of central bank stimulus," said CMC Markets chief market analyst Michael Hewson.

"In some respects, investors are behaving as if the Fed is about to call a full-scale halt to its support for the US economy, even though nothing could be further from the truth.

"With Fed chair Jay Powell set to testify to Congress tomorrow markets will be looking for evidence that all of this talk about the prospect of rate rises and tapering is merely finessing a timeline rather than any underlying concerns that inflation is anything other than transitory."

London's top-flight index began the day weaker, after the US Federal Reserve brought forward the timing of tighter monetary policy last week, while St Louis Fed president James Bullard said on Friday that a rate hike was likely as early as 2022.

Sentiment was given an extra boost in the afternoon, when in remarks to a television crew, Prime Minister Boris Johnson said that "looking at where we are [and the effectiveness of vaccines against all the known variants] I think it's looking good for July 19 to be that terminus point," according to Bloomberg.

Johnson apparently also confirmed that ministers were studying whether travellers would be required to quarantine upon returning to England if they had been previously vaccinated.

"We will certainly be looking at that but I want to stress that this is going to be, whatever happens, a difficult year for travel," the PM cautioned.

In equity markets, supermarket chain Wm Morrison surged 34.6%% 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.

Peers followed suit, with Ocado Group up 4.04%, J Sainsbury ahead 3.84%, and Tesco 1.74% higher.

Online grocer Ocado was given the added boost of an upgrade to 'overweight' at Morgan Stanley.

"There is a lot of private equity money sniffing around the UK as valuations are low - we knew this before the pandemic," said Neil Wilson, chief market analyst at Markets.com.

"But its market share of the UK grocery market, its growing wholesale business and its existing tie-up with Amazon surely means it is not impossible the US tech giant will make an offer [for Morrisons]."

However, Wilson said that if Amazon was interested, an offer would likely have been made by now.

"A private equity bid seems more likely and ultimately may be the best way to unlock value for shareholders who've gone through a lot but ultimately not seen any appreciation in years before today.

"Shares in Tesco and Sainsbury's were up strongly partly on the read-across, partly on expectations that a private equity buyout would see Morrisons less able [or] willing to compete."

Elsewhere, outsourcer Capita leapt 9.14% 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.

On the downside, miner Rio Tinto was knocked 0.29% lower by a downgrade to 'sell' at UBS, which argued that iron ore is approaching an inflection point.

Market Movers

FTSE 100 (UKX) 7,062.29 0.64%
FTSE 250 (MCX) 22,457.08 0.60%
techMARK (TASX) 4,462.90 0.24%

FTSE 100 - Risers

Ocado Group (OCDO) 1,957.00p 4.04%
Sainsbury (J) (SBRY) 270.10p 3.84%
Evraz (EVR) 623.20p 3.66%
Intermediate Capital Group (ICP) 2,186.00p 3.36%
Taylor Wimpey (TW.) 165.30p 2.86%
Weir Group (WEIR) 1,892.50p 2.80%
Ashtead Group (AHT) 5,126.00p 2.44%
Smith (DS) (SMDS) 431.30p 2.35%
CRH (CDI) (CRH) 3,643.00p 2.30%
St James's Place (STJ) 1,484.50p 2.17%

FTSE 100 - Fallers

GlaxoSmithKline (GSK) 1,413.20p -0.72%
HSBC Holdings (HSBA) 426.55p -0.66%
SSE (SSE) 1,516.50p -0.66%
Compass Group (CPG) 1,564.00p -0.60%
Next (NXT) 7,746.00p -0.59%
Auto Trader Group (AUTO) 628.00p -0.54%
Admiral Group (ADM) 3,192.00p -0.53%
Associated British Foods (ABF) 2,270.00p -0.48%
Schroders (SDR) 3,549.00p -0.31%
Hikma Pharmaceuticals (HIK) 2,381.00p -0.25%

FTSE 250 - Risers

Morrison (Wm) Supermarkets (MRW) 240.20p 34.60%
Capita (CPI) 41.42p 10.04%
Energean (ENOG) 775.50p 4.80%
Beazley (BEZ) 321.10p 4.42%
Pets at Home Group (PETS) 461.40p 4.20%
National Express Group (NEX) 278.00p 3.89%
C&C Group (CDI) (CCR) 237.00p 3.49%
Elementis (ELM) 148.70p 3.34%
Grafton Group Ut (CDI) (GFTU) 1,125.00p 3.31%
Crest Nicholson Holdings (CRST) 427.60p 2.84%

FTSE 250 - Fallers

Auction Technology Group (ATG) 1,228.00p -4.95%
PureTech Health (PRTC) 343.00p -4.59%
Genus (GNS) 4,886.00p -3.82%
Syncona Limited NPV (SYNC) 212.00p -3.64%
Telecom Plus (TEP) 1,120.00p -3.28%
Indivior (INDV) 148.20p -3.20%
Ultra Electronics Holdings (ULE) 2,154.00p -3.06%
Moonpig Group (MOON) 440.20p -3.00%
Wood Group (John) (WG.) 222.00p -2.84%
IntegraFin Holding (IHP) 515.50p -2.74%