LONDON MARKET CLOSE: Grocery M&A buzz, oil price rally lift FTSE 100

Mon, 23rd Aug 2021 17:05

(Alliance News) -Â European stocks started the new week on the front foot, with London's large-cap index lifted by grocer share price gains and an oil price rally on China's virus containment efforts.

The FTSE 100 index closed up 21.12 points, or 0.3%, at 7,109.02 on Monday.

The FTSE 250 ended down just 10.40 points at 23,740.49 - despite hitting an all-time high of 23,878.06 in intraday trade on Monday - and the AIM All-Share closed up 4.80 points, or 0.4%, at 1,265.97.

The Cboe UK 100 ended up 0.4% at 707.83, the Cboe UK 250 closed up 0.1% at 21,614.27, and the Cboe Small Companies ended up 0.8% at 15,433.70.

In European equities on Monday, the CAC 40 in Paris ended up 0.9% and the DAX 30 in Frankfurt ended up 0.3%.

Last week's wobble gave way to a more upbeat outlook on Monday.

"Traders became far more risk averse last week, particularly on Thursday following the release of the Fed minutes a day earlier. Perhaps too much was read into them or maybe the selling was opportunistic, a little profit taking ahead of Jackson Hole, but the dips are being bought once more so the doom and gloom has passed fairly quickly," said Craig Erlam, senior market analyst at Oanda.

As markets put Delta variant concerns to one side, European equities advanced and New York charged ahead - despite data showing the pandemic is hampering the US economic recovery.

IHS Markit's US composite output index tumbled to 55.4 points in August from 59.9 in July. While the index remained above the key no-change mark of 50.0, it represented an 8-month low. The market had expected a reading of 58.3 for August, according to FXStreet.

"The expansion slowed sharply again in August as the spread of the Delta variant led to a weakening of demand growth, especially for consumer-facing services, and further frustrated firms' efforts to meet existing sales," said Chris Williamson, chief business economist at IHS Markit.

While the manufacturing purchasing managers' index held up, at 61.2 for August from 63.4 in July, the services index tumbled to 55.2 from 59.9.

The UK's rebound also slowed, as its own composite output index slipped for the third month running, to 55.3 points in August from 59.2 in July.

Survey respondents attributed higher levels of activity to the reopening of the UK economy and subsequent improvement in demand for business and consumer services. However, there were reports that staff shortages had constrained business.

Data from the eurozone was more encouraging, with business activity continuing to grow strongly in August. The composite index slipped moderately to 59.5 points in August from a 15-year high of 60.2 in July.

Amid Monday's risk-on mood, the US dollar pulled back.

The pound was quoted at USD1.3717 at the London equities close Monday, higher compared to USD1.3621 at the close on Friday. The euro stood at USD1.1734 at the European equities close Monday, up against USD1.1681 at the same time on Friday.

Against the yen, the dollar was trading at JPY109.78, down compared to JPY109.81 late Friday.

Stocks in New York were surging at the London equities close, with the DJIA up 0.8%, the S&P 500 index up 1.0%, and the Nasdaq Composite up 1.4%.

In London, J Sainsbury was helping to prop up the FTSE 100 as shares surged 15% on takeover speculation.

Sainsbury's could be the next UK grocer to be subject of bid interest from the private equity space, the Sunday Times reported over the weekend. According to the report, private equity firms were exploring a potential takeover of Sainsbury's with a view to possibly launching offers of more than GBP7 billion, as the bidding war for peer Wm Morrison Supermarkets reignites interest in the UK grocery sector.

The M&A buzz lifted the rest of the UK grocery sector, with Tesco shares closing up 2.4% and online grocer Ocado rising 1.7%.

Another sector booming on Monday was energy, as oil prices surged on demand hopes. Industrial giant China reported no new domestic cases, and Beijing appears poised to bring to heel the pandemic's most serious resurgence in months with mass testing and targeted lockdowns.

Brent oil was quoted at USD68.44 a barrel at the London equities close Monday, rallying from USD66.02 late Friday.

Shares in BP closed up 2.5% while peer Royal Dutch Shell's 'A' and 'B' stock rose 2.1% and 1.9% respectively. Mid-cap firm Harbour Energy rose 8.3% and Tullow Oil ended up 3.9%.

Miners also advanced, with Glencore rising 2.6% and Antofagasta closing up 2.1%.

It was also a bright session for gold, which benefited as the dollar weakened ahead of this week's Jackson Hole central banking gathering.

The annual event had originally been scheduled to be held in person over several days, but will now as a virtual event "due to the recently elevated Covid-19 health risk level in Teton County, Wyoming".

"While we are disappointed that health conditions will prevent us from being able to gather in person at the Jackson Lake Lodge this year as we had planned, the safety of our guests and the Teton County community is our priority," said Esther George, president and chief executive of the Kansas City Fed.

US Federal Reserve Chair Jerome Powell will speak at 10 am Eastern time on Friday. The full agenda will be released at 8 pm Eastern time on Thursday.

Gold was quoted at USD1,804.37 an ounce at the London equities close Monday, up against USD1,783.81 at the close on Friday. In London, blue-chip precious metals miner Fresnillo closed up 1.3%.

The UK corporate calendar for Tuesday has half-year results from energy services provider John Wood Group and biotherapeutics company PureTech Health.

A slim economic calendar on Tuesday has German gross domestic product at 0700 BST and US new home sales at 1500 BST.

By Lucy Heming;Â lucyheming@alliancenews.com