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FTSE 100 Live: Sainsbury’s rallies after Morrisons auction, Evergrande and OPEC to test market resolve

·15-min read
 (ESI)
(ESI)

Developments in China's Evergrande crisis and a meeting of OPEC oil ministers are the main focus for investors after last week's inflation-driven volatility.

Trading in shares of indebted property firm Evergrande have been suspended in Hong Kong pending a “major transaction”, while the OPEC+ alliance is under pressure to boost production quotas in an effort to peg back a Brent crude currently at almost $80 a barrel.

Traders are also focused on the fall-out from Saturday's £7 billion auction of supermarket Morrisons, including where defeated consortium Fortress might target its cash after missing out to private equity giant Clayton, Dubilier & Rice. Sainsbury’s shares were 2% higher today.

FTSE 100 Live Monday

  • Evergrande shares suspended pending deal

  • Oil ministers meeting later

  • Sainsbury’s shares higher after Morrisons auction

  • BT Group shares slump 7%

FTSE closes slightly lower

16:52 , Oscar Williams-Grut

The FTSE 100 has closed slightly lower, down 12 points — or 0.17% — at 7015.

The top stories in the market are:

Shares in Sainsbury’s, Tesco, and Ocado advanced today amid speculation about continued private equity interest in the sector.

• Shares in airlines improved after red list restrictions were relaxed and new data pointed to a rebound in bookings.

• BT sunk almost 5% after a report in the weekend press that Sky was working with Virgin Media O2 on a full-fibre broadband roll-out plan.

FinnCapp has reported a 55% jump in half-year revenues as brokers continue to benefit from the dealmaking spree in the City.

French Connection has been sold for £29 million.

• Writing exclusively for the Standard, Next boss Lord Wolfson has urged the government to adopt a market-driven — rather than ideological — approach to immigration as staff shortages cripple the economy.

Elsewhere:

Business groups have reacted positively to Chancellor Rishi Sunak’s speech at the Conservative Party conference.

Amazon founder Jeff Bezos has backed London logistics startup Beacon.

Central London office space deals have surpassed pre-pandemic levels.

Fintech GoCardless has hired JPMorgan to run a fundraising process that will likely see the 10-year-old business valued at over $1 billion.

Olympic athlete Jessic Ennis-Hill’s period tracking app Jennis has raised £1 million.

Monzo has dropped its bid for a US banking licence after it became clear the regulator wasn’t on board.

• And we profiled Dropless, the London startup trying to make water-free car washes a thing.

That’s all from us today — have a good evening and join us again tomorrow.

Evergrande shares suspended

07:32 , Graeme Evans

China's Evergrande crisis is again a key focus for markets after the debt-laden property giant's shares were suspended in Hong Kong pending a statement on a “major transaction”.

Reuters quoted Chinese media as saying that Evergrande will sell a half-stake in its property management unit to Hopson Development for more than $5 billion.

The uncertainty over Evergrande and the potential for contagion if it collapses has been one of the reasons for recent stock market turbulence, alongside surging energy prices, supply chain disruption and wider concerns about more persistent inflation.

Traders will be looking for help from the OPEC+ alliance when it meets over video conference later today. With Brent crude remaining close to $80 a dollar, there is pressure to bolster existing production targets in order to balance the global oil market.

Oanda analyst Jeffrey Halley said: “Much will depend on the outcome of the OPEC+ meeting this afternoon. If OPEC+ remains unmoved, Northern hemisphere energy woes will reassert themselves, which could undo any initial moves higher.”

Even if OPEC+ increases production, he points out there will be at least a month’s delay and probably longer before the pumps spool up. “Nothing that OPEC+ does will alleviate immediate demand in the oil spot market and will certainly not impact gas markets.”

Profit-taking forced the US dollar lower on Friday after its strong run fuelled by the global economic uncertainty. The pound rose 0.5% on Friday to 1.35 against the US dollar and was trading at a similar level today.

The FTSE 100 fell 0.8% on Friday but was due to recover by 10 points at the start of today's session to stand at 7037.

Supermarket shuffle

07:56 , Graeme Evans

The £7 billion Morrisons auction on Saturday failed to live up to City expectations, given that the supermarket's shares closed on Friday at 297p compared with the winning offer of 287p a share from Clayton, Dubilier & Rice.

The private equity firm, which includes former Tesco boss Sir Terry Leahy among its advisers, saw off an offer of 286p a share from a consortium led by Fortress Investment.

With the three-month battle for Morrisons now almost over — there's still a shareholder vote on 19 October — attention will turn to the next move by the Fortress team and whether Qatar-backed Sainsbury's is a possible takeover target.

The week ahead

08:16 , Graeme Evans

The week ahead will see London's focus stay on the supermarket sector, with Tesco likely to provide more detail on the industry's supply chain crisis when it reports half-year results on Wednesday. Greggs is also due to post a trading update the previous day.

Then on Friday comes the monthly non-farm payrolls report in the US, which should be significant in determining when the Federal Reserve begins to taper economic support.

Deutsche Bank's US economists are forecasting a pick-up in September, with non-farm payrolls growing by 400,000 and the unemployment rate ticking down to a post-pandemic low of 5.1%.

The other important releases this week will be the monthly purchasing managers' indices, which will give an indication how inflationary pressures are impacting confidence. Flash readings have already indicated slowing growth momentum across the major economies.

Rally for Sainsbury's, BT lower

08:33 , Graeme Evans

Sainsbury's shares have opened 2% higher at 290p as traders focus on whether defeated Morrisons bidder Fortress might now turn its attention to a new supermarket target.

Mining stocks and travel-focused Rolls-Royce and British Airways owner IAG were also higher as the FTSE 100 index lifted five points to 7032 in early trading.

BT Group slid 6% or 10.2p to 148.65p in a further reversal of fortunes. The value of the telecoms stock more than doubled between last October and June, but has since fallen sharply from above 200p to 148.65p today.

Paddy Power owner Flutter reveals new CEO for US FanDuel arm

08:59 , Naomi Ackerman

Paddy Power owner Flutter has revealed it has chosen in-house hire Amy Howe as new CEO for its booming US business, FanDuel.

The former Ticketmaster COO has acted as interim CEO since July.

The FTSE 100 gambling giant is considering listing part of FanDuel - the leading sports bets operator in the US - in New York.

It was forced to push back potential float plans in May after the sudden resignation of former boss, Matt King, after four years at the helm.

It comes as the sector sees a boom in the US following a 2018 Supreme Court ruling allowing states to decide on legalising sports bets.

The group's rival, Ladbrokes owner Entain, this month received a huge $20 billion offer from major operator, DraftKings.

Flutter has said it expects the total addressable market for its US offering to exceed $20 billion by 2025.

Group CEO, Peter Jackson, said Howe's "track record of leadership and experience in scaling a digital business will be invaluable as we look to grow our leadership position".

Sky speculation hits BT shares

09:09 , Graeme Evans

BT Group's shares slumped 7% following weekend speculation that Sky is working on a deal to co-invest in Virgin Media O2's full-fibre broadband roll-out plan.

The potential partnership, reported by the Sunday Telegraph, steps up competition against BT's infrastructure arm Openreach as it spends £15 billion on upgrading 25 million homes and businesses from copper phone networks.

Analysts at UBS said BT Openreach could lose more than £600 million of “very high margin revenue” under a cable wholesale/fibre joint venture between Sky and Virgin Media 02.

Sky is the largest external customer for BT Openreach, with UBS estimating that it spends as much as £760 million a year on broadband wholesale fees for six million subscribers.

FinnCap enjoys jump in revenues

09:26 , Simon English

FINNCAP, the tech and life sciences small cap broker, gave the latest evidence today that the City flourished during lockdown.

Bankers made hay during Covid, raising money for clients and in many cases bringing them to market.

FinnCap, led by Sam Smith, said today that half-year revenue was up 55% to £32 million. For the full year, revenues should be between £45 million and £50 million.

more here

Clean and green: the water free carwash from Dropless

09:38 , Simon English

Have you ever considered how bad washing your car is for the environment?

Me neither, until just now.

The business making me think about it is called Dropless, which wants to wash your vehicle without using any water. At all.

Read more here

French Connection sold in £29m deal

10:13 , Simon English

FRENCH Connection, the storied UK fashion house that briefly captured the nations hearts, was sold today in a £29 million deal.

That is far less than the business was once worth when its controversial FCUK logos were seen everywhere.

Founder Stephen Marks has been looking for a sale for sometime in the face of declining revenues, a trend made only worse by the pandemic.

Full story here

BT under pressure

10:45 , Graeme Evans

BT shares have slumped 7% - dealing another blow to long-suffering retail investors - after it was reported that Sky is working on a deal to co-invest in Virgin Media O2's full-fibre broadband roll-out plan.

The potential partnership, reported by the Sunday Telegraph, steps up competition against BT's infrastructure arm Openreach as it spends £15 billion on upgrading 25 million homes and businesses from copper phone networks.

Analysts at UBS said BT Openreach could lose more than £600 million of “very high margin revenue” under a cable wholesale/fibre joint venture between Sky and Virgin Media 02.

Sky is the largest external customer for BT Openreach, with UBS estimating that it spends as much as £760 million a year on broadband wholesale fees for six million subscribers.

BT Group shares doubled between last October and June, but have since fallen sharply from above 200p to the 148.40p seen today after dropping another 10.45p.

The shares were comfortably the biggest faller in the FTSE 100 index, which rose 2.6 points to 7,029.67 as traders sat on the sidelines ahead of key developments on China's Evergrande debt crisis and today's meeting of the OPEC+ alliance.

Evergrande's shares were suspended in Hong Kong overnight, ahead of what Chinese media say is a deal for the property giant to sell a half-stake in its property management unit to Hopson Development for more than $5 billion.

Brent crude, meanwhile, was close to $80 a barrel amid pressure for OPEC to bolster its existing production targets in order to balance the global oil market.

The biggest gains in the FTSE 100 came from the supermarket sector as Sainsbury's rose 5% and Tesco 2% on speculation about where defeated consortium Fortress might target next after losing out in Saturday's Morrisons auction.

The FTSE 250 index was 105.34 points lower at 22,870.43, despite Marks & Spencer being among the stocks higher after lifting 3.55p to 185.15p. There was also a gain of 5% or 65p to 1,445p for Plus500 after a profits upgrade by the contracts-for-difference trading house.

Airline shares take off as budget giants report rising passenger numbers and amber list scrapped

11:43 , Naomi Ackerman

Shares in listed airlines took off on Monday morning as budget giants reported seeing rising passenger numbers and the UK simplified travel restrictions.

The updates came as the Government replaced multiple Covid list categories for countries to a single “red list”, making travel simpler and cheaper for many.

Read the full story here

Sainsbury’s, Tesco, and Ocado stock jumps on takeover speculation

11:55 , Oscar Williams-Grut

Shares in British supermarkets surged today amid speculation that they could be targets for private equity bids.

Sainsbury’s jumped by 13.8p — or 4.8% — to top the FTSE 100. Tesco was the second biggest riser with a gain of 1.6% and Ocado was just behind, up 1%.

Momentum in the sector follows the conclusion of the bidding war for Morrisons over the weekend. Private equity firm CD&R won out with a 287p-a-share bid in an auction on Saturday. The offer values Morrisons at £9.8 billion including debt. CD&R saw off competition from a consortium led by Fortress.

US investor Fortress has been left with significant dry powder to spend and Joshua Pack at the firm has fuelled speculation that Fortress could return for another bid elsewhere in the sector.

“The UK remains a very attractive investment environment from many perspectives, and we will continue to explore opportunities to help strong management teams grow their businesses and create long-term value,” Pack said in a statement.

Read more here.

Next boss calls for more immigration

12:28 , Oscar Williams-Grut

Lord Wolfson, the Brexit-supporting CEO of Next, has written exclusively for the Standard to urge the government to loosen immigration rules.

“There is a workable solution to managing the UK’s need for overseas skills; but it requires us to avoid the descent into the bitterness that seems to accompany any debate involving Brexit,” the Tory peer writes.

“To move forward, Whitehall must be under no illusion: labour shortages are a real problem... raising nominal wages can only result in a Seventies-style inflationary spiral.

“The answer is to create a demand-led system, that allows the needs of our economy to pull in the talent we really need. For example, why not allow businesses to sponsor as many work visas as they need, with two vital caveats: firstly all overseas workers must receive the same pay as their UK colleagues and secondly, businesses must pay a percentage (say seven per cent) of overseas workers’ wages to the Government as a visa tax.”

The plea comes as industry faces a severe shortfall in labour. Read the full piece here.

Central London office spend bounces back

12:39 , Joanna Bourke

Investor appetite for central London office buildings has bounced back to surpass pre-Covid levels, with nearly £3 billion spent over the last quarter, figures show.

Investors spent close to £3bn on central London offices in Q3 (PA Wire)
Investors spent close to £3bn on central London offices in Q3 (PA Wire)

Buyers are betting that occupier demand for high-quality and modern workspace will improve, even as many firms embrace flexible working and some bosses look to reduce office sizes.

Preliminary data from property agent JLL, compiled for the Evening Standard, shows around £1.5 billion and £1.4 billion was spent respectively on City and West End office buildings in the three months to September 30.

Read the full story HERE.

FTSE flat at lunchtime

13:44 , Oscar Williams-Grut

The FTSE is broadly flat this lunchtime. The index is up 5 points to 7032.

At the top end, Sainsbury’s, Tesco and Ocado are soaring on takeover speculation. At the other end of the table, BT is coming under pressure after it was reported that Sky is working on a deal to co-invest in Virgin Media O2’s full-fibre broadband roll-out plan.

The potential partnership, reported by the Sunday Telegraph, steps up competition against BT’s infrastructure arm Openreach as it spends £15 billion on upgrading 25 million homes and businesses from copper phone networks.

Analysts at UBS said BT Openreach could lose more than £600 million of “very high margin revenue” under a cable wholesale/fibre joint venture between Sky and Virgin Media 02.

Sky is the largest external customer for BT Openreach, with UBS estimating it spends as much as £760 million a year on broadband wholesale fees for six million subscribers.

BT Group shares are down 5%.

Rishi reaction: small firms warn tax rises are hurting

14:27 , Simon English

RISHI Sunak won backing from lobby groups for big business today as he set out his vision for the UK economy.

But small firms say his tax rises are risk to economic recovery.

At his first in-person speech to the Conservative Party conference, the Chancellor pledged he would “do whatever I can to protect people’s livelihoods and create new opportunities”.

Read more here

GoCardless taps JPMorgan for fundraising, fueling IPO speculation

15:04 , Oscar Williams-Grut

GoCardless has tapped up JPMorgan to lead a fund-raising process that will likely see the firm reach unicorn status, the Standard can reveal.

JPMorgan is understood to be in the early stages of working on a funding round for the 10-year-old business. A source in the market suggested GoCardless could be seeking around £200 million. The company last raised money in December 2020 when investors including Bain Capital put in $95 million. GoCardless was valued at $970 million in the deal. New funding would likely see the business become a unicorn — a private tech firm worth over $1 billion.

JPMorgan and GoCardless declined to comment.

GoCardless is one of London’s earliest fintech success stories. The company helps businesses accept direct debits online, as well as offering broader payment services. Its original niche was serving small businesses once thought of by banks as unprofitable in the direct debit market.

Today it works with the likes of The Guardian newspaper, challenger energy supplier Bulb and TripAdvisor. It processes around $20 billion of payments for 65,000 customers around the world each year and has offices in New York, San Francisco, Paris, Munich, and Melbourne.

Read the full story here.

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