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Merger and acquisition speculation has helped to spark the markets again in a deathly quiet period for corporate reporting, with Sainsbury’s the latest retailer to soar in value.
The FTSE 100 firm climbed after reports that the UK’s second largest grocer was being examined as a potential takeover target by US private equity firm Apollo Global Management.
Both Sainsbury’s and Apollo have declined to comment on the Sunday Times report, but it has not stopped investors from getting excited.
Sainsbury’s has been boosted in recent weeks by the rising valuation of rival Morrisons which agreed a £7 billion deal last week.
Now the stock, which was heavily shorted by traders earlier in the year, has reached a seven-year high. It closed 45.3p higher at 340p.
Michael Hewson, chief market analyst at CMC Markets UK, said the FTSE 100 had a “positive day” on the back of the M&A chatter, as resource firms also had a strong session.
London’s top flight closed 21.12 points, or 0.3%, higher at 7,109.02 on Monday.
Mr Hewson added: “European markets have got off to a fairly positive start to the week, helped by a decent hand off from Asia, as a weaker US dollar and firmer commodity prices help to push energy and basic resource stocks off their recent lows, with BP, Royal Dutch Shell and Glencore outperforming, along with Tesco.
“The FTSE250 even managed to eke out a new record high, however as the day progressed a lack of momentum saw stocks slip back from their intraday peaks.”
Elsewhere in Europe, sentiment was similarly positive, with French traders particularly upbeat about the economic recovery.
The German Dax increased by 0.28% and the French Cac moved 0.86% higher.
Across the Atlantic, Wall Street opened where it left off on Friday to rise on the opening bell as the Nasdaq 100 hit another record high.
Meanwhile, sterling made gains despite disappointing PMI data as it benefited from a slump in the dollar, which continued its slide in value from Friday.
The pound was up 0.05% versus the US dollar at 1.372 and was 0.07% higher against the euro at 1.169.
In company news, Sureserve jumped in value after the energy services group signed a contract extension with The Guinness Partnership, a developer and owner of affordable homes.
Shares climbed by 6p to 97p at the end of play after it confirmed its new contract will run for 10 years.
Elsewhere, Endeavour Mining lifted after analysts at Barclays said the resources business was currently undervalued and predicted a “busy second half ahead” for the firm.
It closed 85p higher at 1,705p as a result.
The price of oil snapped back sharply, aided by the weakness in the dollar, after seven consecutive trading days of decline.
Brent crude increased by 5.35% to 68.67 dollars per barrel.
The biggest risers on the FTSE 100 were Sainsbury’s, up 45.3p at 340p; Rolls-Royce, up 3.58p at 113.74p; Evraz, up 15.8p at 560p; Burberry Group, up 52p at 1,877p; and Prudential, up 40.5p at 1,495p.
The biggest fallers of the day were BT Group, down 5.25p at 168.15p; SSE, down 31.5p at 1,635p; Pershing Square, down 45p at 2,495p; Smith & Nephew, down 18p at 1,407p; and AstraZeneca, down 107p at 8,624p.