(Alliance News) - Stock prices in London were higher at midday on Monday with UK grocer J Sainsbury leading the FTSE 100 on reported takeover interest, while attention turns the US Federal Reserve's Jackson Hole symposium which will be held online at the end of the week.
The large-cap index was up 29.42 points, or 0.4%, at 7,117.37. The mid-cap FTSE 250 index was up 4.74 points, or 0.2%, at 23,797.63. The AIM All-Share index was up 0.1% at 1,262.91.
The Cboe UK 100 index was up 0.5% at 708.10. The Cboe 250 was up 0.3% at 21,643.52, and the Cboe Small Companies was up 0.5% at 15,386.81.
In mainland Europe, the CAC 40 stock index in Paris was 0.8% higher, while the DAX 30 in Frankfurt was up 0.2%.
In the FTSE 100, Sainsbury's was the standout performer, up 13%, after the Sunday Times reported it could be the next UK grocer to be the object of bid interest from private equity.
Private equity firms are exploring potential takeover approaches for Sainsbury's with a view to possibly launching offers of more than GBP7 billion, the newspaper said, as the bidding war for peer Wm Morrison Supermarkets reignites interest in the UK grocery sector.
Morrisons was up 0.2%, while Tesco was up 2.1%.
The Times said US firm Apollo Global Management Inc is "running the rule" over the UK's second-largest supermarket chain.
Last week, Morrisons accepted a raised offer from Clayton, Dubilier & Rice worth GBP7.0 billion as rival suitor Fortress Investment Group assesses its options. Apollo had decided against making an independent offer for Morrisons, instead in July saying it was in talks with Fortress to join its bidding group.
Analysts at UBS noted: "This news yet again highlights the attractive free cash flow based valuation of the UK supermarket assets with a growing profit pool as the discounters' threat is largely neutralised and the profitability of the large online businesses improves.
"We believe Sainsbury's has a strong operational momentum as we recently discussed here and confirmed by the four upgrades in profit outlook since November. We see private equity ownership of Morrisons and Asda as a positive for the sector and reiterate our Buy ratings on both Sainsbury's and Tesco."
Pearson was up 3.2% after JPMorgan raised the education publisher to Overweight from Neutral.
WPP was up 0.5%. The ad agency acquired Satalia, a technology company offering artificial intelligence solutions for clients, for an undisclosed amount.
The marketing firm highlighted that Satalia builds technologies that helps clients develop business strategies and improve operational efficiency. Satalia has clients including BT, DFS, DS Smith, PwC, Tesco and Unilever.
In the FTSE 250, easyJet was up 2.2% after the budget airline said it has appointed Stephen Hester as a non-executive director and chair-designate. He will replace Chair John Barton who will round off a near nine-year stint in the role in December.
Hester served as CEO of state-backed lender Royal Bank of Scotland Group during the financial crisis, replacing Fred Goodwin who led the bank to the brink of collapse in 2008. Hester left RBS, since renamed NatWest Group, in 2013 and went on to lead RSA Insurance as CEO from February 2014 until this year, when RSA was acquired for GBP7.2 billion by Canada's Intact and Scandinavian insurer Tryg.
Back in May, Sky News reported that easyJet had engaged recruitment firm Lygon Group to find a successor to Barton as chair.
At the recent AGM, Barton and Chief Executive Officer Johan Lundgren were only barely re-elected to the board, with 43% of shareholders opposed. This followed a campaign against them by founder and largest shareholder Stelios Haji-Ioannou, who was unhappy about a contract to buy aircraft from Airbus.
At the other end of the midcaps, Pennon Group was the worst performer, down 4.0%, after Credit Suisse downgraded the water utility to Underperform from Neutral.
The pound was quoted at USD1.3667 at midday on Monday, up from USD1.3621 at the London equities close Friday.
On the economic front, UK private sector companies experienced a sharp slowdown in output growth during August, survey results compiled by IHS Markit and the Chartered Institute of Procurement & Supply showed.
At 55.3 points in August, down from 59.2 in July, the headline seasonally adjusted IHS Markit-CIPS flash UK composite output index slipped for the third month running. The latest reading signalled the slowest expansion of output since the UK private sector returned to growth in March.
At 55.5 points in August, down from 59.6 in July, the seasonally adjusted IHS Markit-CIPS flash UK services PMI business activity index was above the 50.0 no-change mark for the sixth month running. The flash UK manufacturing output index reading for August was 54.1 points, down from 57.1 in July.
Emma Mogford, fund manager at Premier Miton Monthly Income Fund noted: "The UK is still growing at a good pace, albeit slower than the last few months. Growth has been impacted by a slowdown in services, as consumers have been cautious in the face of the Delta variant. However, manufacturing growth has remained strong despite some evidence for slowing global growth."
The euro was priced at USD1.1717 at midday, higher than USD1.1681 late Friday, following an upbeat PMI reading from the continent.
Eurozone business activity continued to grow strongly in August, Markit said, with the rate of expansion cooling only slightly despite widespread supply chain delays.
The headline IHS Markit eurozone composite purchasing managers' index slipped to 59.5 points in August from a 15-year high of 60.2 in July.
Data showed that service sector growth exceeded that of manufacturing for the first time since the pandemic, buoyed by the further reopening of the economy. The flash eurozone services PMI activity index stood at 59.7 points in August versus 59.8 in July.
The flash eurozone manufacturing PMI output index came in at 59.2 points, soft from 61.1 a month before, moderating for a second month to the weakest since February.
Against the Japanese yen, the dollar was trading at JPY110.06, up from JPY109.81 late Friday in London.
Brent oil was quoted at USD67.02 a barrel Monday at midday, up sharply from USD66.02 late Friday. Gold was trading at USD1,788.50 an ounce, higher against USD1,783.81.
US stock market futures were pointed higher following a positive finish on Friday, fuelled by comments from Federal Reserve policymaker Robert Kaplan. The Dallas Fed president said the spread of the Delta variant of Covid-19 could cause him reconsider plans to taper economic stimulus.
The Dow Jones Industrial Average was called up 0.5%, the S&P 500 up 0.4%, and the Nasdaq Composite up 0.3%.
Ahead this week, investors will be looking ahead to the Federal Reserve's Jackson Hole symposium, which will be held virtually on Friday.
The annual event had originally been scheduled to be held in person over several days, but was moved online "due to the recently elevated COVID-19 health risk level in Teton County, Wyoming".
US Fed 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.
"Market participants will be paying incredibly close attention to Powell's remarks, amid expectations of a hawkish pivot from last month's FOMC meeting, and confirmation that the US economy continues to inch towards having made the 'substantial further progress' required for the pace of asset purchases to be slowed," said Caxton analyst Michael Brown.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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