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The Trader: Stocks slip, Morrisons up as bidding war intensifies, OPEC still stuck

Shares in London are flat as traders asses the lie of the land after Wall Street set new records last week
The Trader: Stocks slip, Morrisons up as bidding war intensifies, OPEC still stuck

 

  • European shares are off marginally after Wall Street closed at new highs on Friday
  • UK grocer Morrisons attracts second bidder in as many weeks
  • OPEC countries still talking about production increases

European stocks slid early on Monday as they continue to run up and down well-worn ranges. On Friday, the S&P 500 rose for a 7th straight session and notched another all-time high after a strong jobs report. The nonfarm payrolls report indicated US employers added 850,000 jobs last month, the strongest number in 10 months and a sign that hiring is accelerating as pandemic-era support is scaled back. However, the unemployment rate rose to 5.9 per cent, against expectations it would fall to 5.6 per cent. In all this was a positive report for stocks, indicating solid-but-not-too-hot economic recovery and keeping the Fed on the course the market sees it on. Yields fell, with the 10-year back to its lowest since March, and the dollar eased back after being bid up all week. The soft finish last week for the dollar has continued into Monday but we should caution that the Independence Day holiday today, held over from yesterday, will keep US markets closed, and maybe keep equities from making any serious moves. Overnight Asian shares were steady as the Caixin services PMI fell to a14-month low. 

Bidding war intensifies: Morrisons shares leapt again after management said over the weekend they have accepted a £9.5bn offer from Fortress. The deal values the stock at 252p, a 42 per cent premium to the undisturbed price, plus a 2p special dividend. Apollo Global Management said in a statement this morning that it is now considering an offer.  Shares this morning trade up 11 per cent at 267p, reflecting a premium to the agreed bid that indicates investors believe there could be more juice to be squeezed from this particular bidding war. I think there could well be another offer or two and 280p might be seen before it’s a knockout. We’ve talked fairly regularly about the amount of private equity money there is waiting for UK companies, which are cheap vs peers. Given our interventionist chancellor wants to open up the listing process to make it more appealing to list in London, he may also want to consider ways to shore up the defences of public companies. When you look at UK valuations vs US and even European peers it’s still too cheap.

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