FTSE 250 hits record high; oil highest since 2018 as Opec+ talks end – as it happened

Graeme Wearden

from Economics | The Guardian on 2021-07-05 18:30 (#5KWFV)

Rolling coverage of the latest economic and financial news

7.29pm BST

That's all for today. A quick reminder of the main stories.

Supermarket chain Morrisons is at the centre of a potential bidding war after a third private firm expressed interest in taking the firm over. Apollo confirmed this morning it was considering joining the battle to buy the UK's fourth-largest supermarket chain.

#OPEC+ calls off oil policy meeting after United Arab Emirates rejected a proposed eight-month extension to output curbs, meaning no deal to boost production has been agreed.#Brent crude climbs above $77 a barrel. @Reuters https://t.co/bHVPGAPabl

7.23pm BST

The UK's largest producer of semiconductors has been acquired by the Chinese-owned manufacturer Nexperia, prompting a senior Tory MP to call for the government to review the sale to a foreign owner during an increasingly severe global shortage of computer chips.

Nexperia, a Dutch firm owned by China's Wingtech, said on Monday that it has taken full control of Newport Wafer Fab (NWF), the UK's largest producer of silicon chips, which are vital in products from TVs and mobile phones to cars and games consoles.

The semiconductor industry sector falls under the scope of the legislation, the very purpose of which is to protect the nation's technology companies from foreign takeovers when there is a material risk to economic and national security.".

6.44pm BST

In other energy news...the chemicals company owned by Sir Jim Ratcliffe has agreed to become a cornerstone investor in a new clean" hydrogen fund that plans to list on the London Stock Exchange later this year.

Ineos, which has made Monaco-based Ratcliffe one of the UK's richest people, will invest at least 25m in HydrogenOne Capital Growth as it plans to raise a total of 250m by becoming the first hydrogen specialist to float in the UK.

6.19pm BST

Lively times on the oil market, after OPEC+ again adjourned its meeting to discuss easing restraint on production. Brent crude trading over $77 per barrel. pic.twitter.com/9d32dhZv1N

6.10pm BST

The oil price has hit its highest level since late 2018, after the Opec+ group reportedly failed to agree a plan for oil supplies beyond this month.

The virtual meeting between oil ministers has been called off without a deal, newswires say, after the United Arab Emirates refused to agree to extend some production cuts until the end of 2022.

Brent crude rose above $77 a barrel for the first time since 2018 after OPEC+ failed to reach a deal on bringing back curtailed output https://t.co/LOnGtJ0RR9 #OOTT pic.twitter.com/6YtwrUqJ0V

Several days of tense talks failed to resolve a bitter dispute between Saudi Arabia and the United Arab Emirates, delegates said, asking not to be named because the information wasn't public. The group didn't agree a date for its next meeting, according to a statement from OPEC Secretary-General Mohammad Barkindo.

The most immediate effect of the breakdown in talks is that, for now, OPEC+ won't increase production for August, depriving the global economy of vital extra supplies as demand recovers rapidly from the coronavirus pandemic.

#Brent crude hits $77 as OPEC delays output hike decision again - the group is sticking to current output cut agreement for the time being pic.twitter.com/psxucBU9Bb

While this may be a bullish outcome today, clear indication that UAE is keen to bring back more barrels into the mkt AND the increased chance of OPEC+ alliance dissolving altogether is likely bearish beyond the very near term #OOTT #Oil #OPEC #EFT

>$77 (first time since 2018) #OOTT #Oil #EFT #opecmeeting https://t.co/JTOfEdrqi2

5.25pm BST

The FTSE 250 share index continued its rally into the close of trading, and has finished at a new all-time high, up 275 points or 1.2% at 23022.4 points.

Morrisons closed 11.5% higher at 267.5p (still above the 254p bid accepted from the Fortress-led investment group which valued the company's shares at 6.3bn).

Sainsbury's is considered a possible target, given that billionaire Daniel Kretinsky, the owner of Vesa Equity Investments has been building his stake in the company.

J Sainsbury is aiming to hold onto market share through a price match promise with the low cost rival Aldi, as shoppers swap virtual baskets for physical trollies with the easing of restrictions.

There's just one price businesses, government and workers really don't want to have to pay for the Independence Day' expected on June 19^th and that is the price of another lockdown. Economically it would hurt, psychologically it would maim and of course any resurgence of the virus would bring too many real deaths.

Looking at London markets today investors seem pretty sure the vaccine rollout has changed things from this time a year ago. In the week leading up to July 4^th2020 when many restrictions were lifted, there was a mixed bag of risers and fallers, undoubtedly a response to the uncertainty of the situation. Today almost all retail, travel and leisure stocks across the FTSE 100 and 250 have made gains and the momentum has pushed the latter to an all-time high.

5.01pm BST

UK asset manager Legal & General Investment Management warned today that private equity firms must not be allowed to acquire Wm Morrison for the wrong reasons".

LGIM, the 9th largest shareholder in Morrisons, called on the company to disclose more detail about the value of its property assets (which a private equity buyer could potentially sell for short-term gain).

As the Morrisons situation evolves it is leading to more questions than answers. The company has thus far disclosed little information about the current value of its properties, both the retail stores and the distribution assets.

Given this is an agreed bid, it is likely that Fortress and their partners have had more information than others on this. Investors need to have the detailed figures to be able to make a considered decision regarding the right future for the company and their shareholdings.

LGIM warns against private equity buying Morrisons for wrong reasons', via @FT #PrivateEquity
https://t.co/gFdPE2w2lr

4.37pm BST

The head of the International Monetary Fund, Kristalina Georgieva, has warned of a dangerous divergence" between wealthy and developing countries as they seek to recover from the COVID-19 pandemic.

Speaking at the Paris Peace Forum today, Georgieva warns against failing to vaccinate the whole world...

.@KGeorgieva: Accelerating global vaccinations is critical. As long as we leave fertile ground for COVID mutations in the world, this will ricochet back to all countries. @ParisPeaceForum pic.twitter.com/2bdwQi4bms

.@KGeorgieva: If the dangerous divergence between countries continues, it may mean we ultimately have advanced economies normalizing their monetary policies - while other countries' debts become more expensive to service even as their recoveries are still lagging behind. pic.twitter.com/8Dybl0r841

.@KGeorgieva: For both economic and ethical reasons, we ought to vaccinate the world. It is a solvable problem - if we all pull together. @ParisPeaceForum pic.twitter.com/PbVZ1giDn8

.@KGeorgieva: The $50 billion cost of vaccinating the world would be dwarfed by the global economic benefit. @ParisPeaceForum pic.twitter.com/F0NBTrMlfI

4.12pm BST

Britain's FTSE 250 index of medium-sized firms has hit a new all-time high, lifted by the takeover battle for Wm Morrison and plans to reopen the UK economy.

The FTSE 250, which more closely tracks the UK economy than the FTSE 100, has jumped 1.1% to rise over its previous record high set last month.

3.14pm BST

More takeover news. Australia's Ramsay Health Care has raised its offer to buy Britain's private hospitals group Spire Healthcare to 250p per share.

Spire accepted a bid of 240p in late May, which valued it at 1bn.

Toscafund joins opposition to 1bn Ramsay takeover of Spire Healthcare https://t.co/uNZoYRd6ql

We are confident that our 250 pence cash offer per Spire share, which was reached after extensive negotiations with the Spire board, is fair and reasonable.

It is therefore our best and final offer."

The Increased Final Offer represents a 30% premium to the share price on the day prior to the announcement of the Initial Offer and a 41% premium to the three-month average share price prior to the announcement of the Initial Offer.

The Board believes that the Increased Final Offer is in the best interests of Spire shareholders as a whole, and accordingly unanimously recommends that shareholders vote in favour of the Increased Final Offer at the Court Meeting and General Meeting due to be held on 12 July 2021.

Going forward, any opportunities for Spire to increase admissions above current market expectations, whether NHS or private pay, will be balanced by the Company's continued focus on the safe use of existing capacity, near term availability and costs of clinical staff and consultant partners, and additional clinical recruitment and training, coupled with capacity increases to meet such demand.

Therefore, any expansion in capacity would require higher levels of operating investment and capital expenditure than in current guidance.

1.58pm BST

Despite the current pick-up in hiring, many younger workers fear that poor mental health will make it hard for them to find a job after the pandemic.

That's another blow to a generation that have already been hurt particularly badly by Covid-19, through job losses and the lack of hiring opportunities at the start of their careers.

More than one in four young people are worried that poor mental health will affect their ability to find work after the Covid-19 pandemic, according to a report.

After the opening up of the British economy this spring, the Resolution Foundation said young workers were still suffering a heavier toll than their older colleagues and were paying a heavier price with their mental health.

Lunchtime thread: here's a quick summary of the latest RF report, from @RSehmi , which explores how young people fear poor mental health will affect their post-Covid job prospects. Over a year into the crisis, one-in-five young people say their mental health is poor. pic.twitter.com/RnEoJBIGcD

Our research, supported by @HealthFdn, also shows that certain young people are more at risk than others, including young women, students, low paid workers, those not working or who are facing financial difficulties. pic.twitter.com/w1SwcegcJD

Young people also remain disproportionately affected by the economic impact of the pandemic. At the end of May, 18-24-year olds were two-and-a-half times more likely to be out of work than all other age groups. pic.twitter.com/5f10JFrflY

And there is a clear link between the two. Close to three-in-ten young people who were in work before the crisis, but are now either currently unemployed, furloughed or seen their pay decrease, are reporting poor mental health. pic.twitter.com/EX4mMYPbsk

Around one-in-four 18-24-year olds said that their mental health would affect their ability to find a job and progress in work in future. pic.twitter.com/Kty25UrxYv

And three-in-ten 18-24-year olds believe that their mental health will be affected if they are unable to find a job. pic.twitter.com/hggor6Yqs4

What can we do? Policymakers and employers must take steps to limit the linked mental health and economic effects of the crisis on young people, particularly as the Job Retention Scheme winds down and the temporary uplift to Universal Credit is withdrawn: https://t.co/MAXOkwlVdQ pic.twitter.com/8YiuxMnHuH

1.48pm BST

June's PMI surveys also shows that UK firms took on staff last month at the fastest clip since the data started being collected in the late 1990s.

Service sector activity (index at 62.4) increased at a slightly faster rate than manufacturing output (61.1), although both sectors saw a slowdown in the speed of recovery since May.

A rapid turnaround in staffing numbers continued in June, led by additional hiring across the service economy.

1.25pm BST

Back in the City, shares in Morrisons are still sharply higher as traders anticipate a possible bidding war for the UK's fourth-largest supermarket chain.

WM Morrison are currently up 11% today at 266.1p, having hit 268p in early trading, after Apollo Global Management became the third private equity firm to show interest.

The Fortress Investment Group-led $8.7bn takeover offer for British supermarket chain Morrisons represents good value", abrdn's CEO Stephen Bird said on Monday.

Abrdn, formerly Standard Life Aberdeen, is the fifteenth largest investor in Britain's fourth biggest supermarket group, according to Refinitiv data.

Investor opposition is starting to build against the 6.3bn (254p a share) Fortress takeover of Morrisons. A top 20 shareholder has told me: My view is that 254p undervalues Wm Morrison, but with three private equity groups interested it is unlikely to be the final bid."

12.59pm BST

Here's our news story on the latest Morrisons developments:

12.50pm BST

A modicum of doubt" has crept into the UK service sector last month despite the strong growth, says Duncan Brock, group director at the Chartered Institute of Procurement & Supply.

Brock points to the rising cost pressures flagged in this morning's PMI data, as well as the ongoing supply challenges and the marginal dip in service sector orders from abroad:

The services sector continued to expand at record-level rates as marketplaces opened up and consumers returned to hospitality with a fourth sharp monthly rise in new business and the highest job creation levels for seven years.

This return to robust activity should have service providers relieved at the new opportunities after lockdown, but a modicum of doubt has crept in. Optimism dropped to the lowest since January, while restricted international travel depressed overseas orders and interrupted supply lines as shortages increased. The rush to build operating capacity meant skilled labour became increasingly expensive too, adding to the cost burden woes.

11.55am BST

Hipgnosis, which owns the rights to 65,000 songs by artists from Neil Young to Beyonce, has raised its dividend as it expects the pandemic-fuelled streaming boom to continue as listening increases on digital services such as TikTok and Peloton.

The London-listed company, which makes money every time one of the songs to which it owns the rights are played, almost doubled revenues from $82m to $160m in the year to the end of March.

11.26am BST

The speedy recovery across UK companies slowed slightly last month, as firms were held back by capacity constraints and staff shortages, and rising prices.

Growth at UK services companies dipped a little in June after surging in May, but remained robust.

International travel restrictions and uncertainties about quarantine policies were the most commonly cited factor. Some firms also noted that Brexit-related issues had dampened export orders to the EU.

The UK services #PMI posted at 62.4 in June, pointing to a solid expansion in business activity. Job creation rose at the fastest pace in 7-years while strong demand persisted. Input and output price inflation hit record highs, however. Read more: https://t.co/vCgFFG6kGI pic.twitter.com/l2rBRF40pu

The service sector recovery remained in full swing during June as looser pandemic restrictions released pent up demand for business and consumer services. Sales growth eased slightly from May's recent peak, but capacity constraints and staff shortages meant that many service providers struggled to keep up with new orders.

Backlogs of work increased at a faster pace than any other time since the survey began in July 1996, despite job creation reaching a seven-year high. Difficulties filling staff vacancies were reported by survey respondents in all parts of the service economy during June, with hospitality and leisure experiencing the greatest squeeze.

10.37am BST

The UK car industry continued its weak recovery from the pandemic in June, with sales well below pre-Covid-19 levels despite a bounceback from the lockdowns of 2020, according to the latest data.

People in the UK bought 186,128 new cars in June, up 28% on the same month last year, according to the Society of Motor Manufacturers and Traders (SMMT), a lobby group.

With the final phases of the UK's vaccine rollout well underway and confidence increasing, the automotive sector is now battling against a long Covid' of vehicle supply challenges.

The semiconductor shortages arising from Covid-constrained output globally are affecting vehicle production, disrupting supply on certain models and restricting the automotive recovery."

10.06am BST

On the economic front, eurozone companies have posted their fastest growth in 15 years during June.

Both manufacturers and services companies reported surging levels of output last month, according to the latest survey of purchasing managers from IHS Markit.

Business is booming in the eurozone's service sector, with output growing at a rate unsurpassed over the past 15 years. Added to the impressive growth seen in the manufacturing sector, the PMI surveys suggest the region's economy is firing on all cylinders as it heads into the summer.

Service sector growth has picked up across the board among the countries surveyed, with hard-hit sectors such as hospitality and tourism now coming back to life to join the recovery as economies and travel are opened up from virus-related restrictions.

The composite Eurozone #PMI hit a 15-year high in June with the headline figure at 59.5, driven by quicker expansions at both manufacturing and service sectors. Ireland led the way with growth, while Spain reached a 21-year high. Read more: https://t.co/GRChtTiYMR pic.twitter.com/DfHJp5hAsZ

9.45am BST

The jump in supermarket shares has helped lift the London stock market this morning.

The blue-chip FTSE 100 index is up 16 points or 0.2% at 7140 points, led by British Airways parent company IAG (+2.6%), Sainsbury's (+1.95%), Barclays (+1.9%), HSBC (+1.4%) and Tesco (+1.3%). Mining stocks are also up.

9.30am BST

The prospect of Morrisons ending up in private equity hands is worrying the unions, with Unite calling for unbreakable guarantees' on jobs and conditions on Saturday.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, explains why Morrison's is so significant to the UK food industry:

As the UK's second largest food manufacturer, a huge number of farmers and producers are reliant on the grocer, not to mention the staff employed at its stores and factories, so any private equity bid is being met with suspicion by unions, fretful that parts of this support network could be dismantled.

Already Morrisons has moved to try and assuage concerns, by reportedly writing to some members of parliament saying that Fortress will continue to place a very significant emphasis on the wider responsibilities of ownership. There certainly will be relief that Fortress has no plans yet to strip Morrisons of its assets - and sell off chunks of its store estate, which was one of the initial main concerns.

9.19am BST

Neil Wilson of Markets.com also predicts there could be further bids for Morrisons... and points out that UK companies currently look cheap to overseas investors:

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% 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% 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.

8.57am BST

Shares in other supermarket chains are also pushing a little higher this morning, as bid excitement ripples through the City.

Sainsbury's are up 1.6% while Tesco has gained 1.1%, putting them among the top risers on the blue-chip FTSE 100 index.

Sainsbury's, Marks & Spencer and Tesco have performed well during the pandemic but their share prices remain subdued.

These are good businesses with strong property portfolios. Why have analysts and investors taken so long to realise this? To private equity with the weak pound they are a bargain,' the broker said.

8.29am BST

Morrisons share price up 11.36%, or 27.25p, to 267.05p in early trading. Through the 254p bid price of Fortress consortium as traders bet on bidding war breaking out, fuelled by Apollo confirming its weighing a rival offer with advisers at Morgan Stanley and CD&R still in wings

8.27am BST

Richard Hunter, head of markets at interactive investor, agrees that Morrisons could find itself at the centre of a bidding war.

Apollo could try to trump the Fortress-led bid which Morrison's board has accepted, or initial suitors Clayton Dubilier & Rice could return to the table with a larger offer. Plus, could Amazon -- who have a grocery delivery partnership with Morrisons -- make its own offer?...

As an investment destination, the UK is attracting increased interest from overseas and the latest twist in the Morrisons bidding war has upped the ante.

Having rejected an initial 230p per share bid from Clayton Dubilier & Rice, the board has now accepted a 254p bid from Fortress, apparently on the basis of business continuity as well as price.

8.14am BST

Shares in Morrisons have jumped 11% at the start of trading in London, as traders anticipate a bidding war for the supermarket chain.

They have opened sharply higher at 268p, up from 239.8p on Friday night, after Apollo told the City it was considering a possible bid.

*MORRISON RISES 11% AS TAKEOVER BATTLE HEATS UP

7.57am BST

The Times is reporting today that the Fortress consortium is being tipped to see off other potential suitors for Morrisons, after giving commitments to preserve the legacy of its founding family.

They say:

Darren Jones, Labour chairman of the business, energy and industrial strategy committee, said: There have been too many examples in the past where private equity owners have underinvested, taken payouts and then left important British retail brands in administration, with workers, pensioners and high streets left high and dry."

However, Morrisons has already written to Kwasi Kwarteng, the business secretary, and a handful of local MPs to assuage their concerns and assure them both Morrisons and Fortress place very significant emphasis on the wider responsibilities of ownership of Morrisons, including recognising the legacy of Sir Ken Morrison".

Today's @TimesBusiness front page: Fortress moves to secure Morrisons from rival bids https://t.co/4NlOY6xUMs pic.twitter.com/EGPXHZ6EZg

7.54am BST

My colleague Sarah Butler has a handy guide to the US investors, led by Fortress, whose 6.3bn offer has been accepted by Morrisons (but could yet be challenged by Apollo...)

The first US alternative investment firm to float on the New York Stock Exchange, in 2007, Fortress was bought out by Japan's SoftBank in a $3.3bn deal in 2017. It was a surprising move for the giant investment group, which has tended to focus on the technology sector.

The move on Morrisons, a cornerstone of the UK's food supply infrastructure during the disruptions of the pandemic and Brexit, marks a second tilt by the SoftBank empire at a highly sensitive British business. In 2016, SoftBank acquired the Cambridge computer chip firm ARM. Still regarded as the UK's leading tech company, its designs are used in the iPhone.

7.34am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The future of Wm Morrison hangs in the balance this morning, as the prospect of a full-scale bidding war for the UK's fourth-largest supermarket chain breaks out.

Apollo Global Management, the US private equity group, has confirmed this morning that it is in the early stages of considering a bid -- raising the possibility of a three-way battle for Morrisons.

Apollo Global Management, Inc. (together with its subsidiaries, Apollo") notes the recent press speculation in relation to Morrisons and confirms that it is, on behalf of certain investment funds managed by it, in the preliminary stages of evaluating a possible offer for Morrisons.

No approach has been made to the Board of Morrisons. There can be no certainty that any offer will be made, nor as to the terms on which any such offer might be made.

Private equity company Apollo Global Management is in the preliminary stages of evaluating a possible offer for British supermarket group Morrisons MRW.L

And then there were three... Apollo private equity confirms interest in Morrisons https://t.co/aLcRwJeTcZ

Apollo Global Mgmt has noted that speculation regarding their interest and has confirmed it's in the early stages of assessing an offer for Morrisons.

Usual no guarantee any offer will be made etc.

Morrisons is considered attractive because it owns the freehold on about 85% of its properties - including its supermarkets - and for its integrated business approach. It has long-term relationships with its farmers and suppliers as well as its own food manufacturing sites and even its own fishing fleet.

Andrew Gwynn, an equity analyst at the financial firm Exane, said he believed the Fortress-led bid had a good chance.

We believe in making long-term investments focused on providing strong management teams with the necessary flexibility and support to execute their strategy in a sustainable and value-enhancing manner.

We fully recognise Morrisons' rich history and the very important role Morrisons plays for colleagues, customers, members of the Morrisons pension schemes, local communities, partner suppliers and farmers."

EXCLUSIVE: Saudi Arabia and the United Arab Emirates cranked up the tension in their OPEC+ standoff on Sunday | Full story is here: https://t.co/qSDISZahJ3 And a clip below of our exclusive interview with Saudi oil minister Prince Abdulaziz bin Salman | #OOTT More on @BloombergTV pic.twitter.com/my3uG08LP9

I hope everyone had a great weekend! A quick wrap of the news in focus and look at the week ahead, with the OPEC+ decision still unresolved pic.twitter.com/ZucjRT0KXt

European Opening Calls:#FTSE 7124 +0.01%#DAX 15633 -0.11%#CAC 6543 -0.14%#AEX 733 -0.11%#MIB 25258 -0.10%#IBEX 8886 -0.24%#OMX 2288 -0.04%#STOXX 4079 -0.14%

On Monday we're taking evidence from @MarkJCarney, the Prime Minister's Finance Adviser at #COP26 and Special Envoy for Climate Action and Finance at the United Nations.

Watch it live at 3.30pm on Monday 5 July https://t.co/qtewAwJqOX pic.twitter.com/9kivQw4XzY

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