The UK’s major shares fell in early trade as investors worldwide react to a Fed-led market wobble as worries re-emerge that the US Fed may speed up interest rate rise plans to combat inflationary pressure. Supermarkets were also front a centre with Morrison’s (MRW) jumping after the group rebuffed a buyout offer over the weekend.
Most commentators had pencilled in 2023 or even 2024 for the re-evaluation of rates alongside the tapering of monetary support but Federal Reserve official James Bullard, has said that a rise in borrowing costs could come as earlier as the end of next year.
Wall Street and Asia’s main markets were rocked with the Dow off more than 500 points on Friday and the Nikkei down 950 points on Monday. The FTSE 100 was trading 0.3% down at 6,996 in early morning deals.
The inflation debate is set to rumble on given the speed and strength of global economic recovery following the success of the vaccination programme and extremely accommodative monetary policy from the Fed which has enabled the economy to snap back.
MORRISONS TAKEOVER POSSIBLE
In company news, shares in Morrisons jumped 31.5% to 234.53p on hopes that private equity firm Clayton, Dubilier & Rice might raise its proposed offer for the UK supermarket chain, or that’s its offer might even flush out interest from other possible suitors.
Over the weekend, Morrisons, the UK’s fourth largest grocer by sales, said it had rejected a proposed 230p per share cash offer worth £5.52 billion from the private equity investor, saying it ‘significantly undervalued’ the group and its future prospects.
Under UK takeover rules Clayton, Dubilier & Rice has until 17 July to announce a firm intention to make an offer. Shares in Tesco (TSCO) and Sainsbury (SBRY) both rallied as investors bet that the whole sector could now be in play.
Digital services provider Capita (CPI) gained 3.9% to 39.11p on announcing that it would receive net cash proceeds of £172.5 million from the sale of the Axelos joint venture to PeopleCert International.
Capital also said it remained on track to deliver revenue growth in 2021, for the first time in six years.
The Renewable Infrastructure Group (TRIG) fell 0.2% to 127.18p after power generation was halted at the 396MW megawatt Merkur offshore wind farm in the German North Sea, due to stress fatigue in its GE turbines.
TRIG said contractual provisions with GE included a mechanism to protect lost revenue whilst turbines were not operational, subject to a cap that currently wasn’t expected to be exceeded.
AROUND THE MARKET
IT services and cloud hosing company SysGroup (SYS:AIM) reversed 5.2% to 44.1p, having swung to a modest annual profit as cost control helped offset falling sales.
SysGroup’s pre-tax profit for the year through March amounted to £0.21 million, compared to a year-on-year loss of £0.23 million. Its revenue fell 7% to £18.1 million.
Chocolate maker Hotel Chocolat (HOTC:AIM) shed 0.8% to 366.05p, having agreed to acquire the 53% of Rabot 1745 — a loss-making restaurant overlooking London’s Borough Market — that it didn't own for the nominal sum of £4.
Consumer goods group Venture Life (VLG:AIM) added 0.9% to 98p after it secured a credit facility from Santander UK and Silicon Valley Bank worth up to £30 million.
Career guidance and development platform Dev Clever (DEV:AIM) rallied 14% to 42.3p following news that it had secured a partnership with Dubai-based Aldebaron to bolster its international rollout plans.
Dev Clever also agreed to acquire education business The Inspirational Learning Group for £0.2 million in cash and 6 million Dev Clever shares.
Construction group NMCN (NMCN) slumped 8.9% to 179.8p as it struck a recapitalisation agreement involving a deeply discounted £29 million fundraising with Svella and other investors.
The deal included a £10 million convertible bridging loan, £14 million equity raising and a £5 million open offer, all at 20p per share, representing a 90% discount to NMCN’s closing price Friday.