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FTSE 100 struggles for direction as Sainsbury's takeover speculation fades

·3-min read
Sainsbury's stock jumped 15% on Monday after speculation the company could become a target for privae equity takeover. Photo: Lee Smith/Reuters
Sainsbury's stock jumped 15% on Monday after speculation the company could become a target for privae equity takeover. Photo: Lee Smith/Reuters

The FTSE 100 (^FTSE) had closed in the green on Monday in London after moving lower, following a day of gains fuelled by rumours in the market that grocer Sainsbury's (SBRY.L) could be the latest private equity takeover target. 

Sainsbury's had closed 15.4% higher on Monday — a 45.3 pence per share premium on Friday's closing price. Investors rushed to buy following reports in the Sunday Times that Apollo (APO) had considered it as a potential option to buy. 

The interest from Apollo is understood to be exploratory, according to the report.

Apollo declined to comment on the rumours, as did Sainsbury's. 

Watch: Could Sainsbury's be next for a takeover bid?

Market watchers were sceptical of the report, with analysts at Shore Capital calling it "shallow" and "sensationalist". 

Britain's second largest supermarket chain opened 2% lower on Tuesday in London as buying cooled off. 

The FTSE was 0.1% higher by the closing bell. 

“The FTSE 100 was heading nowhere fast on Tuesday, starved of any obvious catalysts on the corporate and economic front” said AJ Bell financial analyst Danni Hewson.

“Concerns about the spread of the Delta variant seem to wax and wane as often as the weather and a slightly sunnier mood to match the meteorological conditions in the UK helped the travel sector eke out some modest gains early on."

Over the last year there has been a flurry of private equity firms moving to take UK companies private, with Morrisons (MRW.L) the latest high profile example in the supermarket sector. 

Elsewhere, Germany's DAX (^GDAXI) was 0.4% higher and the CAC (^FCHI) in France fell 0.2%. 

Markets in the US were buoyed by the news that the US FDA had approved Pfizer-Covid BioNTech's COVID-19 vaccine for use. 

US stocks ticked higher across the board following a positive day of trade yesterday, which saw the tech-heavy Nasdaq close 1.6% higher. 

Read more: Small business confidence swells amid bank holiday boom predictions

By the close in Europe, the S&P 500 (^GSPC) was up 0.2%, the Dow (^DJI) also opened 0.2% higher, and the Nasdaq (^IXIC) was up 0.4%.

"The stock market's recovery was facilitated by optimism that the approval would serve as a foundation for additional steps to accelerate economic growth, which is currently slowed by the advance of cases caused by the delta variant," said Naeem Aslam, chief market analyst at AvaTrade.

"The approval is critical because it will persuade people who are still hesitant to get their vaccinations due to concerns about unwarranted side effects."

Asian stocks also saw a second day of gains, with indexes closing higher almost across the board. The Hang Seng (^HSI) was up 1.9%, the SSE Composite (000001.SS) rose 1.1% and Japan's Nikkei (^N225) headed 0.9% higher. 

Watch: What are SPACs?

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