London midday: Stocks extend gains amid weak pound, Sainsbury's surges on Asda deal
London stocks had extended gains by midday on Monday, underpinned by a weaker pound and deal news after Sainsbury's announced plans to merge with Walmart's UK unit, Asda.
The FTSE 100 was up 0.5% to 7,540.47, while the pound was down 0.4% versus the dollar at 1.3725 and 0.2% lower against the euro at 1.1347. Sterling has been under pressure since last week's weak UK GDP data dashed any remaining hopes of an interest rate hike in May.
A weaker pound tends to lift the top-flight index as around 70% of its constituents derive most of their earnings from overseas.
Sainsbury's surged 16% after confirming that it has agreed terms with Walmart over a merger with UK supermarket chain Asda to create a £51bn-revenue giant in exchange for a £3bn cash payment.
The agreed deal will see Sainsbury's, which also reported its final results on Monday, hold 58% of combined business and retain its chairman, chief executive and chief financial officer, as well as its listing in London. Tesco shares pared earlier losses to trade down just 0.1%, while Morrisons reversed course to trade higher.
Spreadex analyst Connor Campbell said: "Obviously regulators are going to have a LOT to say about such a landscape-shifting deal, meaning there’s a long way to go before this bonkers but potentially brilliant marriage becomes a reality."
"Investors are already signalling how they feel about the merger, however; Sainsbury’s rocketed as much as 20% higher after the bell, sitting between £3.15 and £3.20 for the first time in a few months shy of four years."
In its 52-week fiscal year, Sainsbury's reported a return to profit growth, with underlying profit before tax up 1.4% to £589m, with profits up 11% in the second half after cutting £185m of costs. Looking to the current year, chief executive Mike Coupe said he was "comfortable" with the current City forecast for underlying pre-tax profit of 7% to £629m.
Elsewhere, Mondi was in the black after announcing the acquisition of Egypt's National Company for Paper Products and Import & Export (NPP) for EGP 510m (€23.7m) on a debt and cash free-basis.
Advertising giant WPP rallied after it posted a 0.8% increase in first-quarter like-for-like revenue and reiterated its guidance for 2018, as it said it would take a "fresh look" at business in light of Martin Sorrell's exit, amid talk that it could spin off assets.
Aviva edged higher after saying it will make goodwill payments to shareholders who sold preference shares in the period from 8 to 22 March.
Randgold Resources edged up after saying that industrial disputes at its Tongon gold mine in Côte d'Ivoire would hit 2018 production guidance of 290,000 ounces although it was making efforts to recover lost output.
Mike Ashley's Sports Direct was in the black after disclosing stakes in US companies Finish Line and Iconic Brand Group.
On the downside, Glencore retreated after saying late on Friday that two of its subsidiaries in the Democratic Republic of Congo had been served freezing orders for $3bn of damages for alleged unpaid royalty agreements, news which prompted RBC Capital Markets to downgrade the stock to 'outperform' from 'top pick'.
Old Mutual slipped as the Anglo-South African financial services group said that its businesses continue to trade in line with the expectations outlined in its results back in March.
Rank Group ticked lower after the FTSE 250 gambling company appointed former Ladbrokes executive John O'Reilly as chief executive with effect from 7 May, succeeding Henry Birch.
On the broker note front, Barclays downgraded Victrex to 'underweight' and reinstated Elementis at 'equalweight', while Thomas Cook was boosted by an initiation at 'buy' by Jefferies.
Market Movers
FTSE 100 (UKX) 7,540.47 0.51%
FTSE 250 (MCX) 20,355.05 0.41%
techMARK (TASX) 3,465.58 0.53%
FTSE 100 - Risers
Sainsbury (J) (SBRY) 314.30p 16.49%
WPP (WPP) 1,225.50p 6.70%
Prudential (PRU) 1,900.00p 1.88%
Anglo American (AAL) 1,728.40p 1.72%
TUI AG Reg Shs (DI) (TUI) 1,667.00p 1.68%
Rentokil Initial (RTO) 311.60p 1.66%
Standard Life Aberdeen (SLA) 370.24p 1.49%
Whitbread (WTB) 4,312.10p 1.37%
Fresnillo (FRES) 1,299.00p 1.37%
Unilever (ULVR) 4,106.00p 1.36%
FTSE 100 - Fallers
Glencore (GLEN) 357.85p -3.02%
BP (BP.) 531.90p -1.02%
G4S (GFS) 259.90p -0.65%
Old Mutual (OML) 253.10p -0.63%
Royal Dutch Shell 'A' (RDSA) 2,520.00p -0.45%
Royal Dutch Shell 'B' (RDSB) 2,587.50p -0.33%
Sage Group (SGE) 639.00p -0.31%
Barclays (BARC) 208.30p -0.31%
GKN (GKN) 464.43p -0.23%
Micro Focus International (MCRO) 1,271.61p -0.19%
FTSE 250 - Risers
Virgin Money Holdings (UK) (VM.) 286.80p 5.83%
Ferrexpo (FXPO) 238.35p 3.72%
Thomas Cook Group (TCG) 124.02p 3.35%
OneSavings Bank (OSB) 398.60p 2.52%
Essentra (ESNT) 444.80p 2.49%
Wetherspoon (J.D.) (JDW) 1,168.00p 2.46%
PZ Cussons (PZC) 249.40p 2.30%
Domino's Pizza Group (DOM) 365.80p 2.24%
Ocado Group (OCDO) 539.40p 2.12%
ZPG Plc (ZPG) 355.16p 2.06%
FTSE 250 - Fallers
Victrex plc (VCT) 2,594.00p -3.14%
Card Factory (CARD) 227.76p -3.08%
Contour Global (GLO) 257.60p -2.42%
Cairn Energy (CNE) 226.40p -2.41%
Hikma Pharmaceuticals (HIK) 1,296.00p -2.15%
Spire Healthcare Group (SPI) 227.60p -1.73%
Games Workshop Group (GAW) 2,430.00p -1.62%
IP Group (IPO) 137.00p -1.58%
Dairy Crest Group (DCG) 546.50p -1.26%
Vesuvius (VSVS) 589.50p -1.26%