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FTSE 100 rallies, crude oil falls, Bitcoin drops back below $40,000

EconomyAug 02, 2021 16:35
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Key Points

  • FTSE 100 closing price of 7081.4, +0.7%
  • M&A Monday lifts midcaps ( Meggitt and Sanne)
  • Union at Escondida mine rejects BHP contract offer
  • Oil lower on China growth concerns
  • UK manufacturing growth slows, GBP steady
  • Bitcoin retreats back below $40,000

By Samuel Indyk

Investing.com – The FTSE 100 rose on Monday amid a broad based global equity rally. The midcap FTSE 250 index outperformed, supported by M&A related gains and strong earnings.

Meggitt PLC (LON:MGGT) was the best performing stock in the FTSE 250, rising over 50% after the company agreed to be taken over by US-based Parker-Hannifin (NYSE:PH) for 800 pence per share in cash, representing a 71% premium from Friday’s closing price. This is the second bid for a UK defence group by a US firm in less than seven days, after Ultra Electronics (LON:ULE) said it would be minded to accept Cobham (LON:COB)'s offer last week.

Shares in Sanne Group (LON:SNNS) jumped after the company said it was in advanced talks with Apex over a potential takeover for 920 pence per share in cash, valuing the group at around £1.5 billion. Sanne had previously been in discussions with Cinven about a potential deal worth 875 pence per share.

BHP Group (LON:BHPB) was in focus after the union of workers at its Escondida copper mine in Chile voted to reject the company’s contract off, which could potentially lead to a strike. The government is now likely to step in to mediate talks which could last up to 10 days, but if no agreement is reached workers are expected to down tools. Escondida is the world’s largest copper mine and striking workers could impact global copper supply, however, Copper prices were relatively stable for now.

WTI and Brent crude futures both declined over fears of slowing Chinese growth. China’s Caixin manufacturing PMI fell to 50.3 - barely above the expansionary 50 threshold - to its lowest level since April 2020. Meanwhile, Covid cases in China have now spread to eight different provinces and there are fears that strict lockdowns could crimp growth at the world’s largest crude importer.

“At present, soft lockdowns have been implemented in China, but if the situation worsens, this could prompt further restrictions that could exacerbate the slowdown in economic activity, and thus reduced oil consumption,” writes StoneX energy analyst Kevin Solomon.

Manufacturing growth in the UK slowed in July, with IHS Markit’s manufacturing PMI coming in at 60.4 from 63.9 in June, unrevised from the flash reading. Growth in output and new work eased but the industry is still facing supply-chain issues.

“Although July saw UK manufacturers report a further month of solid growth, scarcities of inputs, transport and labour are stifling many businesses,” said IHS Markit Director Rob Dobson.

The update had little impact on GBP with GBP/USD trading relatively flat around 1.3900. The US Dollar Index was slightly weaker, trading near a one-month low ahead of Friday’s labour market report and as the US ISM manufacturing PMI also showed signs of slower manufacturing growth.

Bitcoin and other cryptocurrencies pulled back after weekend gains took Bitcoin to its highest level since 18th May. Saudi Aramco (SE:2222) denied reports it was planning to use flare gas to mine Bitcoin, which some had cited for the reason behind the jump in cryptocurrencies during the weekend.

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FTSE 100 rallies, crude oil falls, Bitcoin drops back below $40,000
 

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