MARKET WRAP: Oil hits 7-year high, FTSE edges lower

imageEconomy5 hours ago (Oct 04, 2021 16:36)

© Reuters.

Key Points

  • FTSE 100 closing price of 7,010, -0.2%
  • Oil rallies as OPEC+ sticks to production plans
  • BP , Shell jump on oil price rise
  • Morrisons takeover battle ends, Sainsbury’s next on radar?
  • GBP/USD higher as USD falls
  • Bitcoin steady after weekend surge above $49,000

By Samuel Indyk – WTI crude oil futures surged above $78/barrel to reach their highest level since November 2014 on Monday after the OPEC+ group stuck with their existing oil output plan and agreed to increase production by just 400,000 barrels per day in November.

Brent oil futures jumped towards $82/barrel to their highest level since October 2018. The rally in prices came amid speculation that the cartel could have increased production by more than the pencilled in 400,000 bpd as energy shortages in Asia and Europe look set to add to demand for oil in the coming months.

The jump in oil prices lifted shares of BP PLC (LON:BP) and Royal Dutch Shell (LON:RDSa) who both traded near the top of the FTSE 100, although the blue-chip index ended the session lower as US markets sold-off.

Supermarkets were in focus after the conclusion of the auction for Morrisons (LON:MRW) saw Clayton, Dubilier and Rice emerge victorious. The private equity group will pay 287 pence per share for the UK supermarket, which, including debt, has a total enterprise value of £9.95 billion.

After Fortress lost out, focus could now turn to their next move, with some speculation that Sainsbury ‘s (LON:SBRY) might be the next takeover target.

“Fortress are clearly interested in what the UK has to offer, and a boom in private equity activity in London this year means they won’t be the only ones,” writes Hargreaves Lansdown’s Sophie Lund-Yates. “A weak pound and low interest rates mean UK companies could look more enticing now than they have in a while, and further offers for UK businesses can’t be ruled out.”

BT (LON:BT) was the notable underperformer in the UK, falling as much as 7% after reports that Sky is working on a deal with Virgin Media O2 to invest in their full-fibre broadband rollout, a move that would challenge BT’s dominance in the space.

GBP/USD continued to claw back some of the losses seen last week with the pair trading above 1.3600 for the first time since Tuesday’s sell off which saw a drop to the lowest level since December 2020. The USD was mostly lower ahead of Friday’s Nonfarm Payrolls report.

Cryptocurrencies were mostly lower after the surge late last week and over the weekend took Bitcoin above $49,000. Later on Sunday the world’s largest cryptocurrency pared back some of those gains as momentum fizzled out ahead of $50,000, which is likely to act as major resistance.

Other major cryptocurrencies showed similar price action with the Ethereum, Cardano, Solana, and XRP all nursing losses after last week’s jump.


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MARKET WRAP: Oil hits 7-year high, FTSE edges lower

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