Monday, 1 February: Optimism flowed in global stocks on Friday as the Bank of Japan (BoJ) surprised investors with their decision to cut interest rates in to negative territory. However, those who thought February could begin as January left were unfortunately wrong as weak data from China and brent oil prices led European and US markets to turn negative. An official survey released today indicated that China’s factory sector contracted for a sixth straight month with the official manufacturing purchasing manager’s index (PMI) reading 49.4 for January (vs estimate of 49.6). This resulted in China’s manufacturing sector contracting at its fastest pace in over 3-years. OPEC have quashed any hopes of an emergency meeting to combat the ongoing oil price fall: brent oil has spent most of Monday trading hovering around $35 a barrel, swinging between highs of $36 a barrel during late morning trading to nearly $34/barrel mid-afternoon. At the time of writing, brent oil stands at $34.63 a barrel.
After seeing themselves in red territory on Friday, Home Retail Group reversed their losses as it seems a deal may have been reached between Sainsbury’s and themselves. Sainsbury’s first had an approach for Home Retail rejected in November (believed to be at a price of around £1bn), but the UK’s second largest supermarket seem to have returned with a £1.3bn takeover. Sainsbury’s have three options to choose from (to be decided by 5pm tomorrow): they need to either have a formal offer on the table; walk away from the deal; or ask for an extension from the City’s Takeover Panel (who regulate bids and deals). However, it seems the two parties are in discussion of a buyout price of 160-165p per share. Home Retail Group have spent today in the green, peaking over 150p during afternoon trading. They closed trading +11.85% at 152p. Sainsbury ended the day lower at 244p (-0.20%).
At the close European indices were down with the FTSE 100 -0.39%, the CAC 40 -0.64%, and the DAX 0.41%. In the US, the S&P and the Dow Jones are both lower by 0.30%, at the time of writing.