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MARKET WRAP: FTSE surges above 7,600, USD edges higher

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Key Points

FTSE 100 closing price of 7,611.78 (+0.9%)
Unilever falls on bid for GSK unit
Taylor Wimpey higher after results
USD edges higher in relatively quiet trade
Oil steady as Libyan output comes back online
Bitcoin steady, Cardano outperforms

By Samuel Indyk – The FTSE 100 traded above 7,600 for the first time since January 2020 on Monday, lifted by M&A talk, albeit in relatively quiet trade.

GlaxoSmithKline (LON:GSK) shares soared higher after the company announced it had rejected a £50 billion bid from Unilever (LON:ULVR) for its consumer health unit, which is a joint venture with Pfizer (NYSE:PFE). Glaxo owns a 68% stake in the unit but said Unilever’s bid seriously undervalues the business.

“Based on Unilever’s new strategic direction, which includes increased focus on growth in the Health, Beauty and Hygiene segments, there could be another offer in the pipeline,” writes Hargreaves Lansdown (LON:HRGV) Equity Analyst Laura Hoy. “The group says it will pounce on acquisition opportunities within the space, and they don’t get much more appealing than this one.”

Unilever shares declined following the revelation that they are interested in a deal, with Bernstein analysts noting that large-scale consumer goods deals do not pay out as it is impossible to eke out high growth rates on such large businesses.

Taylor Wimpey (LON:TW) shares rose, and bucked the trend for homebuilders that was seen last week, following a trading update. The FTSE 100 component said completions were up 47% in the latest week to 14,087. However, AJ Bell Investment Director Russ Mould cautions that inflation could end up hurting the company if house prices slow.

“The challenge for the company will come as house prices cool, particularly as this has masked rising build costs so far,” Mould said. “Inflationary pressures could begin to bite more if sales price growth stalls.”

FX markets were relatively quiet with US markets closed due to Martin Luther King Day. The USD edged higher with USD/JPY rising above 114.50 ahead of the Bank of Japan policy announcement. GBP/USD slipped below 1.3650 ahead of key data releases this week, including labour market data on Tuesday, inflation on Wednesday and retail sales on Friday.

WTI and Brent crude futures were both trading relatively flat near seven-year highs. Libya announced it had managed to increase production back up to 1.2 million barrels per day after bad weather, a damaged pipeline and regional conflicts curtailed output at the beginning of the year.

Bitcoin was relatively steady, remaining in the $40,000-$45,000 range as it has done during the last week. Outperformance was observed in Cardano after an announcement on Friday that the Pavia metaverse had arrived on the Cardano blockchain.


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MARKET WRAP: FTSE surges above 7,600, USD edges higher

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