M&A splurge helps lift FTSE and BP predicts oil demand peak

“Mergers and acquisitions activity showed there was still a bit of life in the market – helping the FTSE 100 to a positive start on Monday as it consolidated its position above the 6,000 mark,” says AJ Bell Investment Director Russ Mould.

“Along with US pharma giant Gilead buying a cancer specialist for north of $20 billion, Japanese investor Softbank announced it would sell UK microchip designer ARM to US-based Nvidia for $40 billion – just four years after snapping up the business in the wake of the Brexit vote for around $10 billion less. That’s a very tidy profit, although it is likely to have invested a lot in the business during its ownership.

“The biggest deal in terms of market sentiment was Oracle’s reported partnership with Chinese social media platform TikTok which helped ease concerns over the on-off trade war between the US and China.

“Later this week the focus is likely to be on the central bankers in the UK and US as they deliver their latest decisions on interest rates.”

BP

“The publication of the latest annual report from BP on the future of energy lays bare just why the company is so keen to transition away from fossil fuels.

“Its economists don’t have a crystal ball but it is striking to see them predict that oil demand may already have peaked.

“Essentially the argument seems to be that Covid-19 has accelerated trends that were already in motion – in this case a shift away from oil and gas due to mounting environmental concerns among the public, politicians and investors.

“The argument in favour of BP and other big oil companies being the ones to lead the energy transition is that they are probably the best custodians of existing oil assets and that they have transferable expertise which can be applied to other, cleaner forms of energy.

“BP’s recently-announced $1.1 billion investment in offshore wind assets in the US was the latest step in reshaping its portfolio but the company’s investor event this week is likely to see the credibility of its 2050 carbon neutral target tested.

“Having announced such an ambitious goal at the outset of his tenure the pressure will be on chief executive Bernard Looney to flesh out his plans.

“He still needs to balance the need to move in a greener direction with the fact that many investors still hold the shares for their (albeit reduced) dividends which are underpinned by cash flow from the oil and gas business.”

These articles are for information purposes only and are not a personal recommendation or advice.


The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.


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