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Wed City brief: Oil merger fails to lift FTSE100

The mega deal involving Shell and BG Group pushed London’s blue chips higher in early trade with the FTSE100 once again flirting with the 7,000 benchmark but a fall in oil saw it close 24.36pts lower at 6,937.41.

The energy giants will combine to create the biggest company on the index worth some £224 billion and could herald more deals in the oil sector.

Shares in BG rose 42%% at one point and closed up 26.6% to hit their highest level since September when the stock was tracking a falling oil price. Shell shares shed 5.3%.

Other oil companies were in demand, though off their highs as the oil price fell back. Tullow closed up 4.4% and BP by 0.5%.

Accendo Markets senior trader Marc Kimsey said: “We’re just getting started” with M&A in the oil sector, with the Shell-BG deal likely to prompt a bout of industry consolidation.

“The decline in oil price over the past year has battered some stocks which are clearly now looking attractive,” he said.

Media company Sky was 1.6% higher after French firm Vivendi ruled out a takeover. Chip design firm ARM Holdings rose 1.9%, with traders citing speculation about a takeover bid.

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