London close: FTSE dips as AstraZeneca tumbles on merger report

(Sharecast News) - London stocks dipped on Monday, with AstraZeneca proving a drag on the back of a merger report, while oil prices fell on optimism over a potential US-Iran deal.

The FTSE 100 closed down 0.1% at 10,857.70, underperforming European peers, while Brent crude was down 4.8% at $83.74 a barrel and West Texas Intermediate was 6.1% lower a $79.55.

Oil prices fell back as Donald Trump said talks with Iran would begin on Monday after the US refrained from carrying out new strikes against Tehran over the weekend.

The US President said on Truth Social that at the request of Iran and other Middle Eastern countries, he held off on the biggest attack "since World War II", "subject to being able to rapidly make a deal". A deal would include the "immediate, complete, and total opening of the Hormuz Strait, and an end to Iran's nuclear threat," Trump said.

Speaking to reporters on Air Force One on Sunday, he said: "They knew the extent of the attack because they saw it forming.

"We're talking to them in the form of a negotiation. It begins tomorrow afternoon."

Iranian media denied that Tehran had asked for the strikes to be called off, while Iran's foreign ministry said it was not in discussions with the US but rather talking to Oman about establishing a temporary safe route through the Hormuz Strait.

Russ Mould, investment director at AJ Bell, said: "News Washington has cancelled strikes and will resume talks with Tehran, apparently after pressure from its allies in the Gulf, has seen Brent crude oil drop below $84 per barrel. But the market has been here before and a more concerted fall in crude and in government bond yields will require greater evidence that a lasting resolution can be forthcoming this time round."

On home shores, a survey showed that growth in the manufacturing sector eased in July.

The S&P Global manufacturing purchasing managers' index fell to a four-month low of 51.9 from 52.5 in June, coming in below the flash estimate of 52.8.

Still, it was the ninth month in a row that the index was above the 50.0 mark that separates contraction from expansion.

Rob Dobson, director at S&P Global Market Intelligence, said: "July brought further encouragement for the UK manufacturing sector, as rates of growth in output, new orders and new export business all accelerated. The increase in production was the fastest in almost two years, as improving market conditions led to better hit rates in securing new contracts.

"There was also positive news on the price and supply fronts. The rate of increase in input costs slowed sharply to a five-month low as supply chain delays eased to their lowest since the outbreak of the war in the Middle East. Better resource availability and supplier reliability will hopefully provide further respite to squeezed supply chains in the months ahead, though developments in the Middle East will be key to supply and price developments in the coming weeks.

"These positive price and demand trends were not fully reflected in the labour market, with the upturn in manufacturing hirings grinding to a near halt in July, but the first rise in backlogs of work in over four years suggests employment could pick up in the coming months. This would be assisted if business optimism recovers from its current subdued level. Hopefully progress relating to geopolitics, global trade tensions and the direction of the new UK government's industrial and tax policies will aid, and not hinder, this process."

Elsewhere, EY nudged up its 2026 UK growth forecast but warned of a potential recession if the Strait of Hormuz stays closed until early-mid 2027.

In equity markets, AstraZeneca tumbled following a report it's in talks to combine with US rival Bristol Myers Squibb in a deal that would create one of the world's biggest pharmaceutical groups, valued at nearly $400bn.

According to the Financial Times, citing people familiar with the matter, the companies have held discussions about a tie-up in recent months. It was understood the talks could yield a deal in the near future but may be delayed or fall apart.

The FT said the exact structure of any deal could not immediately be determined, but would probably require both cash and shares.

Jefferies, which rates AstraZeneca at 'buy' with a 17,500p price target, said a tie-up between the two "would be more than a head scratcher".

"Given the strength of AZ's growth and innovation profile, we are a bit perplexed by the news," it said. "Of course financial accretion can look good and maybe more cash generation would allow for more R&D. But if there is one company that doesn't need financial engineering, it's AZ in our view."

IG Group suffered heavy losses again, having fallen sharply on Friday on news it will buy US daily fantasy sports and prediction markets operator Underdog for up to $1.3bn.

BP gushed lower in tandem with oil prices, but Shell rose after agreeing to sell its European onshore renewables portfolio to TotalEnergies for an undisclosed sum.

On the upside, Barratt Redrow was the standout gainer on the FTSE 100, while Persimmon, Taylor Wimpey and Vistry also advanced as investors scaled back rate hike expectations after the slump in oil prices and following reports the government is considering reviving the Help to Buy scheme.

Smith & Nephew gained ahead of half-year results on Tuesday, while takeover target easyJet flew higher after saying it had extended the 'put up or shut up' deadline for both competing offers from private equity firms Castlelake and Apollo to 7 August.

More broadly, airlines were higher amid the prospect of lower fuel costs, with IAG and Wizz Air both up.

Shipping services group Clarksons surged after saying it expects full-year results "materially ahead" of market forecasts following a record first-half profit as it benefited from the volatility caused by disruptions in the Strait of Hormuz.

Market Movers

FTSE 100 (UKX) 10,857.70 -0.10%

FTSE 250 (MCX) 24,224.77 1.04%

techMARK (TASX) 6,050.09 0.20%

FTSE 100 - Risers

Barratt Redrow (BTRW) 304.50p 3.82%

Metlen Energy & Metals (MTLN) 47.90p 3.63%

Rentokil Initial (RTO) 356.80p 3.48%

Smith & Nephew (SN.) 1,197.00p 3.32%

ICG (ICG) 1,949.00p 3.23%

St James's Place (STJ) 1,086.50p 3.13%

Lion Finance Group (BGEO) 11,930.00p 2.76%

The Sage Group (SGE) 999.40p 2.69%

Rolls-Royce Holdings (RR.) 1,506.80p 2.66%

Pershing Square Holdings Ltd NPV (PSH) 3,902.00p 2.47%

FTSE 100 - Fallers

AstraZeneca (AZN) 11,500.00p -8.96%

IG Group Holdings (IGG) 1,371.00p -6.10%

Coca-Cola HBC AG (CDI) (CCH) 4,884.00p -2.51%

British American Tobacco (BATS) 4,466.00p -2.28%

InterContinental Hotels Group (IHG) 157.15p -2.21%

Imperial Brands (IMB) 2,764.00p -2.16%

Hiscox Limited (DI) (HSX) 1,777.00p -1.77%

Coca-Cola Europacific Partners (DI) (CCEP) 8,060.00p -1.59%

Airtel Africa (AAF) 328.00p -1.50%

Rio Tinto (RIO) 7,089.00p -1.18%

FTSE 250 - Risers

Clarkson (CKN) 5,155.00p 8.99%

Vistry Group (VTY) 315.00p 7.95%

Ceres Power Holdings (CWR) 374.00p 7.78%

XP Power Ltd. (DI) (XPP) 1,732.00p 7.18%

Baltic Classifieds Group (BCG) 210.80p 5.93%

Bridgepoint Group (Reg S) (BPT) 339.60p 5.93%

Genuit Group (GEN) 287.00p 5.83%

Seraphim Space Investment Trust (SSIT) 161.60p 5.76%

Wetherspoon (J.D.) (JDW) 817.00p 5.01%

Wizz Air Holdings (WIZZ) 1,113.00p 4.80%

FTSE 250 - Fallers

Drax Group (DRX) 715.50p -2.98%

Hansa Investment Company Limited (DI) (HAN) 328.00p -2.38%

AEP Plantations (AEP) 176.00p -2.22%

Plus500 Ltd (DI) (PLUS) 3,826.00p -2.15%

Currys (CURY) 164.30p -2.14%

Trustpilot Group (TRST) 265.00p -2.07%

Premier Foods (PFD) 190.50p -1.96%

Ithaca Energy (ITH) 237.80p -1.82%

Cranswick (CWK) 5,260.00p -1.68%

Pennon Group (PNN) 456.00p -1.51%