FTSE 100 Slides as Unilever Falls, Warner Bros. Discovery Bidding War Heats Up
Markets experienced a downturn on Monday as investors braced for key US economic data, while a fierce battle for control of Warner Bros. Discovery captivated Wall Street.
London’s FTSE 100 closed down 21.92 points, a decline of 0.2%, finishing at 9,645.09 points. The FTSE 250 fared worse, dropping 142.67 points, or 0.7%, to 21,921.28. The AIM All-Share index also saw losses, falling 2.78 points, or 0.4%, to 748.52. Broader market indicators reflected the negative sentiment, with the Cboe UK 100 down 0.2% at 967.04 points, the Cboe UK 250 ending down 0.6% at 19,023.34 points, and the Cboe Small Companies falling 0.9% to 17,526.76 points.
Stock market activity in London was subdued as traders awaited the outcome of the Federal Reserve’s interest rate decision, scheduled for Wednesday. The consensus anticipates a third consecutive 25 basis point cut, which would bring the target range for federal funds to between 3.5% and 3.75%. However, the meeting is expected to be contentious.
According to a report from Goldman Sachs, the rationale for a rate cut is “solid,” citing slowing job growth, a rising unemployment rate – now at 4.4% for three consecutive months – and increasing signs of stress in the labor market. Barclays anticipates an “aggressive” cut. One analyst noted that at the subsequent press conference, Federal Reserve President Powell is expected to signal a likely pause in rate adjustments at the January meeting, contingent on the labor market not experiencing a sudden downturn, while acknowledging that the Federal Open Market Committee “remains very divided on the future direction of policy.”
Currency markets also saw movement, with the pound trading lower at $1.3319 at the close of trading, down from $1.3326 on Friday. The euro similarly weakened to $1.1624, compared to $1.1635 previously. Conversely, the dollar strengthened against the yen, trading at 155.88 yen, up from 155.42 yen.
European markets presented a mixed picture, with the CAC 40 in Paris falling 0.2%, while the DAX 40 in Frankfurt edged up 0.1%. Across the Atlantic, New York’s stock market was also in negative territory at the close of London trading. The Dow Jones Industrial Average and S&P 500 index both declined 0.3%, while the Nasdaq Composite fell 0.2%.
The most dramatic developments unfolded in the media landscape, where a bidding war for Warner Bros. Discovery intensified. Paramount Skydance launched a $30 per share cash offer, surpassing a previous bid from Netflix. This hostile takeover attempt sets the stage for a showdown between Paramount – backed by Larry Ellison, an ally of former President Donald Trump – and streaming giant Netflix for control of the iconic Hollywood studio.
Netflix’s initial move to acquire Warner Bros. last week sparked considerable concern within the industry, prompting criticism from Hollywood figures worried about the future of the entertainment sector. Former President Trump weighed in on Sunday, suggesting that Netflix’s acquisition could pose a problem due to potential market share dominance. Paramount chairman and CEO David Ellison affirmed the company’s commitment to the deal, stating, “We’re here to finish what we started,” after submitting their sixth offer. As a result of the bidding war, Netflix shares fell 4.5%, Warner Bros. shares rose 5.0%, and Paramount Skydance shares soared 7.3%.
Bond yields also shifted, with the 10-year U.S. Treasury yield rising to 4.19% from 4.14%, and the 30-year U.S. Treasury yield increasing to 4.83% from 4.80%.
Within the FTSE 100, Unilever experienced a significant drop of 6.6% following the commencement of trading for Magnum Ice Cream in Amsterdam, London, and New York. Shares of the Ben & Jerry’s and Magnum owner rose 1.3% in Amsterdam, but the market value of approximately €7.94 billion fell short of some forecasts. According to Morningstar equity analyst Diana Radu, initial valuations are “lower than previous estimates,” and technical factors are contributing to downward pressure on the share price. “Still, we remain optimistic about the long-term prospects,” Radu added, noting the ice cream business’s renewed management team and focused strategy.
Construction companies also faced headwinds as UK bond yields increased, with Barratt Redrow down 4.0% and Persimmon down 3.5%. However, Citi equity analyst Ami Galla anticipates a spring rally in the sector, predicting positive performance for mass housing builders through 2026, benefiting from a favorable interest rate outlook and improvements in the planning environment.
Defensive stocks provided a bright spot, rebounding amid ongoing geopolitical uncertainty. Babcock International led gains among blue-chip stocks, rising 2.6%, followed by BAE Systems, up 1.1%. Aerospace manufacturer Rolls-Royce also saw strong demand, increasing 2.1% after securing an order from defense company KNDS for over 300 engines for Leopard 2 battle tanks. On the FTSE 250, Kainos rose 6.6% following an upgrade from Bank of America, while Baltic Classifieds recovered some ground, rising 5.9% after a disappointing trading update last week.
Commodity markets saw declines, with Brent oil trading at $62.79 a barrel, down from $63.60 on Friday, and gold falling to $4,192.10 an ounce from $4,208.77.
The top-performing stocks on the FTSE 100 were Babcock International, Scottish Mortgage Investment Trust, Polar Capital Technology Trust, Rolls Royce, and Prudential. Conversely, Unilever, Barratt Redrow, JD Sports Fashion, Persimmon, and Entain experienced the largest declines.
Looking ahead, Tuesday’s economic calendar includes the Australian interest rate decision and BRC retail sales data from the UK. The two-day FOMC meeting is set to begin in the United States. UK corporate news will feature half-year results from Ashtead Group and Moonpig.
