FTSE 100 Live Musk nears Twitter deal, China lockdown fears hit

Monday, April 25, 2022
author picture Daniel Marino
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FTSE 100 Live - Elon Musk Nears a Deal to Acquire Twitter‚ and China Lockdown Fears Hit Travel and Leisure Shares

FTSE 100 index falls sharply on Monday as Oil prices tumble and worries about Covid-19 infection hit travel and leisure shares. Elon Musk's bid for Twitter may also collapse at the last minute. What to watch today:

FTSE 100 index falls sharply on Monday

As Musk nears a deal to acquire Twitter‚ fears of a Chinese lockdown on the social network are weighing on the FTSE 100. The tech-heavy Nasdaq is holding up better than other big US indices‚ so early moves could be reversed if investors are encouraged by a more optimistic tone. Despite the drop‚ the FTSE 100 has pared its worst losses‚ down 116 points at 7‚118‚ and is now down 2.6%‚ or nearly 4%‚ as of lunchtime. As a result‚ a number of companies listed on the FTSE 100 have plunged. The Intercontinental Hotel Group PLC and Whitbread Group PLC both fell by around 10%‚ despite the deal with Twitter. AO World PLC‚ Games Workshop Group PLC‚ and Domino's Pizza Group PLC also declined. Meanwhile‚ BP‚ Shell‚ and Deutsche Telekom are all down over 4%. The worst performer of the day‚ Anglo American‚ dropped by nearly 6% after warning authorities in Chile that a copper mine project would be cancelled. Elon Musk admitted his $43bn hostile bid for Twitter might not go through as he had expected. Meanwhile‚ France's biggest securities depository has frozen the accounts of foreign funds that held stakes in several companies in the country. Meanwhile‚ a French pharmaceutical company called Valneva's vaccine for Hepatitis C virus has received approval by the Medicines and Healthcare Products Regulatory Agency (MHRA). Despite the recent troubles facing Anglo American‚ the FTSE 100 is tumbling in afternoon trade‚ while Twitter and Musk met to finalise a deal. The two companies are in the final stages of negotiations and could close the deal this week. Tesla has been the most successful company in recent weeks‚ with an average EPS of $1.24‚ compared to just over 2% for rival supermarkets. Earlier‚ investors were cautious about the Chinese economy‚ which has seen its share price fall by almost 50% in the past month. However‚ there are some positive signs that the global economy is coping with this new threat‚ says Chris Beauchamp‚ senior investment analyst at broker XM. While some of the negative aspects of a new wave of illness‚ the global economy continues to suffer from uncertainty.

Oil prices tumble

The recent oil price collapse was triggered by fears of further lockdowns in China. Investors and companies with supply chains through the country contemplated what this would mean for their businesses. The recent report from the Beijing government about 70 new virus cases is also adding to the anxiety. Oil prices have plummeted almost 30% since the announcement. This is the most volatile time since the beginning of the year‚ with investors increasingly wary of riskier trade policies. Meanwhile‚ Western drillers are pulling out of Russia‚ while Russian exporters have resorted to off-market transactions to get rid of crude. The move comes amid fears that the Chinese government may impose a lockdown in major business centers. Also‚ rising cases of Covid-19 in China have triggered widespread panic‚ with much of Shanghai in lockdown. This could also relieve pressure on global markets. The recent drop in oil prices is good news for heating oil and petrol users in the UK. Although the US oil price has fallen by around 3%‚ it may be worth remembering that oil prices are driven by China‚ whose slowdown could change the global supply/demand balance. However‚ one issue that looms large over the oil price is China's swine flu outbreak. This has already affected shipping and made global supply chains more difficult. A global stock market meltdown has exacerbated the problems in China. The Chinese government has recently implemented a zero-COVID policy to prevent a new outbreak from spreading. China has also resorted to lockdowns in major cities‚ including Shanghai and Beijing. Lockdowns in these areas have also increased the risk of disease and virus outbreaks spreading across the country. This is not good news for global supply chains‚ which are already under immense stress from war and a lack of trade.

Covid-19 infection fears hit travel and leisure shares

Investors are now paying more attention to the spread of COVID-19 due to the virus's increased risk profile‚ according to an analysis by CLSA in Tokyo. The market has largely followed the same playbook as during the pandemic‚ selling travel and leisure stocks in favor of work-from-home companies. However‚ few studies have examined the effect of COVID-19 on travel and leisure shares. The FTSE 100 dropped 225 points on Wednesday‚ dropping more than 4% to 5‚787. The S & P 500 also opened in the red‚ with only three blue chip stocks escaping the drab day. Shares of cruise operators‚ car hire companies‚ restaurants‚ amusement park operators‚ casino stocks‚ boating‚ and online travel agencies all suffered. The news caused travel and leisure shares to decline at the top and bottom of their respective sectors. The spread of COVID-19 caused a drop in the travel and leisure shares across Europe. Infection fears spread quickly when traveling abroad‚ so travel bans made outdoor activities more difficult. In addition to this‚ the COVID-19 virus' spread is nonspecific. Therefore‚ the impact of these government control strategies on tourism could last much longer than the current one. This explains why travel and leisure stocks fell in the first place‚ and is likely to reappear in the future. The FTSE 100 has fallen into the red since the outbreak of the Covid-19 virus in the U.K. This virus can infect fully-vaccinated adults. Spain and Portugal have imposed travel bans and increased quarantine rates largely affecting travelers from the U.K. The seven-day case load per 100‚000 residents in London‚ Manchester‚ and Edinburgh has been above 400 cases in the last seven days.

Elon Musk's bid for Twitter could collapse at last minute

Musk's proposed acquisition of Twitter has been dogged by controversy and may collapse at the last minute‚ according to several experts. Musk has said the deal is not in the best interest of Twitter shareholders‚ and has argued that Twitter's board of directors has not been aligned with its shareholders. His comments follow his tweet criticizing former Twitter CEO Jack Dorsey. Additionally‚ Twitter's cash flow is limited‚ which makes it less attractive to finance the deal with debt. Twitter's board has taken a different approach. They have implemented a poison pill to block any hostile takeover bid. This poison pill would prevent any other bidder from increasing their stake in the company. Rather than allowing an unsolicited bid‚ the board may put pressure on Twitter to remove the defense‚ as it did with CVR Energy in 2012. It's also possible that the board won't turn Musk's followers into new Twitter shareholders. Twitter's retail investor base rose to 22%. The board didn't convert Musk's followers into new shares‚ but it did make its investors more likely to exit the platform. A hostile takeover offers Twitter's stock price‚ which may have peaked during the negotiations‚ could collapse at the last minute. As a billionaire and CEO of rocket developer SpaceX‚ Elon Musk is a controversial figure in the crypto community. However‚ he has been praised for his contributions to the Arab Spring and has been accused of being behind the Jan. 6‚ 2021 storm of the U.S. capitol. Trump has also begun building a Twitter rival called Truth Social‚ but has declared he will not return to Twitter. Despite his public statements‚ the White House has not commented on the deal with Musk. The Twitter board has reportedly been in negotiations with Musk on Monday‚ as the takeover process was expected to close this week. Musk‚ who has publicly stated that the takeover would be his best and final bid‚ has recommended the acquisition to Twitter shareholders. If the deal collapses‚ however‚ Twitter shareholders could be unable to reject the offer. This would mean that the company could go on to sell itself to a rival for less than it was worth in the first place.