The FTSE 100 closed lower on Monday as a sharp sell-off in AstraZeneca weighed heavily on the index, overshadowing broader optimism across European markets.
The FTSE 100 index ended the session down 10.35 points, or 0.1%, closing at 10,857.70, underperforming its continental counterparts.
AstraZeneca (AZN.L), the second largest company in the FTSE 100 by market value, slumped 9.0% following reports of potential merger discussions with US pharmaceutical giant Bristol-Myers (BMY).
The Financial Times reported on Sunday that the two companies recently held talks about a $400 billion merger, a deal that rattled investor confidence in AstraZeneca’s strategic direction.
Were the deal to proceed, it would create the world’s fourth largest pharmaceutical firm by market value, trailing only Eli Lilly (LLY), Johnson & Johnson (JNJ), and AbbVie.
Jefferies analyst Michael Leuchten said a deal “would be more than a head scratcher”, adding: “Given the strength of AstraZeneca’s growth and innovation profile, we are a bit perplexed by the news.”
Leuchten continued: “But if there is one company that doesn’t need financial engineering, it’s AstraZeneca in our view.”
Bank of America analyst Sachin Jain suggested that investors could perceive a potential merger as a signal that AstraZeneca “lacks confidence” in its own pipeline.
While the FTSE 100 struggled, the FTSE 250 rose 249.75 points, or 1.0%, to close at 24,224.77, with the AIM All-Share also advancing 0.8% to 768.61.
European markets performed more strongly, with the Cac 40 in Paris closing up 1.2% and the Dax 40 in Frankfurt rising 1.5% by the end of trading.
US stocks were also higher, with the Dow Jones Industrial Average up 1.0%, the S&P 500 gaining 1.1%, and the Nasdaq Composite advancing 1.8%.
A significant drop in oil prices helped fuel the gains in both European and US markets, with Brent crude for October delivery falling to $83.92 a barrel from $90.12 late Friday.
The decline followed comments from US President Donald Trump, who said he was holding off on new attacks on Iran, citing that the “perimeters” of a deal were present.
Kathleen Brooks, research director at XTB, said the oil price falls will “ease inflation fears and could also act as a dampener on bond yields, which rose sharply last week, especially at the long end.”
The yield on the US 10-year Treasury narrowed to 4.69% on Monday from 4.74% on Friday, while the 30-year yield fell to 5.23% from 5.27%.
Lower bond yields provided a notable boost to UK housebuilders, with Vistry climbing 8.0%, Barratt Redrow rising 3.8%, and Persimmon advancing 2.2%.
Shipping services company Clarkson surged 9.0% to an all-time high after saying it expects full-year performance to be “materially” ahead of market expectations following a record first-half profit.
Clarkson attributed the strong performance to turbulence in the Strait of Hormuz, with the company noting the disruption “reshaped trade flows, driving an initial surge in freight rates and elevated hedging activity.”
Smith & Nephew advanced 3.3% ahead of half-year results due on Tuesday, while InterContinental Hotels Group fell 2.2% following mixed results from US peer Marriott International.
Investors will be watching Tuesday’s corporate calendar closely, with half-year results due from oil major BP, Asia-focused lender HSBC, and Smith & Nephew.