That’s all for today. A quick reminder of the main stories.

Supermarket chain Morrisons is at the centre of a potential bidding war after a third private firm expressed interest in taking the firm over. Apollo confirmed this morning it was considering joining the battle to buy the UK’s fourth-largest supermarket chain.

Apollo’s interest, two days after Morrisons accepted a £6.3bn offer from a consortium led by the US investment fund Fortress, drove its shares up 11.5%. They closed at 267.5p, above Fortress’s 254p-per-share offer.

But Britain’s largest asset manager has warned that Morrisons could be taken over by a private equity outfit for the “wrong reasons”.

Legal & General Investment Management (LGIM) warned on Monday that potential buyers should not buy Morrisons to take advantage of a possibly undervalued property portfolio, to load it up with debt, or to cut its tax bill, in comments that appeared to criticise practices commonly associated with the private equity industry.

Morrison’s share price jump helped to push the FTSE 250 index of medium-sized UK firms to a new record high today.

Shares in travel companies and hospitality chains also rallied, as the City anticipated the end of many lockdown restrictions in England later this month.

Oil has also rallied, hitting its highest since October 2018, after the Opec+ group failed to agree a plan to slowly keep increasing production over the rest of this year.

The move could mean tighter supplies and higher prices, but could also threaten the production cuts agreement that has been in place since early in the pandemic.

Growth across the UK’s service sector slowed a little last month, as rising price-pressures and a struggle to find staff hit some companies. But firms also reported strong output and order growth, and a jump in hiring.

Eurozone private sector posted its fastest growth in 15 years - but also saw rising inflationary pressures.

Young people fear that their poor mental health will affect their ability to find work after the pandemic, according to a report that shows the impact of Covid-19 on younger workers.

While other workers are concerned about the cost, and health risks, of commuting to the office again:

The shortage of semiconductors held back UK car sales last month. Registrations were 28% higher than a year ago, but still 16% below an average June, as the weak recovery continued.

Here are more of today’s stories:

Goodnight. GW

The oil price has hit its highest level since late 2018, after the Opec+ group reportedly failed to agree a plan for oil supplies beyond this month.

The virtual meeting between oil ministers has been called off without a deal, newswires say, after the United Arab Emirates refused to agree to extend some production cuts until the end of 2022.

Opec+ had hoped to keep gradually relaxing the steep production cuts it made early in the pandemic, by adding more oil to the market each month from August until December.

But the UAE blocked the plan, unless its own ‘baseline’ for cuts was lifted (allowing it to pump more oil within the agreement).

This means that, as thing stand, Opec hasn’t agreed to increase output again beyond this month -- which has pushed Brent crude up to $77 per barrel for the first time since October 2018, up 1.2% today.

Bloomberg says the failure to reach a deal puts the cartel ‘into crisis’, and leaving the oil market facing tight supplies and rising prices.

Several days of tense talks failed to resolve a bitter dispute between Saudi Arabia and the United Arab Emirates, delegates said, asking not to be named because the information wasn’t public. The group didn’t agree a date for its next meeting, according to a statement from OPEC Secretary-General Mohammad Barkindo.

The most immediate effect of the breakdown in talks is that, for now, OPEC+ won’t increase production for August, depriving the global economy of vital extra supplies as demand recovers rapidly from the coronavirus pandemic.

However, the situation is fluid and the group could reactivate talks at any moment. With prices up about 50% this year and climbing toward $80 a barrel, the cartel may feel pressure from consuming countries concerned about rising inflation.

Opec+ originally cut oil production by almost 10m barrels a day last year after demand slumped, but has been adding supply back gradually in recent months.

Current cuts stand at nearly 6m barrels per day -- and the proposal on the table would have added 400,000 barrels back each month from August. That would bring 2m barrels per day back by the end of the year, but leave the remaining cuts in place until the end of 2022.

Although the group haven’t agreed to lift production, there is a risk that Opec+’s commitment to the production cuts now falters. That could lead to members pumping more oil, driving energy prices lower.

The FTSE 250 share index continued its rally into the close of trading, and has finished at a new all-time high, up 275 points or 1.2% at 23022.4 points.

Morrisons closed 11.5% higher at 267.5p (still above the 254p bid accepted from the Fortress-led investment group which valued the company’s shares at £6.3bn).

Travel firms, hospitality companies and pub chains also ended the day higher (as highlighted earlier), with Cineworld up 4.3%, Upper Crust owner SSP up 5%, National Express rising almost 4% and JD Wetherspoon gaining 3.1%.

The blue-chip FTSE 100 index also strengthened, ending 41 points or 0.6% higher at 7165 points. That’s its highest close since mid-June (when it hit its highest point since the pandemic).

British Airways parent company IAG led the FTSE 100 risers, up 4.9%, with jet engine maker and servicer Rolls-Royce up 2.3%. Banks also rose, with Barclays (+3%), NatWest (+2.2%) and Lloyds (+1.9%) gaining ground.

Tesco (+3%) and Sainsbury (+2.3%) rallied too, as speculation swirled about whether other supermarkets could attract takeover interest.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, explained:

Sainsbury’s is considered a possible target, given that billionaire Daniel Kretinsky, the owner of Vesa Equity Investments has been building his stake in the company.

J Sainsbury is aiming to hold onto market share through a price match promise with the low cost rival Aldi, as shoppers swap virtual baskets for physical trollies with the easing of restrictions.

Boris Johnson is now outlining plans to end most Covid restrictions on 19th July:

Danni Hewson, financial analyst at AJ Bell, points out that investors seem confident that the vaccine rollout will protect the UK from yet another lockdown.

“There’s just one price businesses, government and workers really don’t want to have to pay for the ‘Independence Day’ expected on June 19^th and that is the price of another lockdown. Economically it would hurt, psychologically it would maim and of course any resurgence of the virus would bring too many real deaths.

“Looking at London markets today investors seem pretty sure the vaccine rollout has changed things from this time a year ago. In the week leading up to July 4^th 2020 when many restrictions were lifted, there was a mixed bag of risers and fallers, undoubtedly a response to the uncertainty of the situation. Today almost all retail, travel and leisure stocks across the FTSE 100 and 250 have made gains and the momentum has pushed the latter to an all-time high.

UK asset manager Legal & General Investment Management warned today that private equity firms must not be allowed to acquire Wm Morrison for the “wrong reasons”.

LGIM, the 9th largest shareholder in Morrisons, called on the company to disclose more detail about the value of its property assets (which a private equity buyer could potentially sell for short-term gain).

Andrew Koch, senior fund manager at Legal & General Investment Management, warned that a buyer shouldn’t profit by purchasing the supermarket chain’s property portfolio too cheaply, or by “levering the company up with debt”.

Koch said:

“As the Morrisons situation evolves it is leading to more questions than answers. The company has thus far disclosed little information about the current value of its properties, both the retail stores and the distribution assets.

Given this is an agreed bid, it is likely that Fortress and their partners have had more information than others on this. Investors need to have the detailed figures to be able to make a considered decision regarding the right future for the company and their shareholdings.

As responsible stewards of our clients capital, it is important that the company isn’t taken over for the wrong reasons. If an acquirer makes strong returns this should come from making the company a better business. It should not come from buying its property portfolio too cheaply, levering the company up with debt, and potentially reducing the tax paid to the Exchequer.”

Britain’s FTSE 250 index of medium-sized firms has hit a new all-time high, lifted by the takeover battle for Wm Morrison and plans to reopen the UK economy.

The FTSE 250, which more closely tracks the UK economy than the FTSE 100, has jumped 1.1% to rise over its previous record high set last month.

It’s currently up 263 points at 23,010 points for the first time in late trading, extending its rapid recovery from the market crash of March 2020.

Morrisons is helping to drive the rally as traders anticipate a possible bidding war for the UK’s fourth-largest supermarket chain.

Its shares are up over 11% at 267p, above the 254p bid which it accepted from the investment group led by Fortress, after private equity group Apollo confirmed it is considering a possible bid for Morrisons too.

Student accommodation group GCP Student Living has surged by 14%, after it revealed on Friday night that it has received a takeover approach from a consortium led by its biggest shareholder.

Travel and hospitality firms are also rallying, ahead of Boris Johnson’s announcement later today about the likely lifting of most remaining Covid-19 restrictions in England.

Budget airline easyJet are up 3.7% in late trading, SSP Group (which runs Upper Crust and Caffè Ritazza outlets at travel hubs) are up 5%, while cinema chain Cineworld has gained 4.2%.

Travel company FirstGroup (+3.75%), pub chains JD Wetherspoon (+3.5%) and Mitchells & Butlers (+3%) are also higher in late trading.

Back in the City, shares in Morrisons are still sharply higher as traders anticipate a possible bidding war for the UK’s fourth-largest supermarket chain.

WM Morrison are currently up 11% today at 266.1p, having hit 268p in early trading, after Apollo Global Management became the third private equity firm to show interest.

That leaves Morrisons shares around 5% above the 254p offer from the Fortress-led group which the supermarket’s board accepted, showing that traders anticipate there could be another bid.

Confirmation this morning that Apollo is considering a possible offer has pushed shares higher. Clayton, Dubilier & Rice, whose 230p bid was rejected last month, could potentially lift its offer too.

Reuters reports that abrdn (which rebranded from Standard Life Aberdeen today), says the Fortress offer is ‘good value’:

The Fortress Investment Group-led $8.7bn takeover offer for British supermarket chain Morrisons represents “good value”, abrdn’s CEO Stephen Bird said on Monday.

Abrdn, formerly Standard Life Aberdeen, is the fifteenth largest investor in Britain’s fourth biggest supermarket group, according to Refinitiv data.

The asset manager’s holdings are as a passive, or index-tracking, investment, an abrdn spokesperson said.

Morrisons said on Saturday that its board, led by Chairman Andrew Higginson, had recommended a takeover led by SoftBank owned Fortress Investment Group that valued the firm at £6.3bn pounds ($8.7bn).

“I think the Morrisons deal is good value, I think it’s a smart thing to do,” abrdn’s Bird told Reuters.

Other investors are anticipating a higher offer, reports Ben Martin of The Times:

[Correction: I wrongly called Morrisons the third-largest UK supermarket earlier in the blog, rather than the fourth. Now fixed, apologies].

A “modicum of doubt” has crept into the UK service sector last month despite the strong growth, says Duncan Brock, group director at the Chartered Institute of Procurement & Supply.

Brock points to the rising cost pressures flagged in this morning’s PMI data, as well as the ongoing supply challenges and the marginal dip in service sector orders from abroad:

“The services sector continued to expand at record-level rates as marketplaces opened up and consumers returned to hospitality with a fourth sharp monthly rise in new business and the highest job creation levels for seven years.

“This return to robust activity should have service providers relieved at the new opportunities after lockdown, but a modicum of doubt has crept in. Optimism dropped to the lowest since January, while restricted international travel depressed overseas orders and interrupted supply lines as shortages increased. The rush to build operating capacity meant skilled labour became increasingly expensive too, adding to the cost burden woes.

“With the sharpest escalation in price inflation for 25 years, it is no wonder businesses are concerned that they are paying substantially more for fuel, food and transport costs than they were a year ago. UK households should be concerned too as the rise in prices from service providers was the fastest since July 1996 and the cost of living is set to rise in the coming months.”

The speedy recovery across UK companies slowed slightly last month, as firms were held back by capacity constraints and staff shortages, and rising prices.

Growth at UK services companies dipped a little in June after surging in May, but remained robust.

But cost inflation hit a record, as companies also reported soaring price pressures and shortages of supplies and staff.

That’s according to data firm IHS Markit, whose UK service sector PMI index has slipped to 62.4. That shows a slight easing in growth from May’s 24-year high of 62.9 (any reading over 50 shows growth), but it still a high reading showing a strong rise in activity.

Staffing levels across services firms rose at the fastest rate in seven years (both new hires and workers returning from furlough) amid another sharp rise in new orders.

Firms reported a surge in demand for consumer services thanks to looser pandemic restrictions, and a rise in business investment in response to the improving economic outlook

But some still reported staff shortages, and other capacity constraints, which meant they also faced higher volumes of unfinished business - backlogs of work rose at the fastest pace since survey began in 1996.

And input costs and the prices charged by services firms both rose at a record pace.

Firms said higher staff wages, increased raw material prices and greater transportation charges were the main factors pushing up costs.

And there was a “marginal reduction” in export sales among service sector companies, with companies pointing to Covid-19 and Brexit frictions.

International travel restrictions and uncertainties about quarantine policies were the most commonly cited factor. Some firms also noted that Brexit-related issues had dampened export orders to the EU.

Tim Moore, economics director at IHS Markit, says staff shortages and supply chain delays were the most commonly cited factors holding back growth.

“The service sector recovery remained in full swing during June as looser pandemic restrictions released pent up demand for business and consumer services. Sales growth eased slightly from May’s recent peak, but capacity constraints and staff shortages meant that many service providers struggled to keep up with new orders.

“Backlogs of work increased at a faster pace than any other time since the survey began in July 1996, despite job creation reaching a seven-year high. Difficulties filling staff vacancies were reported by survey respondents in all parts of the service economy during June, with hospitality and leisure experiencing the greatest squeeze.

“Staff shortages and delays among suppliers were by far the most commonly cited constraints on growth in June. International travel restrictions, especially uncertainty about quarantine polices at home and abroad, were also a prominent source of anxiety. These disruptions to inbound and outbound travel contributed to another slight dip in export sales, which stood in sharp contrast to resurgent domestic demand.

The latest survey data highlighted survey-record rates of input cost and prices charged inflation across the service sector, reflecting higher commodity prices, transport shortages and staff wages. Imbalanced supply and demand was the main driver, while the roll-back of pandemic discounting by some service providers amplified the latest round of price hikes.”

UK vacancies have now risen to pre-pandemic levels, as more firms have reopened and look for staff.

But these shortages don’t add up to a booming labour market, say some economists.

Torsten Bell, chief executive of the Resolution Foundation, warned last month that the labour market is very far from tight, with total hours worked still lower than before Covid-19, and over 2 million people who are not working as they were pre-crisis.

The UK car industry continued its weak recovery from the pandemic in June, with sales well below pre-Covid-19 levels despite a bounceback from the lockdowns of 2020, according to the latest data.

People in the UK bought 186,128 new cars in June, up 28% on the same month last year, according to the Society of Motor Manufacturers and Traders (SMMT), a lobby group.

However, sales were still down 16% compared to the June average for the 10 years before the pandemic.

Sales for the first half of the year fell just short of industry forecasts, with the SMMT pointing to continued difficulties caused by supply chain shortages. In particular, carmakers have found themselves at the back of the queue when it comes to securing computer chips that are vital to controlling modern vehicles.

Sales of battery electric cars continued to grow in June, and Tesla’s Model 3 was the overall bestseller amid an import push. There were 74,000 pure battery car sales in the first half of the year - 8% of all car sales for the half, and one in 10 in June.

However, plug-in hybrid car sales grew more quickly, with sales almost tripling in the first half to 58,000.

Mike Hawes, the SMMT’s chief executive, said:

“With the final phases of the UK’s vaccine rollout well underway and confidence increasing, the automotive sector is now battling against a ‘long Covid’ of vehicle supply challenges.

The semiconductor shortages arising from Covid-constrained output globally are affecting vehicle production, disrupting supply on certain models and restricting the automotive recovery.”

However, he said that the expected end of restrictions on 19 July could help consumer confidence.

Hawes also highlighted positive news for the UK industry’s long-term prospects in the last week, after Nissan said it will invest £1bn in producing electric cars at Sunderland, the biggest single factory in the country. Vauxhall owner Stellantis is also expected to announce plans to build an electric van in Ellesmere Port, near Liverpool, in a move that would secure the long-term future of another important UK car factory.

On the economic front, eurozone companies have posted their fastest growth in 15 years during June.

Both manufacturers and services companies reported surging levels of output last month, according to the latest survey of purchasing managers from IHS Markit.

New business grew at the fastest pace in 21 years as the vaccine rollout lifted demand, while staffing levels rose at the quickest pace since the start of 2018 - led by Ireland, Germany and Spain.

Business confidence hit a record high (since 2012), with bosses optimistic that activity will continue to rise sharply in the coming months.

But firms also suffered from rising cost pressures (which rose at the fastest rate since September 2000 across eurozone companies, today’s report shows)

Service sector firms said they were facing some wage pressures due to increased demand for staff as economies reopen, and higher prices for goods, fuel and utilities.

And this is feeding through to higher output prices, with eurozone firms hiking their charges at the fastest rate in at least 19 years.

Markit’s eurozone composite output index jumped to 59.5 for June, up from May’s 57.1. That shows signals fast growth, and is the highest since 2006.

Service sector growth was the highest since mid-2007, while manufacturing was close to March’s record surge.

Chris Williamson, chief business economist at IHS Markit, says the data shows Europe’s economic recovery “stepped up a gear in June”, but inflationary pressures have also ratcheted higher.

“Business is booming in the eurozone’s service sector, with output growing at a rate unsurpassed over the past 15 years. Added to the impressive growth seen in the manufacturing sector, the PMI surveys suggest the region’s economy is firing on all cylinders as it heads into the summer.

“Service sector growth has picked up across the board among the countries surveyed, with hard-hit sectors such as hospitality and tourism now coming back to life to join the recovery as economies and travel are opened up from virus-related restrictions.

“A wave of optimism that the worst of the pandemic is behind us has meanwhile propelled firms’ expectations of growth to the highest for 21 years, boding well for the upturn to gain further strength in coming months.

“Firms are increasingly struggling to meet surging demand, however, in part due to labour supply shortages, meaning greater pricing power and underscoring how the recent rise in inflationary pressures is by no means confined to the manufacturing sector. Service sector companies are hiking their prices at the steepest pace for over 20 years as costs spike higher, accompanying a similar jump in manufacturing prices to signal a broad-based increase in inflationary pressures.”

Richard Hunter, head of markets at interactive investor, agrees that Morrisons could find itself at the centre of a bidding war.

Apollo could try to trump the Fortress-led bid which Morrison’s board has accepted, or initial suitors Clayton Dubilier & Rice could return to the table with a larger offer. Plus, could Amazon -- who have a grocery delivery partnership with Morrisons -- make its own offer?...

Hunter says:

“As an investment destination, the UK is attracting increased interest from overseas and the latest twist in the Morrisons bidding war has upped the ante.

Having rejected an initial 230p per share bid from Clayton Dubilier & Rice, the board has now accepted a 254p bid from Fortress, apparently on the basis of business continuity as well as price.

It is perfectly feasible, however, that this is not yet the end game. UK supermarkets in general are cash generating engines, whose share price gains have been capped by the costs of the pandemic, despite increased sales, making them more attractive on valuation metrics. In addition, Morrisons largely owns its freehold estate, adding another sweetener to any potential purchase.

Quite apart from the possibility of a revised offer from CD&R, Apollo Global Management have confirmed that they are also considering an approach, having recently missed out on a deal to buy Asda. This could lead to a three-way bidding war, with some speculation that following on from its business relationship with Morrisons, Amazon could even emerge from left field as a surprise last minute entrant.

Shares in Morrisons have jumped 11% at the start of trading in London, as traders anticipate a bidding war for the supermarket chain.

They have opened sharply higher at 268p, up from 239.8p on Friday night, after Apollo told the City it was considering a possible bid.

That lifts Morrison’s share price above the agreed takeover offer from Fortress (252p a share plus a 2p special dividend) which was announced on Saturday morning.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The future of Wm Morrison hangs in the balance this morning, as the prospect of a full-scale bidding war for the UK’s fourth-largest supermarket chain breaks out.

Apollo Global Management, the US private equity group, has confirmed this morning that it is in the early stages of considering a bid -- raising the possibility of a three-way battle for Morrisons.

Apollo told the City:

Apollo Global Management, Inc. (together with its subsidiaries, “Apollo”) notes the recent press speculation in relation to Morrisons and confirms that it is, on behalf of certain investment funds managed by it, in the preliminary stages of evaluating a possible offer for Morrisons.

No approach has been made to the Board of Morrisons. There can be no certainty that any offer will be made, nor as to the terms on which any such offer might be made.

Apollo’s move comes after Morrisons, which operates 500 stores and employs about 118,000 staff in the UK, announced on Saturday morning that it had accepted a £6.3bn offer from a consortium led by US investment firm Fortress.

Fortress, owned by the Japanese investment giant SoftBank, has teamed up with the Canada Pension Plan Investment Board and the billionaire US industrialists Koch family to secure a recommended offer for Morrisons.

Fortress’s deal, if it was secured, would be the biggest private equity deal since the £11bn takeover of Boots in 2007.

That deal is worth 254p a share (252p in cash and a 2p cash dividend). That is a 4% premium to the 243p Morrisons share price closed at on Friday but a premium of 42% to its closing share price of 178p on 18 June – the last business day before CD&R’s proposal.

That deal beat the £5.52bn proposal (or 230p per share) from US private equity firm Clayton, Dubilier & Rice (CD&R) which Morrisons directors rejected on 19 June, saying it undervalued the firm.

Some analysts believe Fortress’s bid could succeed, as my colleague Miles Brignall explained:

Morrisons is considered attractive because it owns the freehold on about 85% of its properties – including its supermarkets – and for its integrated business approach. It has long-term relationships with its farmers and suppliers as well as its own food manufacturing sites and even its own fishing fleet.

Andrew Gwynn, an equity analyst at the financial firm Exane, said he believed the Fortress-led bid had a good chance.

“Fortress doesn’t seem to be proposing any aggressive change, with a focus on simply empowering the management team to deliver on their longer-term strategy. The deal is conditional on 75% approval from shareholders. We think that should be achievable at this price range. The deal is very likely to succeed,” he said.

But Apollo’s statement today suggests that the race could have further to run - in a battle that has raised concerns that Morrisons could fall victim to job losses or asset-stripping.

Fortress has tried to calm those concerns over the weekend, saying it does not anticipate engaging in any material sale and leaseback transactions of Morrisons stores.

Joshua Pack, managing partner of Fortress, said:

“We believe in making long-term investments focused on providing strong management teams with the necessary flexibility and support to execute their strategy in a sustainable and value-enhancing manner.

“We fully recognise Morrisons’ rich history and the very important role Morrisons plays for colleagues, customers, members of the Morrisons pension schemes, local communities, partner suppliers and farmers.”

Also coming up today

Opec+ ministers will resume their attempts to agree a deal to increase oil supply from August, after failing to reach agreement last week.

On the table is a plan to gradually increase production over the next few months, but also extend the ongoing agreement to curb output - until the end of next year. The United Arab Emirates blocked a plan, according to Reuters, unless the UAE’s production baseline was raised (allowing it to pump more crude.

If an agreement isn’t reached... then the current curbs could remain in place, squeezing supplies just as demand increases.

But there is also a possibility that OPEC+ unity may collapse, ending the agreement to limit supplies - which would mean a surge in output, and tumbling prices.

Plus, we find out how service sector firms across the globe fared last month, with the latest purchasing manager surveys. Also, UK car registration figures for June are due.

Wall Street is closed to mark Independence Day, after finishing at another record high on Friday night, while European markets are set for a subdued start:

And former Bank of England governor Mark Carney - now UN Special Envoy for Climate Action and Finance and UK Prime Minister Johnson’s Finance Adviser for COP26 - is testifying to the Treasury committee on climate change and finance.

The agenda

• 9am BST: UK car sales for June
• 9am BST: Eurozone services PMI for June
• 9.30am BST: UK services PMI for June
• 2pm BST: Brazil’s services PMI for June
• 3.30pm BST: Treasury committee hearing with Mark Carney, the Prime Minister’s finance adviser at COP26