FTSE 100 round-up: Unilever, GSK, BP and Shell in spotlight

As European markets falter on inflation worries, London’s outperformance is continuing thanks to support from FTSE 100 heavyweights.

Unilever (LSE:ULVR), drugmaker GSK (LSE:GSK) and oil giants BP (LSE:BP.) and Shell (LSE:SHEL) today ensured the FTSE 100 index stood out in a session when European markets suffered a bout of interest rate worries.

The FTSE 100 added another 21.73 points to 7621.79, meaning the top flight is 50 points from February and April highs and within sight of the all-time record of 7,900 seen four years ago.

As usual at times of London outperformance, commodities-based stocks were behind the rally after Brent crude futures hit $124 a barrel as part of a two-week surge for oil markets.

Brent’s latest 2% increase followed Europe’s ban on 90% of Russian oil imports and expectations of a demand pick-up after major China cities eased Covid restrictions. Opec ministers meet on Thursday but are not likely to ramp up monthly production plans.

BP rose 5.95p to 439.45p and Shell lifted 29.5p to 2403.5p, while Antofagasta (LSE:ANTO) and Rio Tinto (LSE:RIO) improved 24.5p to 1,543p and 102p to 5,837p respectively after copper and iron ore futures traded at near their highest levels in a month.

In contrast, the UK-focused FTSE 250 index surrendered recent gains as easyJet (LSE:EZJ) and other consumer-based stocks left the UK-focused benchmark 109 points lower at 20,437.

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Markets in Frankfurt and Paris were also weaker as the euro area’s inflation rate hit a fresh record of 8.1% in May, adding to pressure on the European Central Bank to accelerate plans for tightening monetary policy. Rate hikes of at least 0.25% are seen in July and September.

For Unilever shareholders, Europe’s economic storm clouds were put to one side as they cheered the appointment of activist investor Nelson Peltz as a non-executive director.

The founder of Trian fund management has held similar roles at US rivals Procter & Gamble (NYSE:PG), Heinz (NASDAQ:KHC) and Mondelez (NASDAQ:MDLZ) and the hope for Unilever shareholders is that Peltz will be able to use his boardroom influence to accelerate the pace of change at Unilever.

The appointment came after Trian built a 1.5% stake in Unilever worth about £1.4 billion, a buying spree that began in January after the Marmite and Dove soap maker’s failed bid for GSK’s consumer health division.

Peltz said today: “We believe it is a company with significant potential, through leveraging its portfolio of strong consumer brands and its geographical footprint.

“Trian has made a considerable investment in Unilever. We look forward to working collaboratively with management and the board to help drive Unilever's strategy, operations, sustainability, and shareholder value for the benefit of all stakeholders."

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Unilever shares jumped by as much as 7% following the appointment before settling at 3,698p for a rise of 203p. That’s still well short of the level of 4,200p seen last July.

Another of London’s top-10 stocks in the spotlight today was GSK as the pharmaceuticals giant bulked up prior to July’s separation of the consumer health business Haleon.

Its move for Boston, Massachusetts-based Affinivax will see GSK pay an initial $2.1 billion (£1.66 billion) as it boosts its position in the development of pneumococcal vaccines, such as for meningitis and bloodstream infections.

Two further milestone payments of $600 million (£475.5 million) will be made based on meeting clinical development milestones. 

GSK said the proposed acquisition would benefit its vaccines R&D pipeline, provide access to new and potentially disruptive technology and broaden its footprint in the Boston area. 

Pfizer (NYSE:PFE) is the dominant player in the pneumococcal market but large vaccine players Sanofi (EURONEXT:SAN) and Merck & Co (NYSE:MRK) also have projects in this sector.

Analysts at UBS said today: “Benefit will need to play out in late-stage clinical trials and Pfizer is a formidable presence so we expect investors might need GSK management to convince on the commercial potential.”

Ahead of the consumer health business separation, GSK recently published commitments for its remaining operations to deliver compound annual sales growth of more than 5% between 2021 and 2026, and more than 10% in adjusted operating profit.

GSK’s shares were up 6.2p to 1734.21p, having risen from less than 1,500p in early March. UBS has a “neutral”  recommendation and price target of 1,790p.