London stocks drop as BP and Shell fall on oil weakness and Avast surges on deal talk

The pound GBPUSD, -0.16% fell 0.1% against the dollar to $1.3844 after Bank of England Governor Andrew Bailey told BusinessLive that he wouldn’t be pressured into any decision on raising interest rates, even amid rising inflation pressures. That’s as data showed the number of people on company payrolls in the U.K. rose in June for the seventh straight month.

Topping the FTSE 100 gainers list were shares of Avast AVST, +1.11%, which surged more than 16% after the Prague-based maker of security software for consumers said it was in “advanced discussions” regarding a possible merger with U.S. software group NortonLifeLock NLOK, -3.90%.

Analysts at Berenberg said “nothing short of a $10 billion valuation is fair to Avast’s shareholders,” amid press speculation the deal could value the company at $7.2 billion (5.2 billion).

“As evidenced by the Colonial Pipeline ransomware attack in the U.S. earlier this year, we are in an age where even real, critical infrastructure is being targeted by cybercriminals, propelling valuations in the cybersecurity industry,” a team of Berenberg analysts led by Bharath Nagaraj said in a note to clients.

The analyst said Norton probably wants Avast’s big 435 million user base and monetization platform, and while none of the listed cybersecurity peers outside of McAfee are likely to counter-bid, there are other possibilities.

“A number of PE funds are active in the cybersecurity space (Thomas Bravo, Insight Partners, Bain Capital, Crosspoint Capital Partners, Vitruvian Partners), so a counter-bid from any of them, or a combination of them, is not out of the question,” said the analyst.

On the downside, shares of ASOS ASC, +0.93% fell 16% after the company warned of a hit to market demand due to uncertainty over COVID-19 during the last three weeks of the first four months of fiscal 2022. The U.K. has been battling surging cases of the virus due to the highly infectious delta variant.

Travel names were under pressure after Spain’s Balearic Islands were moved to the U.K.’s amber list on. From Monday, residents returning from tourist hot spot must quarantine unless they have been fully vaccinated. TUI TUI, +5.45% fell 2%, along with Carnival CCL, +0.86%.

Shares of Just Eat Takeaway.com GRUB, -10.03% tumbled 6.5% even as the food delivery company said order growth accelerated in the second quarter and raised its full-year growth target.

“A 733% gain in UK order growth just doesn’t cut it any more, it appears, and in any case matching this for the next half is likely to prove impossible, given the expected return to pubs and restaurants and the concomitant decline in takeaway orders,” said Chris Beauchamp, chief market analyst at IG, in a note to clients.

Shares of cinema operator Cineworld CINE, +9.32% were down sharply for a fourth straight session, tumbling another 7%.