Woodside calls off merger talks with Santos, Barratt and Redrow agree merger

London open

The FTSE 100 is expected to open four points higher on Wednesday, having closed up 0.9% on Tuesday at 7,681.01.

Stocks to watch

Woodside Energy, the Australian oil and gas group with secondary listings in London and New York, has announced it has called off merger talks with Santos that would have created an energy giant worth $52bn. The companies confirmed in December that they were in talks around a potential tie-up, but have now said they have "ceased discussions". In a statement on Wednesday, Woodside chief executive Meg O'Neill said: "While the discussions with Santos did not result in a transaction, Woodside considers that the global LNG sector provides significant potential for value creation."

Sainsbury's said in a strategy update on Wednesday that it anticipates retail operating profit growth aligned with its commitment to profit leverage from sales growth, alongside an increase in capital expenditure to £800m to £850m annually over the next three years, including a £70m investment in its Smart Charge electric vehicle charging network in the 2025 financial year. The grocery giant said its targeted incremental capital expenditure would prioritise high-return efficiency and growth investments, while retail free cash flow was forecast to be at least £500m per year, totalling £1.6bn over the next three years, with expected cash flow growth as profits increase partly offsetting the role of working capital benefits. Additionally, it said it anticipated around £150m in one-off cash costs related to cost-saving programmes over the three-year period.

UK housebuilders Barratt and Redrow said they had agreed an all-share merger valuing the latter at £2.5bn. Under the terms of the deal Redrow investors will receive 1.44 new Barratt shares for their own stock which would leave them with 32.8% of the combined group and Barratt shareholders with the remainder. The terms also imply a premium of 27.2% to the closing price per Redrow Share of 600p on February 6.

Newspaper round-up

The cancellation of the northern leg of HS2 has raised “urgent unanswered questions” and the government does not yet understand how the £67bn high-speed railway will now function, according to a scathing report from parliament’s spending watchdog. The remaining London-Birmingham line will be “very poor value for money”, the public accounts committee of MPs said, with costs now forecast to significantly outweigh the benefits. – Guardian

The new president of the Confederation of British Industry has admitted that the Guardian’s revelations about sexual misconduct at the lobbying group were “an appalling shock” that tipped it into a “near-death experience”. Rupert Soames said the scandal had triggered an existential crisis, from which he is trying to rescue the organisation. – Guardian

The Bank of England has pushed the UK into recession by refusing to clearly communicate its plans to cut interest rates, top economists have warned. Britain fell into a recession at the end of 2023, according to estimates by the National Institute of Economic and Social Research (NIESR), as GDP fell by 0.1pc in part because of the Bank’s insistence high interest rates would not fall soon from their current 16-year high of 5.25pc. – Telegraph

A new Dutch-style mortgage lender is set to release fixed-rate mortgages where the rates will automatically reduce as borrowers repay them. April Mortgages, authorised by the Financial Conduct Authority in October, plans to offer loans to existing homeowners remortgaging and new buyers by the end of March. – The Times

Estimated energy output from wind farms should be subject to independent checking, according to MPs, after claims that operators overestimate ­production to reap financial benefits. Wind farm operators are often paid to switch off their turbines when generation outstrips demand to prevent the electricity grid from being overloaded. These curtailment payments are based on the amount of energy that a wind farm company says it will produce. – The Times

US close

US stocks were trading within a tight range on Tuesday but finished with minor gains, bouncing back after Fed-induced losses the previous session as bond yields surged.

With no major economic data due on Tuesday, market chatter was dominated by comments from Federal Reserve policymakers, who are doing their best to temper expectations of an imminent interest-rate cut.

Meanwhile, a barrage of corporate earnings was keeping investors busy, with well-received results from DuPont, Palantir and Spotify.

The Dow closed up 0.37%, the S&P 500 rose 0.23% while the Nasdaq gained just 0.07%, with very little separating the day's highs and lows as investor risk appetite remained modest.

Bond yields were pulling back, with the 10-year US Treasury yield down 6.6 basis points at 4.095%, after gaining 14 basis points on Monday following comments from Fed chair Jerome Powell who said the central bank was in no rush to cut interest rates.