European markets opened higher on Monday, encouraged by the failure of an attempted coup d’état in Turkey and Softbank’s (T:9984) huge £23.4bn takeover of British chip-designer ARM Holdings (LON:ARM).
With gains in excess of 40%, ARM Holdings is leading gains on the FTSE 100 by a wide margin after the takeover was agreed with Japan’s Softbank. Sage Group (LON:SGE), the FTSE 100’s only other tech stock was enjoying gains of over 2.5% on expectation of more M&A interest in UK tech shares. A pullback in the price of oil has left O&G and basic resource sectors at the bottom of the UK benchmark.
Softbank’s purchase of ARM Holdings is both opportunistic at a devalued pound-lira exchange rate as well as a big forward-looking play on the future of tech in the “internet-of-things.” It will be Softbank’s biggest purchase since it bought into US mobile phone carrier Sprint (NYSE:S). It is another example of a Japanese firm looking outwards as domestic growth peters out and borrowing rates hit record lows.
The deal is the first major blow to those who have forecasted that Brexit will deter inward investment into Britain. It will be the first test for Prime Minister Theresa May’s new Ministry for Business, Energy and Industrial Strategy and her belief that “transient shareholders are not the only people with an interest when firms are sold or closed.”
The British pound has trimmed some of its sharp losses from Friday, helped by the Bank of England’s Martin Weale who said he was unsure whether he would vote for a rate cut at the August policy meeting. Mr Weale seems to be in the “don’t jump the gun” and “keep the powder dry” camp as opposed to the “crack a nut with a sledgehammer” camp occupied by chief economist Andy Haldane.
US stocks look set for a higher open as investors continue, for now, to buy into the breakout of major averages into new records ahead of the Republican National Convention and a number of key earnings reports. Bank of America's (NYSE:BAC) Q2 report will be the key earnings release on Monday following generally well-received results last week.
USA pre-opening levels
S&P 500: 3 points higher at 2,164
Dow Jones: 14 points higher at 17,530
Nasdaq 100: 5 points higher at 4,594
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