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China Data Knocks The Froth Off Sabmiller Deal

Published 13/10/2015, 11:13
Updated 03/08/2021, 16:15

A bigger than expected fall in Chinese imports has seen European markets follow Asia markets lower as concerns about a slowing Chinese economy keep investors on the back foot. The decline in exports was slightly less than expected, probably as a result of the decline in the yuan against the euro and the Japanese yen, but this is largely down to the fact that both currencies have strengthened against the US dollar in the last few weeks.

Mining stocks have borne the brunt of the disappointment with Glencore (L:GLEN) the biggest faller, closely followed by Anglo American (L:AAL).

Also on the slide Royal Mail (L:RMG) shares have dropped sharply after the UK government disposed of its remaining 14% stake in the company at 455p.

On the plus side SABMiller (L:SAB) shares have jumped sharply after the company came to a tentative agreement with long term suitor Anheuser-Busch Inbev SA (L:0O1Z)at £44 per share in a deal worth £68bn, a 50% premium to the share price on 14th September prior to the bid.

While we now have a tentative agreement and a deal extension to the 28th October with a £3bn break clause, payable by AB InBev if the deal doesn’t proceed, the combined company will still have to overcome a host of regulatory obstacles which is likely to prompt a number of disposals in China and the US.

On the currency front the pound slid sharply as UK CPI inflation slipped back into negative territory for the second time this year while retail prices slid to 0.8% as lower food, fuel and energy prices kept downward pressure on prices. This continued weakness is likely to put back expectations further into next year on when to expect a rise in UK base rates from the Bank of England.

As we look ahead to the open for US markets we’re likely to see a similarly weaker open as US investors gear up for the start of earnings season in earnest.

US banks in particular will be in focus this week as we look to gauge the strength of the US economy with JPMorgan Chase & Co (N:JPM) set to announce its latest Q3 numbers after the closing bell later today. Given the bank is one of the US’s largest mortgage providers the trend in this area will be important in the context of the health of the US economy along with its credit card business.

Johnson and Johnson will also be reporting its latest Q3 numbers before the open with expectations of $1.45c a share on sales of $17.45bn.

The Dow Jones Industrial Average is expected to open 62 points lower at 17,070

The S&P500 is expected to open 8.5 points lower at 2,009.5

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No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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