European stock markets are firmly in the red following the major losses incurred on Wall Street yesterday. The declines in longer-dated US government bond yields has spooked traders, and that triggered the declines in global equity markets. From a political and economic point of view, not much has changed, but investor confidence has been shaken in light of the move in the US yesterday, and that is playing on investors’ minds.
It was encouraging to see that the Caixin survey of Chinese services jumped to 53.8 – a five month high. The update rebounded from the October’s reading, which was a 13 month low. China’s economy has been cooling in recent years, but todays’ report shows us that the economy is in better shape than originally thought.
Takeda shareholders voted in favour of the proposed £46 billion takeover of Shire. The Japanese company are keen to expand into the US – where Shire derive a large portion of their revenue. Takeda will end up with an additional $47 billion in net debt, and in return the new group will have global revenue of roughly $32 billion, and this seems like they are paying a lot for a relatively small amount. The firm expects to make savings through synergies, and non-core assets will be spun off too. Margins in the pharmaceutical sector are coming under increased pressure, so now might not be the best time bulk up on debt. Adding to that, over the summer we heard that Amazon (NASDAQ:AMZN), JP Morgan’s boss, Jamie Dimon, and Warren Buffett are looking to launch a healthcare initiative, which might bring about massive disruption to the sector.
Stagecoach shares are higher this morning the company announced disappointing figures, but they topped forecasts. First-half adjusted pre-tax profit fell by 10% to £87 million, but traders were expecting £81.1 million. The group is considering putting its US operation up for sale. The transport company said the results at the regional UK bus division were ‘encouraging’.
Ashtead (LON:AHT) is one of the biggest fallers on the FTSE 100. The group derives the majority of its revenue in the US, and the fears traders have in relation to the state of the US economy is likely to be a factor in the decline.
Despite all the political upheaval in the UK in the past 24 hours, the likelihood of the UK leaving the EU without a deal has greatly reduced, and that is helping GBP/USD. The latest UK services PMI report fell to 50.4 – its lowest level in over two years.
EUR/USD is largely unchanged after Italy and France posted services PMI data that topped the preliminary readings while the German report met forecasts.
US stock markets will remain closed today as a mark of respect for former US President, George H. W. Bush, who is being laid to rest today.
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