Europe
The softer tone that was prevalent Thursday has carried over into Friday as investors continued to evaluate the prospects of US President Donald Trump being able to follow through on his recent promises.
As such, markets in Europe continued their slide from their recent highs ahead of a long weekend in the US, with the CAC 40 slipping sharply as French bond yields continue their recent rise on reports that French socialist candidate Benoit Hamon is considering merging his campaign with far left candidate Jean-Luc Melenchon under a single banner. The markets interpreted this as making a Le Pen victory much more likely.
The FTSE 100 managed to buck the slightly weaker trend but that was primarily as a result of Friday’s news that Kraft Heinz Co (NASDAQ:KHC), the world’s 5th biggest consumer foods brand was looking to acquire Unilever (LON:ULVR) the world’s 3rd biggest consumer food brand for around $143bn, sending the share prices of both companies sharply higher.
While Unilever have rejected the approach there is speculation that Kraft Heinz will return with a higher offer, which in turn will prompt competition concerns as well as worries about job losses, given Kraft Heinz’s narrow focus on costs.
Unilever shareholders will also have to weigh up the costs of throwing away a consistent path of dividend growth, which has seen good regular returns over the last ten years.
Another obstacle will be political considerations, given Kraft’s history of broken promises. UK authorities have already had experience of this in the Cadbury takeover a few years ago; when they promised to keep a factory open, only to then close it after the deal completed. It is hard to imagine that they will get duped again, and the politics of this may outweigh the commercials, particularly at a time when the UK government will want to safeguard as many jobs as possible, given that Unilever employs around 7,500 people in the UK.
Sector peer Reckitt Benckiser (LON:RB) was also higher on the news lest it also become a target in the wake of its recent bid for Mead Johnson (NYSE:MJN).
Mining and oil and gas stocks were the major losers Friday as slightly weaker copper and oil prices weighed on both sectors.
US
US markets slipped back ahead of the long weekend as investors take stock of another record week. The gains seen over the past two weeks have seen little in the way of pullbacks, and with some investors starting to question the deliverability of President Trump’s plans some caution and profit taking is beginning to set in.
Kraft Heinz is moving higher after its bid for Unilever made its way into the public domain.
Also on the agenda, farming equipment maker Deere (NYSE:DE) has managed to post earnings of $0.61c a share, beating estimates, while also seeing revenues beat expectations.
FX
The pound slid back Friday after UK retail sales for January unexpectedly declined by 0.3%, as rising prices appeared to drag on consumer spending. The decline was particularly disappointing as it was the third successive monthly decline in a row, the worst performance in over 10 years. The numbers also pushed back expectations that the Bank of England might be forced to raise interest rates by the end of the year, as UK gilt yields dropped back.
While the US dollar remained broadly strong across the board on Friday, it didn't have much luck against the Japanese yen which continued its recent rise against the US dollar, making it the best performer thus far.
Commodities
Gold prices remained resilient on Friday as investors continued to hedge their bets on the “Trump Trade”, as well as rising political risk in France.
Oil prices slipped back ahead of the weekend and Friday’s latest rig count data.
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