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FTSE Rallies On LSE Group Bid, Weaker Pound

Published 11/09/2019, 17:27
Updated 14/12/2017, 10:25

M&A chatter plus a weaker pound sent the FTSE soaring on Wednesday. The FTSE rallied to a 5-week high with London Stock Exchange Group (LON:LSE) leading the charge following a bid from Hong Kong exchange.

Hong Kong Exchange and Clearing (HK:0388) have bid £32 billion for LSE. The timing of this move cannot be ignored, it comes just as LSE spent $27 billion acquiring Refintiv in July, amid UK political uncertainty over Brexit and amid ongoing political disruption in Hong Kong. Whilst LSE share price initially increased by as much as 15% the price eased back. The fact that the share price is still sub £73 when the bid for price is £83.61 per share is telling. Investors are not convinced that this deal will go through.

Political considerations will play a significant role in deciding whether this deal has a future.

Bojo defeated on suspension in Scottish courts

The pound snapped a two-day winning streak against the dollar. Parliament maybe suspended but political events are keeping the pound traders on their toes. Boris Johnson lost a Scottish court ruling on the suspension of Parliament, which has teed up a showdown in the Supreme Court for net week.

Far from making any thing clearer the decision has added to confusion ahead of the looming Brexit deadline 31st . The decline of the pound versus the dollar is a reflection of the uncertainty of what this means for MP’ currently suspended from Parliament.

ECB in focus

The euro slipped lower across the session as investors look ahead to tomorrow’s ECB policy announcement. Given the deteriorating health of the eurozone economy across the summer, dovish expectations are high.

The ECB are broadly expected to give a 10-basis point overnight depo rate cut and for Draghi to tee up the start of another bond buying programme. Anything short of this could see the euro rebound higher. However, with German GDP for 2019 downgraded the probability of the ECB cutting more deeply is pressuring the common currency. As investors price in a more dovish ECB, the euro has moved sub $1.10.

Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.

Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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