The FTSE gapped higher on the open and managed to maintain its gains across the session, as European political woes waned and as M&A activity overshadowed trade war fears. The FTSE is moving into the close 0.4% higher, in line with its European peers.
Traders have moved forward from last weeks political turmoil in Italy and Spain, which rocked global markets last week. With the new Italian coalition government now sworn in and Spain’s Socialist leader Pedro Sanchez taking the reins in Madrid, the political environment is relatively calm compared to this time last week.
M&A chatter lifts sentiment
Traders were certainly in the mood to take things in their stride this morning, barely flinching at growing trade tensions between the US and China as the third round of trade talks between the two powers broke down. Instead, investors focused on M & A activity, lifting sentiment in the market. Reports over the weekend suggested that Italian bank UniCredit (LON:0RLS) was in early stage merger talks with French rival Societe Generale (LON:0J6Y).
Whilst political turmoil and a weak economic backdrop in Italy have delayed a formal move, with an Italian coalition government now sworn in, this deal could progress into something more concrete relatively quickly.
Closer to home deal talk saw FTSE constituent DS Smith (LON:SMDS) in a deal to buy a Spanish packaging company, whilst in the US Microsoft (NASDAQ:MSFT) is to buy code sharing site GitHub for $7.5 billion in the biggest deal by tech group since LinkedIn (NYSE:LNKD) in 2016. US tech stocks led the charge higher on Wall Street with the Dow trading up 170 points, whilst the S&P gained 0.2% ad the Nasdaq 0.3%.
UK Construction activity remains constant in May
Not even UK construction PMI surprising to the upside has been sufficient to keep the pound buoyant. Whilst UK construction sector activity beat expectations by remaining constant in May, scratching below the surface of the numbers and the problems are becoming increasingly clear in the sector; new orders fell and companies were more pessimistic about the outlook for growth.
Investors sold out of house builders such as Taylor Wimpey (LON:TW) and Persimmon (LON:PSN) and while the pound was initially buoyed by the release, pushing higher versus the dollar, it sold off sharply heading towards the end of the European session.
The pound was struggling back towards $1.33 versus the dollar after failing resistance at $1.3380. Investors will now look towards the all important service sector PMI tomorrow.
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