A recovery in Asian markets, after South Korea became the latest country to gain an exemption from steel and aluminium tariffs, along with comments from US Treasury Secretary Steve Mnuchin that he was cautiously optimistic that some form of agreement can be reached with China, has seen European markets open slightly higher this morning, as the widespread pessimism from last week gives way to a slight recovery in optimism.
On the companies front M&A is dominating proceedings today with packaging company Smurfit Kappa (LON:SKG) the worst performer after the company rejected a new offer of €9bn from America’s International Paper (NYSE:IP). The new offer worth €37.54 was rejected last week as failing to value 'the group's intrinsic worth and future prospects', which is usually code for dig a little bit deeper if you want to have a serious chat.
Elsewhere in the M&A universe, GKN (LON:GKN) is again in the news as shareholders continue to mull over the Melrose (LON:MRON) approach, with management urging the alternative of a deal with US based Dana (NYSE:DAN) who today announced an increase to the cash portion of their bid to $1.8bn, to acquire GKN’s automotive business. Major shareholders appear to be split between the two bids with the Melrose option the more controversial of the two and one might argue the more short termist as well as risky, if recent warnings from Airbus (PA:AIR) are any guide.
Last week GKN’s biggest customer warned that it could take its business elsewhere if the Melrose deal were to be accepted. Given this intervention it remains difficult to see how any deal would be able to deliver the savings that Melrose claims it will.
JD Sports (LON:JD) is also higher after the company announced that it would be acquiring US sports shoe chain Finish Line for £400m, giving JD Sports a major foothold in the US market.
The recovery seen in Asia overnight and the rebound today in Europe is set to give US markets a boost as we look ahead to the open as we head into the final week of Q1.
Dow Jones is expected to open 300 points higher at 23,833
S&P500 is expected to open 37 points higher at 2,625
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