UK and Europe
A slide in the price of oil weighed on the oil and gas sector of the stock market in afternoon trading, taking the FTSE 100 from narrow gains to narrow losses. Other European indices were mixed as markets mostly treaded water ahead of central bank meetings this week.
Mid-caps outperformed blue chips after online gaming companies 888 (LON:888) and Rank (LON:RNK) approached FTSE 250-listed high-street bookie William Hill (LON:WMH) about a possible takeover.
The merger is a sign of the times in betting markets where online companies are increasingly dominant. William Hill’s CEO James Henderson departing last week and a general pickup in merger activity post-Brexit has given Rank and 888 the opening they needed to make an offer.
The argument put forward for the deal is the “complementary online and land-based operations.” The choice for William Hill stakeholders is between continuing to develop the company’s own online operations or turning over its own high street shops to the already well-established online presence of 888 and Rank.
UK-listed airlines EasyJet (LON:EZJ) and IAG (LON:ICAG) received little uplift after Ryanair (LON:RYA) skirted a profit warning but suggested the significant risks of Brexit meant the firm would shift focus away from UK airports.
US
US stocks opened slightly weaker as investors digested a sale of Yahoo! (NASDAQ:YHOO)’s core internet business, more second-quarter corporate earnings and prepared for the latest Federal Reserve policy decision on Wednesday.
Yahoo has finally agreed on a sale price of $4.8bn for its core internet business after a prolonged auction process was won by Verizon Communications (NYSE:VZ). Yahoo is Verizon’s latest big splash into the world of internet advertising. Whereas AOL gave it the technology, Yahoo gives Verizon the content it needs to monetise its millions of smartphone customers.
As US and European markets build on record and 2016 peaks respectively, the fear of missing out is becoming a driving force for investors. Whether stocks can maintain their recent run of good form is a function of earnings and liquidity. If this week’s corporate earnings continue to defy expectations and the Bank of Japan delivers new stimulus, markets should have what they need to keep gaining strength.
FX
FX markets had a relatively subdued start to what could be a very busy week around the meetings of the Federal Reserve and the Bank of Japan, as well as readings on US and UK GDP.
The euro rose against the pound after the German IFO came in ahead of expectations whilst there was a big miss on UK business optimism according to the CBI Industrial Trends survey. EUR/GBP has been stuck between 0.83 and 0.84 for over a week.
Commodities
Oil prices sunk again on Monday following another rise in the number of US oil rigs according to Baker Hughes. US producers have been encouraged back into the market as prices have stabilised near $50 per barrel. However, at this early stage of the recovery in oil prices, producers may be sowing the seeds of their own destruction. Concerns of over-supply are already to starting to weigh on prices whilst global economic growth remains so hard to come by.
The price of gold and silver dropped on a combination of dollar strength ahead of this week’s Fed meeting and general weakness in the commodity sector. A retest of $1300 per oz in the near future seems likely as the market tests the bulls’ conviction.
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