Europe
The FTSE 100 racked up a 14-week high before turning lower this afternoon. The British equity benchmark, closed yesterday for the early May bank holiday, reached a fresh multi-month high earlier today, but ran out of steam as the wider negative mood from the continent took over. The DAX hit a new three-month high on Monday when eurozone markets were open, but traders have now booked profits.
After several weeks of wooing, Shire (LON:SHP) finally agreed to Takeda’s takeover offer. The deal needs to be approved by Shire’s shareholders, but if it goes ahead will be worth £46 billion – which would make it the largest pharmaceutical transaction since 2000. Shares in Shire are up 5.1% at 4,045p. Should the offer be approved, shareholders would receive £24 and 0.839 of a share in Takeda (T:4502), for every one Shire share, which works outs at approximately £49 per share. Takeda’s share price has dropped by 30% from the high in January, and given the downward trend, some Shire shareholders might not be enticed by the offer due to Takeda’s shares underperforming recently.
Apollo Global Management (NYSE:APO) has stated they are no longer interested in buying FirstGroup (LON:FGP). The private equity firm made an offer for the British transport business last month, but the approach was rejected, and now the US financial firm has officially walked away. Firstgroup shares are lower on the day now that Apollo Global Management will not be making another offer.
US
US equity markets have lost a little ground today as traders are worried about geopolitics. The Trump administration will make its decision today in relation to the Iranian nuclear deal, and we still haven’t heard one way or another about the US and Chinese trade talks.
The Dow Jones and S&P 500 have been edging lower recently, but both indices are above their respective 200-day moving averages, and while those metrics are held, the outlook could be positive. The NASDQ 100 is comfortably above its 200-day moving average, and yesterday it hit a three-week high.
FX
The US dollar index has hit a new high for 2018, and the bullish run on the greenback is impressive, especially in light of the very average non-farm payrolls report last week. The disappointing average earnings from the US at the back of last week now make its less clear whether the Fed will hike interest rates another three times this year, but the US dollar is not showing any signs of slowing down.
EUR/USD has suffered at the hands of the stronger US dollar, and the turnaround in German industrial output failed to boost the euro. Industrial production in Germany jumped by 1%, while economists were expecting a rise of 0.8%, and the sector has saw negative growth of 1.6% in February.
GBP/USD is lower on the day again, and the softer UK house price data gave traders an extra reason to sell the pound. The Halifax HPI report showed that UK average house prices fell by 3.1% in April, and that compared with the 0.2% fall the market had expected.
Commodities
Gold is a touch lower today on the back of the US dollar strength. The metal is in the red but is still above its 200-day moving average at $1,305, and if it can hold above that metric it might remain range-bound. In the past month, the metal has spent a lot of time in the $1,300 to $1,350 range, and unless those parameters are breached we can expect a relatively small trading range.
WTI and Brent crude will be closely watched as President Trump announces his decision regarding the Iranian nuclear deal today at 7pm (UK time). Mr Trump has been an outspoken critic of the deal that was brokered by President Obama, and there is talk Mr Trump could withdraw from the agreement and in turn reintroduce sanctions on Iran. Dealers are worried the potential political upheaval would curtail supplies and keep prices high.
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