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Macro mood muted, while Whitbread rallies over break-up talks

Equity markets are broadly unchanged this morning as traders are slightly on edge after the western airstrikes in Syria over the weekend. 

The geopolitical situation is still taking centre stage, and investors remain tetchy. Even though the mood hasn’t soured, with no end in sight there isn’t a sense of optimism either.

Whitbread shares are in demand after the activist investor Elliott Advisors stated they now own more than 6% of the company – making them the single largest shareholder. The investment company is pushing for a demerger of the group, so Costa Coffee and Premier Inn would be two separate companies. Calls to break up the business are not new: US hedge fund Sachem Head own a 3.4% stake in the firm and is also keen to separate the two brands. Some investors believe extra value could be created should the demerger go ahead, and now the onus will be on the board of directors to offer an alternative to the proposed demerger plans. 

Shire has announced the sale of its oncology business to Servier for €2.4 billion. The decision was taken as the department is not part of Shire’s core assets or long-term strategy. The funds could be used to fund shareholder buybacks. This comes at a time when Japan’s Takeda is reported to have firmed up details with its creditors, as it is contemplating making a bid for Shire. The prospect of capital returns and or a takeover approach is likely to keep Shire shares in demand.

The US are considering imposing new sanctions on Russia for its action in Syria. Evraz and BP are under pressure this morning as both companies have exposure to Russia. While Russia remains a financial target of the US, both stocks may find it had to attract buyers. 

WPP shares have slipped after the CEO, Sir Martin Sorrell, stepped down amid an investigation over alleged misconduct. Robert Quarta, the chairman, will become executive chairman until a new CEO is appointed. WPP has been losing ground in the advertising world recently, as traditional advertising is losing out to online and social media marketing. Sir Martin was an integral part of WPP, and some market confidence has been lost now that he is no longer at the helm.

EUR/USD is largely unchanged after German wholesale price index (WPI) remained unchanged in March at 1.2%. It suggests that demand is largely unchanged in the wholesale sector. CPI in Germany recently ticked up, and it indicates that demand is growing, and that is likely to keep the economy moving in the right direction. 

At 1.30pm (UK time) US monthly retail sales figures for March are released, and the consensus is for a 0.4% rise, which compares favourably with a 0.1% decline in February.

Bank of America and Netflix release quarterly results later today.  

We are expecting the Dow Jones to open up 115 points at 24,475 and we are calling the S&P 500 up 13 points at 2669.

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