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RBS hit by government disposal

Stock markets in Europe are mixed as the macroeconomic outlook hasn’t changed much in the past 24 hours. 

Italian politics has calmed down for now, and so have investors’ nerves. The trade talks between the US and China haven’t progressed much, but more importantly, there hasn’t been an escalation in tensions.   

RBS shares are in the red this morning after the UK has sold off a 7.7% stake in the bank, taking its shareholding down to roughly 62.3%. Last month the bailed-out bank reached a settlement with the US Department of Justice in relation to selling toxic loans before the credit crisis. The fine was $4.9 billion, which was considerably lower than the $12 billion that traders were speculating about two years ago. This was the turning point for Westminster selling the tranche. After the dust settles, investors are likely to view the move as a step in the right direction. If the government is reducing their stake in the bank, it indicates the financial institution is in a healthier position. The stock has been broadly pushing higher since July 2016 and if the positive move continues it could target 300p. 

Ryanair shares are a touch higher this morning after the release of solid traffic figures for May. Load factor rose by 1% to 96%, and passenger numbers jumped by 6% to 12.5 million. The respectable figures were held back by staff shortages and air traffic control (ATC) strikes last month The share price has been range bound recently, but if it can hold above the 200-day moving average at 1,646p, its outlook might remain positive. 

Willie Walsh, the CEO of IAG warned that ATC strikes pose a larger risk to the European airline sector than the surge in fuel prices. The aviation industry has been under pressure due to the rally in the oil market, which has been in an upward trend for 11 months. Shares in IAG are lower this morning. 

GBP/USD was helped by the solid services figures from the UK. In May, the services PMI report came in at 54, up from 52.8 in April, and economists were expecting 53.

EUR/USD is slightly higher this morning after Italy, France and Germany revealed services PMI reports that broadly met forecasts. 

At 3pm (UK time) the US ISM non-manufacturing data is released and the consensus estimate is 57.5, and that would be an improvement on April’s 56.8.

We are expecting the Dow Jones to open up 8 points at 24,821 and we are calling the S&P 500 up 2 points at 2,748.

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