market relief

European equity markets have been hit by profit-taking this morning, after the FTSE 100 closed at a record level yesterday. 

With the CAC 40 also hitting its highest since level 2008, traders have taken the opportunity to book some of their profits today. It has been a quiet day so far in terms of news and we are not expecting any major announcements, so volatility is likely to be low.

Shares in Carpetright have jumped after the troubled retailer revealed plans to raise £60 million via a share issue. The funds will be used to pay down unsecured loans and implement a revised business plan. Carpetright has been struggling for years, but if the share issue is successful this could be its first step in the road to recovery.

AstraZeneca shares are in the red after the company revealed first-quarter earnings that missed analysts’ forecasts. Core earnings per share came in at 48 cents, while the consensus estimate was 60 cents. The company’s very successful cholesterol drug, Crestor, is facing competition from generic brands.

Relatively new products like Imfinzi and Fasenra are selling well. AstraZeneca announced higher costs on account of increased investment in new drug launches, which isn’t necessarily a bad thing, provided the new products sell well. The share price has been broadly pushing higher since June 2016, and if the bullish trend continues it could target 5,600p.

The Competition and Markets Authority (CMA), have begun their investigation into the proposed merger of Sainsbury’s and Asda. The first round of the process involves obtaining ‘any initial views’ the deal might have on competition in the sector. The CMA usually spends 40 days mulling over the views that were put forward before making a decision to move on to the second round or not. Shares in Sainsbury’s are marginally higher this morning.

EUR/USD is largely unchanged this morning even though Germany posted some respectable economic updates. In April, German PPI was 2%, up from 1.9%, and WPI was 1.4%, up from 1.2%. These reports pushed up the single currency as it suggests demand is firming up, but the upward move in the single currency was short-lived.

We are expecting the Dow Jones to open up 30 points at 24,744 and we are calling the S&P 500 up 2 points at 2,722. 

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