Stocks in Europe got off to a good start to the week with the German DAX index touching its highest level this year. The FTSE 100 leaped above the highs reached last week, only to fall back by mid-morning.
The basic resource sector is leading the charge on the FTSE 100 amid well-received results from Petra Diamonds and a rebound in the price of oil. The healthcare sector is dragging the UK index lower as regulatory scrutiny of Syngenta’s takeover by ChemChina lowers the chance of success of German pharma firm Bayer acquiring Monsanto.
Stocks in the Eurozone were supported by an improvement in economic activity during October according to purchasing manager surveys. The Markit Eurozone composite PMI rose to 53.7 in October from 52.6, exceeding estimates of a rise to 52.8. The gains come largely as a bounce back in Germany’s service sector.
Shares of Syngenta slumped 9% on fears the European Commission could move to block its takeover by ChemChina. It comes a day ahead of Q3 earnings released tomorrow. The EC said Syngenta has offered no concessions to competition concerns over the takeover. It looks like a shot across the bow right before earnings from increasingly interventionist Europe regulators who have already taken aim at US tech firms Apple and Google this year.
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Shares of French Connection popped 19% on takeover speculation. US firms and private equity are said to be circling the troubled UK fashion company in the hopes of spurring a turnaround. The speculation comes a week after UK clothing retailers ASOS and Burberry raised profit forecasts, mostly thanks to the fall in the value of the pound boosting foreign earnings. UK Plc is still very much in vogue in fashion circles abroad, especially in Asia. With the right investment, French Connection could be well placed to take advantage of a lower Sterling.
Stocks in the US look set for a stronger start with the tech-heavy Nasdaq adding 25 points at the start of a week full of tech company earnings, starting with Apple tomorrow. T-Mobile and VISA are amongst the firms reporting earnings on Monday.
Regulators have put a bit of a downer on M&A hopes across the pond too. The US government, including both Presidential candidates have not come out in favour of AT&T’s proposed takeover of Time Warner. Consolidation in media and communications is rightly a competition concern but politicians seem to be unaware that content is king, and streaming companies like Netflix – and Time Warner’s HBO are a big threat to cable/wireless providers. AT&T doesn’t just want the network; it wants the content for the network.
USA pre-opening levels
S&P 500: 9 points higher at 2,150
Dow Jones: 77 points higher at 18,222
Nasdaq 100: 25 points higher at 4,876
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