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European markets started the new week moderately higher as investors digested more hawkish Fed speak, a drop in the price of oil, improved French and German economic data and another mega-merger facing regulatory headwinds.

The FTSE 100 opened slightly lower amid the latest dire economic forecasts for the UK from the treasury was there to be a Brexit. Shares recouped opening losses to breakeven within the first hour of trading with  Royal Mail was top riser after broker a broker upgrade and newspaper tip following last week’s earnings whilst M&S was keeping company with mining firms propping up the UK benchmark ahead of results on Tuesday.

This week will be a key test for the market’s ability to withstand the Fed’s message that US rates could be about to rise again. There will be more Fed speak today from the St. Louis Fed’s James Bullard and John Williams of the San Francisco Fed. We’re still stuck in a feedback loop where the Fed is watching markets and markets are watching the Fed. If the loop continues, it would suggest downside risk to equities, which are at highs of the year, from a more hawkish Fed.

UK-listed airlines Easyjet and IAG shares rose in response to Irish competitor Ryanair missing expectations for earnings and forecasts. The idea that you can have too much of a good thing seems to extend to the airlines and low fuel prices. Increased competition for low prices is forcing airlines to scale back capacity expansion plans. At the same time, recent terrorist events and a weaker pound appear to be causing lower demand from UK passengers.

Shares of German pharma giant Bayer dipper by over 2% after it made an official offer for US agro-chemical firm Monsanto. Germany’s BASF is really the only potential buyer but the bigger source of disruption is likely from regulators as well as Bayer’s own conservative German shareholders. The current Washington administration has been pretty hostile to big M&A of later and judging on the rhetoric from the trump and Clinton campaigns there’s little chance of that abating. The main competition concern in the US would be over the merged company’s unrivalled control over farmer supply chains from Bayer’s weed killers to Monsanto’s GM seeds.

The British pound rose slightly following the Treasury’s forecast of a one-year recession for Britain if it were to leave the European Union. Anybody who’s followed the Treasury’s forecasts will know there is a wide margin for error but the doom-laden headlines will be one more reason to spook the public out of voting to leave.

French manufacturing saw a smaller than expected rise to 48.3 whilst Germany saw a bigger pickup than expected to 52.4 according to preliminary PMIs for May. Services expanded at a much faster pace of 51.8 and 55.2 for France and Germany respectively. The French service sector is regaining the momentum that was picking up before the Brussels attacks.

US stocks look set for a stronger open, building on last week’s resilient response to the increased odds of US rate-rise this summer ahead of manufacturing data and speeches from the Fed’s Bullard and Williams.