Europe

A combination of an ever weaker pound, falling to 28 month lows against the US dollar, and a big day for M&A has seen the FTSE100 hit its highest levels this year, and its best levels since August last year, when it was above 7,700.

European markets have lagged behind, held back by concerns about a stagnating economy ahead of Q2 GDP, which is due out this Wednesday, and which is likely to heap further pressure on the ECB to do more to help support the European economy at its September meeting.

Just Eat share price rose over 30% at one point today, to a one year high, after Netherlands based Takeaway.com offered to buy the business for £7.31, a 15% premium to last week’s close. In an industry that has already seen a lot of consolidation in the past couple of years, this appears to be an attempt by both companies to reinforce their relative market position in a sector that has already seen Amazon invest $575m in Deliveroo this year.

As a statement of intent against companies like Uber and Amazon it appears to be a statement that says we’re here to stay, and on scale alone not going to make it cheap for them to compete.

London Stock Exchange share price has hit a new record high today, on the back of weekend reports that it is looking to buy Refinitiv Holdings, which is the financial markets news and data division of Thomson Reuters. It marks a significant change in strategy for the LSE, which in recent years has seen its attempts to find an exchange partner founder, as deals with the Toronto exchange, Singapore exchange, and more recently Deutsche Boerse have fallen by the wayside.

A successful deal here, subject to regulatory approval would move the LSE into the position of being a market leader in market data and financial information, and the revenues that would generate, enabling it to take on the likes of Bloomberg, which has a huge presence in this area, and little in the way of direct competition.

Vodafone shares have also continued their gains from last week after the company announced it would be spinning off its mobile tower infrastructure into a separate unit in order to help reduce its debt levels. The company already shares network infrastructure with a number of its rivals in order to minimise costs, as well as speed up the roll-out of new technology like 5G.

On the downside Sports Direct shares were down over 15% at one point today in the wake of the debacle surrounding the release of the company’s full year numbers on Friday. As we head into the close they have managed to recover a good portion of that but there is no doubt recent events have given some investors food for thought. The declines would appear to show that investor confidence in the brand has taken a knock, at a time when the departure of senior managers has raised concerns about corporate governance at the company.

Despite these concerns, if senior management can assuage investor concerns over corporate governance and get past the current problems, the underlying business does generate a decent amount of revenue, which should augur well for a decent rebound. All of this is of course contingent on Mike Ashley being persuaded to concentrate on the businesses currently at hand, and not be tempted to venture to look at other failing retailers.

US

US markets opened flat ahead of the start of this week’s Federal Reserve rate meeting, which starts tomorrow and concludes on Wednesday. The resumption of US, China trade talks appears to being treated as a footnote, on an expectation that any further progress is unlikely this side of 2020, and that for now things are unlikely to get any worse on the tariffs front.

We’ve also seen M&A activity in the US after US drugs giant Pfizer announced that it was merging its off patent drugs business with generic drug company Mylan, in a deal that is likely to be worth $20bn in terms of revenues.

Later today we’ll also the latest Q2 numbers from this year’s hot IPO of the year, Beyond Meat, which has seen its share price rise 800% since May, on expectation over significant amounts of unrealised growth potential. In a move that has given it a market cap of over $14bn it has the potential of an accident waiting to happen, given how much good news is already priced in. The company has an annual turnover of less than $250m and is expected to make a Q2 loss of $0.084c a share.

FX

The pound has had a day to forget, falling to a fresh two year low against the US dollar, after Prime Minister Boris Johnson said he would not meet with EU leaders until they agreed to talk about changes to the backstop. With the EU pushing back against that option the noise levels around the prospect of a “no deal” Brexit have risen sharply, as both sides play chicken ahead of the 31st October Brexit deadline.

The US dollar index has continued to edge higher and could well retest the highs seen earlier this year above 98, benefitting from the belief that whatever the Federal Reserve does this week, the US dollar will still be streets ahead in terms of yield in comparison to its peers.

The Japanese yen has been treading water today ahead of tomorrow’s rate decision from the Bank of Japan. No change is expected and the bank could well double down on its guidance for 2020, in light of this weeks expected Fed decision to cut rates on Wednesday, by pledging to keep rates low, well into the end of next year.

Commodities

Oil prices have struggled to move significantly in either direction today, as concerns about the future outlook for demand is offset by worries about a further rise in tension in the Middle East. The arrival of another British warship, the destroyer HMS Duncan, to protect commercial shipping from Iranian interference is not expected to see tensions diminish any time soon. 

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