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Calm returns to Europe, DS Smith rallies on takeover bid

market relief

market relief

European equity markets are in positive territory this morning as global sentiment has improved. 

The positive US non-farm payrolls report on Friday set the tone for a positive finish in Asia overnight, and that sentiment spilled over to Europe today. The new Italian government is likely to be confirmed later today, and this has steadied traders’ nerves.

DS Smith revealed it intends to buy Europac for $2.2 billion. DS Smith intends to finance the deal through the issuance of new shares and debt. The deal is expected to lead to synergy savings of €50 million per year, and there shouldn’t be a need for any major restructuring. The two businesses have little overlap in terms of clients, and DS Smith announced its plans to expand in the US. The share price hit an all-time high this morning, and if the bullish move continues it could target 600p.

Shares in Wizz Air are higher this morning after the airline announced a solid set of traffic figures. Last month the airline saw passenger numbers increase by 18.1%, and load factor rose by 0.8% to 91.9%.The strong growth rate points to healthy demand. Wizz Air have announced eight new routes and this underlines how confident they are. The share price hit its highest level in nearly one month today, and if the positive move continues it could target 3700p.

Alfa Financial Software shares are in the red today after a number of investment banks altered their outlook on the stock. Barclays, Berenberg and Numis all aggressively cut their price target for the company. On Friday the company warned on profits, and investor sentiment is still weak.

GBP/USD has benefited from the broad decline in the US dollar. In May the UK construction reading was 52.5, topping economists’ estimates of 52, and unchanged from the April report.

EUR/USD is also higher on account of the softer greenback. Last month, Spanish unemployment numbers fell by 83,700, while traders were expecting a decline of 101,300. Today’s positive move in the single currency is largely dollar driven.

At 3pm (UK time) the US factory orders is released and the consensus estimate is -0.5%, compared with 1.6% growth in March.

We are expecting the Dow Jones to open up 100 points at 24,735 and we are calling the S&P 500 up 9 points at 2,743.

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